week 2 relationships

B2B MarketingManaging Industrial Marketing Relationships

Professor Philip Weinberg

Summer 2012

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B2B Marketing – Professor Weinberg

Lesson OutlineInside and outside forces influence organizational buying. In this lesson you’ll learn about:

•The decision process organizational buyers apply to confront differing buying situations and the resulting implications•The variables that influence organizational buying decisions•A model of organizational buying behavior that integrates these important influences•How knowledge of organizational buying enables marketers to make more informed decisions on product design, pricing and promotion

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The Dynamics of Institutional BuyingMarket-driven firms sense market trends and work closely with their customers and vendors. This is crucial to:

•Identify profitable market segments

•Locate buying influences within segments

•Reach organizational buyers efficiently and effectively with an offer

•Each decision goes through various steps. Skipping a step can be detrimental to the decision making process.

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The Institutional Buying Process1 • Problem Recognition

2 • General Description of Need

3 • Product Specifications

4 • Supplier Search

5 • Acquisition & Analysis of Proposals

6 • Supplier Selection

7 • Selection of Order Routine

8 • Performance Review

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• Buying is a process, not an event

• Various points in the process– Critical Decision

Points

– Evolving Information Requirements


The Institutional Buying Process1 • Problem Recognition

2 • General Description of Need

3 • Product Specifications

4 • Supplier Search

5 • Acquisition & Analysis of Proposals

6 • Supplier Selection

7 • Selection of Order Routine

8 • Performance Review

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• Initially, the buyer is aware of a problem - a discrepancy between actual and desired states.

– Internal: A machine breaks down; we can capture that opportunity and provide a replacement

– External: Salesperson, advertising, Push/Pull Strategy

• Our Products, Services and Experiences can move a customer from the actual to desired states.

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Product / Service / Experience

1 • Problem Recognition


• Once a need is recognized, the purchasing department and buying group define the requirements by determining: – The extent of the problem

– The alternatives can solve the problem

– Where the solution can be purchased

• Each small decision ultimately helps define the product specifications.

• Sometimes the supplier is involved if the supplier influences the sale (i.e., the supplier makes the buyer aware of the need).

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2• General Description of Need


• Many times the question boils down to:

– Is it a new task buy?

– Is it a straight rebuy?

– Is it a modified rebuy?

• Buyers try to be objective and consider many ideas.

• Professional sellers try to influence this decision as early as possible in the buying process—if they can!

• This is an important because it often determines how the contract is structured and the specific wording that it uses.

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3• Product Specifications


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4• Supplier Search

Universal Set

• How will suppliers be found?

• The identifier of the problem (step 1) often has influence on the supplier search

• If a salesperson creates the need, the specs may be written so his/her company is the only one that can fulfill the contract

• Often only preferred or approved vendors are considered.


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4• Supplier Search

IneptSet Inert

Set

Awareness Set

Consider-ationSet

Universal Set


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5• Acquisition & Analysis of Proposals

Universal Set

• This step occurs only when the buying organization lacks adequate information to make a decision.

• Proposals are presented in detail often by a team engineers, users and purchasing agents. Successful proposals determine the supplier.

• Many times, this step is perfunctory. The buyer may have already determined the preferred vendor, but legally it may be necessary to seek other vendor proposals to attain government contracts.


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6• Supplier Selection

Universal Set

• At this point, negotiation includes not only the final price, but also:

– Quantities

– Delivery times

– Level of service

– Warranties

– Payment schedules

– Etc.


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7• Selection of Order Routine

Universal Set

• Once the supplier is selected, the order routines are established:


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8• Performance Review

Universal Set

• After receipt of the product or service, a performance review asks:

– Did the supplier meet delivery time?

– Did the product meet the specs?

– Does the contract have to be modified?

– Did the vendor live up to expectations?


Buying Process Influences• Environmental Forces

– Economic conditions– Technological innovations– Political changes

• Competitive Forces– Create USP or destroy

competition’s USP• Organizational Forces

– Buying Situation – Shifts in organizational

objectives– Buying group

• Individual Forces

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Three Buying Situations

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New Task Straight Rebuy Modified Rebuy

OriginPerceived problem, different from previous

Recurring problem or continuing requirement

Benefit to reevaluation (quality / cost / delivery)

InfoExtensive External Search

Little (or no) new information needed

Can be minimal to extensive research

Criteria Undefined Seldom reviewedLimited problem solving of what is “broken”

Preference Undefined Existing Relationship Seeking new relationship

DecisionsJudgmental and Strategic

Casual purchase or routine low priority

Competitive criteria

Buyer Inexperienced Very experienced Experienced, dissatisfied


Gaining an Advantage: New Task• Marketers can gain an edge if they:

– Initiate problem recognition

– Get involved very early in the decision-making process

– Get involved early in the procurement process

– Understand the buying organization's behavior patterns

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Weinberg’s WisdomLeverage your client knowledge and trust to develop Further Business and to create new needs!


Maintaining an Advantage: Straight Rebuy

• Relationships are the most important element!

• Compare the costs / benefits of changing

• Some companies review this area of business – At regular intervals

– Randomly

– After employee turnover

– During audits

• Are you In...

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Seizing an Advantage: Straight Rebuy

• ...or Out? (Don’t worry, Out sellers can get In!)

• They must convince the buyer that – Their current supplier is not doing their job.

– They are experiencing problems that they were not aware of earlier.

– Their purchasing requirements have changed.

– They should consider other alternatives.

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Creating an Advantage: Modified Rebuy

• In suppliers need to understand developments within the buying organization – Be a part of the modified rebuy situation

– Maintains the “edge” unless out of touch with buyer

• Out suppliers need to create the need and influence the buyer to consider other alternatives. – This demands superior salespersonship.

– Selling company needs to offer performance guarantees, warranties and additional services and training.

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• The importance of Purchasing Departments has rapidly increased.– More competitive

– Outsourcing as impetus

• Purchasers play a strategic role within the organization


Buying Centers & Groups

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Initiator Initially perceives a problem and initiates the buying process to solve it.

Influencer Affects the purchasing decision by providing technical information or other relevant (internal or external) information.

Gatekeeper Controls the information to be reviewed by members of the buying group. (For example, buyer may screen advertising material and even salespeople.)

Decider Actually makes the buying decision, whether or not they have formal authority to do so. Could be the owner, an engineer or even the buyer.

Buyer Has formal authority to select and purchase products or services and the responsibility to implement and follow all procurement procedures.

User Actually use the product in question. Can be inconsequential or major players in the process.


How can I assess buying group forces?• Answer these three questions:

1. Who takes part in the buying process2. What is each person’s relative influence in the decision?3. What criteria are important to each member in evaluating the

supplier?

• And take the following steps:1. Isolate the personal stakeholders2. Follow the information flow3. Identify the experts4. Trace the connections to the top5. Understand purchasing’s role

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Weinberg’s Wisdom

Use this technique to get a new Job!


Industrial Buyer PersonasIndustrial

Product UsersEngineering Department

Purchasing Department

Evaluative Criteria

Background & Education

PersonalityTraits

Risks

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A Few Final Thoughts• Understanding the Organizational Buying Process Results in

Favorable Action• By understanding the buying process, the marketer is better

able to play an active role in stimulating a positive market response.

• A marketer who identifies– the organizational screening requirements and– the important evaluative criteria of individual

buying group members

• can make better product, design, pricing and promotional decisions.

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