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: [Link] SPECIFIC FACTORS : 1) Perceived Risk 2) Type of Purchase First time/Once in a Life time versus routine purchases 3) Time pressure [Link] 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: [Link] of Joint decision making& conflict resolution: [Link] decision making used to: 1)Initiate the purchase 2) Gather information on suppliers 3) Evaluate Suppliers 4) Resolving conflicts among parties who jointly decide [Link] 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
