Kotler on Marketing

Business organizations do not only sell; they also buy vast quantities of raw materials, manufactured components, plant and equipment, supplies, and business services. To create and capture value, sellers need to understand these , organizations needs, resources, policies, and buying procedures by wisely turning their suppliers and distributors into valued partners.

Organizational Buying Process

To enhance their effectiveness as a party in the exchange process, industrial salespersons must understand how organizational buyers choose between the competing offerings of industrial marketers. The eight stage model describes the sequence of activities in the organizational buying process as follows : Buying Stages Problem Recognition General need description and Product specification Supplier Search E - Procurement Proposal Solicitation Supplier Selection Order Routine Specification Performance Review

Buying Situations
The same product may elicit markedly different purchasing patterns in various organizations with various levels of experience and information. Therefore attention must be concentrated on

buying situations rather than on products . Three types of buying situations are 1) New task 2) Modified rebuy & 3) Straight rebuy

 New Task
Here, a significant amount of information is required for decision makers to explore alternative ways of solving the problem and to search for alternative supplier. When confronting a new task buying situation, organizational buyers operate in a stage of decision making referred to as extensive problem solving.

Here the buying influentials and decision makers lack well defined criteria for comparing alternative product and suppliers.
Generally, for a new task buy situation multiple influences

contribute to the decision making. It is cross - departmental decision.

 Buying Decision Approaches - Two distinct decision approaches are used : Judgmental new task and Strategic new task.

Judgmental new task - Here, the greatest level of uncertainty

confronts firms : 1. because of the technical complexity of the product, 2. the difficulty of evaluating the alternatives or 3. the unpredictable aspects of dealing with a new supplier. Strategic new task - These purchasing decisions are of extreme importance to the firm - strategically and financially. If the

buyer perceives that a rapid pace of technological change

surrounds the decision, search effort is increased.

Straight Rebuy

When there is a continuing or recurring requirement buyers have substantial experience in dealing with the need and they require little or no new information. Evaluation of new alternative solutions is unnecessary and unlikely to yield appreciable improvements. Hence, a straight rebuy approach is appropriate. Organizational buyers have well - developed choice criteria to apply to the purchase decision.
These criterias are refined over time as the buyers have developed predispositions toward the offerings of one or a few carefully screened suppliers. Organizational buyers employ Routinized response behaviour for a straight rebuy.

Buying Decision Approaches : The buyers use two buying

decision approaches : Casual & Routine Low Priority.

Casual Purchase - involves no information search or analysis

and the product is of minor importance to the firm. The focus is

simply in transmitting the order.

Routine Low Priority - are somewhat more important to the

firm and involve a moderate amount of analysis.

Modified Rebuy The organizational decision makers feel that significant benefits may be derived from a re-evaluation of alternatives. Several factors trigger such re-assessment. Internal forces include the search for quality improvements or cost reductions. A marketer offering cost, quality or service improvements can be an external precipitating force.

A modified rebuy may likely occur when the firm is

displeased with the performance of present suppliers (for example - poor service delivery)

 Buying Decision Approaches : Two buying decision approaches typify this buying class category.

a)

Simple modified rebuy - involves a narrow set of choice

alternatives & encompasses a moderate amount of both

information search & analysis..

b) Complex modified rebuy - involves a large set of choice alternatives and is characterized by little uncertainty. The range of choice enhances the negotiating strength of the buyer.

Systems Buying and Selling : Many business buyers prefer to buy a total solution to a problem from one seller called Systems Buying. One variant of systems selling is systems contracting where a single supplier provides the buyer with his entire requirement of MRO (Maintenance, Repair,

Operating Supplies).

Buying Centre Influence : Economic Buying Influence - The role of the person who will act as Economic Buyer for an organizations sales objective is to give final approval to buy. There is always only one person or a set of people playing this role for a given sales objective. He has direct access to funds. His focus is price & performance.

Impact on bottom line by the purchase.

He can release unallocated funds. The Economic Buyer can say Yes when everybody else has said No as well as Veto a deal that everybody else has approved. Economic buyer is the only person who gives the final approval.

 User Buying Influence - The role of user buyers is to make

judgments about the potential impact of the product or service on their job performance Areas of concern product reliability, service record, retraining, needed, ease of operations, maintenance, safety etc.

User Buyers will use or supervise the use of the product /

service and so their personal success is directly tied to the

success of the product solution.

User buyer influences the outcome of the sale.

 Technical Buying Influence - The role of Technical Buyers is to screen out possible suppliers. Their focus is on the product itself and they make recommendations based on how well it meets a variety of objective specifications. - Technical Buyers cant give a final yes, but they can (and often do) give a no

Makes judgments about the measurable and quantifiable

aspects of the product to meet the specifications.

 Coach - The unique and very special role of a coach is to guide the seller to their particular sales objective by leading the seller to the other buyers and by giving him information

that they need to position himself effectively with each one.

Coaches could be from the buying organization or from the

sellers organization.
Coachs focus is to help make the sales.

Economic

User
Reliability

Low cost of ownership Good budget fit ROI Increased productivity Profitability Flexibility

Increased efficiency Upgrade skills Fulfill performance Best problem solution Do job better/faster/easier Super service Easy to lean and use

Technical
Specification best and products
meets them Delivery time Best technical solution Discounts/low bids/price Reliability

Coach
Recognition

Visibility Makes contribution Seen as a problem solver

Decision Making Units (DMUs) in Business to Business Selling

DMU Occupants
Purchase Manager

Benefits to be incorporated
Terms & Conditions of business more specifically price Ease of production to workers Return on Investment Productivity

Foreman Controller of Finance Production Manager

In an industrial buying situation, there are many buying influences operating and having an impact on the buying process. The process of satisfaction has to take into consideration all these influences.

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Buying Center Targeting : Four Types of Business Customers 1) Price Oriented Customers (Transactional Selling)

2)
3) 4)

Solution Oriented Customers (Consultative Selling)

Gold Standard Customers (Quality Selling) Strategic - Value Customers (Enterprise Selling)

Purchasing Orientation :

Three Company Purchasing Orientations

1) Buying Orientation 2) Procurement Orientation 3) Supply Chain Management Orientation