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BUYING BEHAVIOR AND THE BUYING PROCESS. chapter 4. What are the different types of customers? How do organizations make purchase decisions? Which factors do organizations consider when evaluating products and services? Who is involved in the buying decision?

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  1. BUYING BEHAVIOR AND THE BUYING PROCESS chapter 4 • What are the different types of customers? • How do organizations make purchase decisions? • Which factors do organizations consider when evaluating products and services? • Who is involved in the buying decision? • What should salespeople do in the different types of buying situations? • Which changes are occurring in organizational buying, and how will these changes affect salespeople? SOME QUESTIONS ANSWERED IN THIS CHAPTER ARE: 4-2 McGraw-Hill/Irwin

  2. “Once customers are educated about the total cost of using your products, they will not switch, and price is no longer an objection.” ~David LenlingHormel 4-3 McGraw-Hill/Irwin

  3. Types of Customers Capital equipment items are major purchases such as mainframe computers and machine tools. • Producers • Products included in manufacturing • Services to support the manufacturing operation • OEM purchasers • Goods to use in making their products • End users • Goods and services to support their own production and operations Maintenance, repair, and operating (MRO) supplies include paper towels and replacement parts for machinery. 4-4 McGraw-Hill/Irwin

  4. Types of Customers (continued) • Resellers • Finished products or services with the intention to resell them. Turnover is how quickly an item sells, and how much effort it takes to sell. Profit margin is how much a reseller makes on each sale. 4-5 McGraw-Hill/Irwin

  5. Types of Customers (continued) • Government agencies • Goods and services valued at more than $1 trillion annually • Institutions • Different needs and buying processes • Consumers • Products and services for use by themselves or by their families 4-6 McGraw-Hill/Irwin

  6. Organizational Buying and Selling • Complexity of the organizational buying process • Purchasing agents • Evaluations and negotiations • Complexity is increasing • Derived versus direct demand • Purchases ultimately depend on the demand for their products 4-7 McGraw-Hill/Irwin

  7. Steps in the Buying Process 4-8 McGraw-Hill/Irwin

  8. How do Organizations Make Buying Decisions? • Steps in the buying process • Choices to attend a university related to the 8 steps in the organizational buying process • Creeping commitment • Narrowing range of alternatives • Critical that salespeople be involved in the initial steps 4-9 McGraw-Hill/Irwin

  9. Types of Organizational Buying Decisions • New tasks • A customer purchases a product or service for the first time • Straight rebuys • A customer buys the same product from the original source • Modified rebuys • The customer has purchased the product in the past but is looking for newinformation 4-10 McGraw-Hill/Irwin

  10. Who Makes the Buying Decision? 4-11 McGraw-Hill/Irwin

  11. Supplier Evaluation and Choice • At various steps in the buying process, members of the buying center evaluate alternative methods for: • Solving a problem (# 2) • Qualifications of potential suppliers (# 4) • Proposals submitted by potential suppliers (# 5) • Performance of products purchased (# 8) • Organizational and personal needs: • Rational needs • Emotional needs 4-12 McGraw-Hill/Irwin

  12. Factors Influencing Organizational Buying Decisions 4-13 McGraw-Hill/Irwin

  13. Organizational Needs and Criteria • Economic criteria • Life-cycle costing (total cost of ownership) • Quality criteria • What are organizational buyers looking for? • Service criteria • Value analysis 4-14 McGraw-Hill/Irwin

  14. Life Cycle Costing 4-15 McGraw-Hill/Irwin

  15. Individual Needs of Buying Center Members • Types of needs • Financial security • Self-esteem • Recognition • Risk reduction • Collect additional information • Develop supplier loyalty • Spread the risk 4-16 McGraw-Hill/Irwin

  16. Professional Purchasing’s Growing Importance • Supply chain management • Logistics • Managing inventory while controlling costs • Just-in-time inventory control system • Material requirements planning • Automatic replenishment • Electronic data interchange 4-17 McGraw-Hill/Irwin

  17. EDI Transactions 4-18 McGraw-Hill/Irwin

  18. Professional Purchasing’s Growing Importance (continued) • Supplier relationship management • Identify the annual spend • Summarize the benefits and needs satisfied by a supplier 4-19 McGraw-Hill/Irwin

  19. Professional Purchasing’s Growing Importance (continued) • The Internet and business-to-business selling • Extranets • Support for salespeople rather than replacement • Reverse auctions 4-20 McGraw-Hill/Irwin

  20. Summary • Selling to organizations differs from selling to consumers because organizations are more concentrated, demand is derived, and the buying process is more complex. • The organizational buying process consists of eight steps. • The length of the buying process and the role of various participants depend on the customer’s past experiences. • The people involved in the buying process are referred to as the buying center. • Organizations are facing an increasingly dynamic and competitive environment. • The Internet is playing a much more important role in business-to-business transactions. 4-21 McGraw-Hill/Irwin

  21. Appendix: Multiattribute Model of Product Evaluation and Choice • Based on the idea that people view a product as a collection of characteristics or attributes. • Buyers evaluate a product by considering how each characteristic satisfies the firm’s needs and perhaps their individual needs. • Performance evaluation of characteristics • Importance weights 4-22 McGraw-Hill/Irwin

  22. Information about Laptop Computers 4-23 McGraw-Hill/Irwin

  23. Performance Evaluation of Laptop Computers 4-24 McGraw-Hill/Irwin

  24. Appendix: Multiattribute Model of Product Evaluation and Choice (continued) • Importance weights • Overall evaluation • Value offered • Supplier selection • Implications for salespeople 4-25 McGraw-Hill/Irwin

  25. Information Used to Perform and Overall Evaluation 4-26 McGraw-Hill/Irwin

  26. Value Offered by Each Brand 4-27 McGraw-Hill/Irwin

  27. Implications for Salespeople • Increase the performance rating for your product. • Decrease the performance rating for a competitive product. • Increase or decrease an importance weight. • Add a new dimension. • Decrease the price of your product. 4-28 McGraw-Hill/Irwin

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