Download Bundling of product and services

Understanding Organizational
Buying Behavior
Anand G Khanna
Organizational buying behavior
• Consumer vs. Organizational buying behavior
• Main types of buying situations in
B2B
• Stages of decision in B2B
• Roles in B2B procurement
• Influences on organizational behavior
• Buying centres
Consumer vs. Organizational buying behavior
• Decisions made by consumers are quite simple
• Organizational buying processes are more complicated, there
are several phases and steps
• Different buying behavior for different products and target
groups
• Simple consumer goods like food and beverages are bought
very spontaneously – influenced by advertising and product
presentation
• For premium consumer goods (expensive clothes, computers)
– buying behavior is getting more rational – comparison
• Private investment goods – price bargaining
B2B products – organizational procurement
starts
• More than one person involved
• Buying process follows certain rules
• Price comparison, standardisation, tenders,
processes
Main types of buying situations in B2B
• Straigtht rebuy – routine decision, repetitive process (energy,
office supplies, raw materials, ), component suppliers for the
automotive industry – little or no new information
• Modified rebuy – more complicated but less sophisticated:
cars, trucks, computers, consulting – modified rebuys are
often treated with less attention
• New task – calls for thorough research – industrial plant –
highest level of uncertainty. Strategic new tasks are of
extreme strategic and financial importance (Power Plants,
Mining,Oil&Gas ,Petrochem ,aircrafts, military equipment,
infrastructure) – re-evaluation of alternatives and search for
new information and new alternatives
Decision Making Units
• Cross Functional Groups / Teams
(User ,Technical , Materials , Finance)
• CF recommend for decision making Authority
– predetermined on Value/Project
/Application basis
Steps in the Buying Decision Process
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Problem Recognition
General Need Description
Product/Service Specification
Supplier /Source Search
RFP/RQP/Tender
Bid evaluation& Selection-Contract Award
Delivery, Commissioning , Implementation
Evaluate Performance
Preliminary application
• Recognition of a problem (need) and a general
solution
• Released by top management = operating
department or external consultants
• Result  request for an offer addressed to a
number of potential suppliers
Tender preparation phase
• Determination of characteristics and quantity of needed
items
• Search for and qualification of potential sources
• Supplier has to provide an offer
• Tries to be incomparable with his competitors
• Customer tries to make the offer best comparable
Negotiation phase
• Core selling process
• Comprises acquisition and analysis of
proposals, evaluation of proposals and
selection of suppliers
Processing phase/warranty/ service
phase
• Contains selection of an order routine
• Realisation of the transaction along with the
fixation of after sales service tasks
Roles in B2B procurement – buying
center concept
• Group of people involved in the buying
process – buying center
• Webster/Wind model shows 5 different roles
– not institutionalised –Vary from co to co
Industry to industry
• This causes problems in identifying and
targeting the right people within the decision
process
The Buying Center Environment
External Factors
Internal Factors
Need of Product ,Service
Technology
Accounting
Management Marketing
Legal
Production/Mfg.
Finance
Service
Buying center
Role keepers have different tasks – not
mandatory
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Buyer
User
Initiator
Gatekeeper
Influencer
Buyer
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Formal authority to sign contracts
Member of purchasing department
Influences the vendor selection
Not in technical details
Main criteria: price + terms and conditions of
the contract
User
• Person working with the product
• Interested in benefits and unobstructed
function of the product to buy
• Large knowhow and preconceived opinion
Influencer
• A person with high technical knowledge and
practical experience
 definition of minimum requirements on
technical or company standards
Gatekeeper or Technical Clearing
house ?
• Controls the flow of information within the
buying center
• Assistant of decision maker
• Influence by preparing the decision and the
relevant documents
Decider
• Right to say yes or no
• He/Group is (are ) the mightiest person
Initiator
• Person who brings new ideas and solutions
into the company
Specific Marketing considerations in the
B2B Marketing Business
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Long decision taking process
High risk
Complex buying center
The specific competitive situation
Product policy
• Focuses on innovation
• Has to care for high flexibility in fulfillment of
Demand
• Manufacturing facility and commitment for
deilvery
Price Offering
• Strict bid and tender rules
• High transparency
• Add value with service offering to achieve a
differentiating position –Bundling of product
and services
• Another aspect: financing and sourcing
models
Marketing/Sales policy of Seller
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Focus on negotiation phase
Provide excellent people in the selling center
High technical knowledge
Problem solver!
Proving success with comparable tasks
Reference projects!