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The Interpersonal Dynamics of Industrial Buying Behaviour

B2B Marketing

Roadmap.
How

purchasing factors within the organizational structure influence buying behavior Factors influencing the size & interaction of buying centers How organizational buyers choose & evaluate supplier

Marketing Implications
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Buyers have to be more professional as MRP, JIT , Centralized purchasing & Buyer Technology have a definite impact on INDUSTRIAL MARKETING programs. Buyers responsibilities have broadened considerably & sales people must possess tools necessary to respond to their needs Close BUYER- SELLER responsibilities developed through MRP & JIT

BUYING CENTRE INVOLVEMENT& INTERACTION PATTERNS


Consists of three distinct aspects: 1. Psychological world of the individuals involved in the org. buying decisions
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Expectations Perceived potential of alternative suppliers & brands to satisfy implicit & explicit objectives in a buying situation
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Educational backgrounds & lifestyles of individual decision makers akin to demographics in consumer behavior , develop differential expectations Information sources & active search Purchasing agents have greater exposure to commercial resources than Engineering & Production Personnel. Often biased. Perceptual distortion Each individual strives to make the objective information consistent with his own prior knowledge & expectations by systematically distorting it Satisfaction with past purchases Purchasing agent rewarded for economy, Engineer Quality control , Production personnel efficient scheduling

BUYING CENTRE INVOLVEMENT& INTERACTION PATTERNS


Consists of three distinct aspects: 2. Joint decisions among individuals are precipitated by: 1.PRODUCT SPECIFIC FACTORS : 1) Perceived Risk 2) Type of Purchase First time/Once in a Life time versus routine purchases 3) Time pressure 2.COMPANY SPECIFIC FACTORS 1) Company orientation technologically dominated/ Production oriented 2) Company Size Privately owned small company vs Large scale corporation 3) Degree of centralization Greater the degree, lesser the chances of joint decision making

BUYING CENTRE INVOLVEMENT& INTERACTION PATTERNS


Consists of three distinct aspects: 3.Process of Joint decision making& conflict resolution: 1.Joint decision making used to: 1)Initiate the purchase 2) Gather information on suppliers 3) Evaluate Suppliers 4) Resolving conflicts among parties who jointly decide 2.Conflicts arise due to: 1) Buying motives & expectations about brands & suppliers being different for the engineer/user& purchasing agent

Conflict Resolution

Problem Solving If conflicts are due to disagreements on expectations about suppliers/ brands.. Extended information search Persuasion If there is an agreement on buying goals& objectives but conflict on specific criteria . Greater interaction among parties, outsider reconciles differences Bargaining Arises in unique/ new buying situations. Fundamental differences in buying goals/ objectives .Single party given autonomy in lieu of future favor Politicking Disagreements on objectives & style of decision making

Implications of the Model

Purchase agent is often less critical in industrial purchases Possible to operationalize & quantify most of the variables Demographic & life-style information on individuals involved in buying process is important Trade offs between explicit & implicit objectives create a satisfied customer Systematic examination of power positions of various individuals involved in decision making process is essential

Buying Centre interaction patterns


Size of buying centre & levels of interaction are dependant on:

Vertical Involvement NO. of organizational levels in hierarchy Lateral Involvement No. of departments, divisions or functional areas that are involved in decision making Extensivity Total no. of individuals involved in the communication network of the buying centre Connectedness Degree to which members directly communicate with each other regarding the purchase Purchase situation influence Organization influence

Marketing Implications
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Use secondary data to determine organizational size & orientation . Sales people adept at assessing type of purchasing task faced by firm Structure sales force that can relate to various hierarchical levels When purchasing managers influence is low, need to influence other members with a unique perspective Greater the degree of lateral involvement, the greater the potential for diversity of view points in the buying organization. Need for broadly trained sales force who can liaise with different functional experts

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Psychological Factors in individual decision making


Differences in role orientation Differences in information exposure Perceived risk in the vendor selection process

Reduce risk Play the odds Using sophisticated quantitative methods of vendor analysis & selection Spread the risk Allocation among various suppliers

Marketing Implications

Supplier loyalty is a formidable obstacle- Offer performance guarantees OUT suppliers might need to act as secondary suppliers

Conflict Resolution Strategies


COMPETING Lets do MY WAY! ACCOMODATING I see UR point of view COLLABORATING - Maybe we can work this one out AVOIDING Better let the situation cool down before we act COMPROMISING Lets split the difference

COALITIONS are the most prevalent form of conflict resolution

Power in conflict resolution

REWARD VS COERCIVE POWER

LEGITIMATE POWER

EXPERT POWER MARKETING IMPLICATIONS The more detailed the understanding of how power is distributed in the buying centre , the better the ability to communicate effectively.

Supplier Choice & Evaluation process

Categorical Method - Least precise & MOST SUBJECTIVE.


Supplier evaluation is based on the experience & opinions of the user departments NON QUANTITATIVE ---- High/ Low/ Neutral

Weighted-

Point Weights assigned to evaluation criteria. Composite performance index that can be quantitatively used

Weighted point method


FACTOR WEIGHT ACTUAL PERF. SCORE PERFORMANCE 90% ACCEPTABLE 90% ON SCHEDULE 60% 40*.9=36 30*.9 = 27 20*.6 = 12

QUALITY DELIVERY

40 30

COST REDUCING20 SUGGESTIONS PRICE 10

80%

10*.8 = 8

Supplier Choice & Evaluation process

Cost- Ratio Method - Based on use of cost analysis.

All identifiable purchasing costs are related to the value of products received When ratio of costs to products is high, supplier rating is low Choice of costs depends on products involved,quality, delivery, service & price From buyers perspective, costs include Visits to the VENDOR Evaluation of samples Inspection of shipments Costs associated with defective products

Supplier Choice & Evaluation process


Cost- Ratios also computed for costs associated with delivery:

Cost of paperwork in expediting the order Telephone follow- ups Rescheduling due to delayed shipments & emergency transportation Factory down time

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