Summary
Organizational buying is the decision making process of by which formal organizations purchase products they need. Organizations can be institutions such as hospitals or schools or they can be governments. There are three types of buying situations – the rebuy, modified rebuy, and new tasks. Each organization has a buying center, which is made up of all the people who fulfill a role in the buying process. Marketers need to influence these parties and should stay aware of things currently going on in the marketplace that could influence the buying center’s decisions. Organizations build strong relationships with their customers and supply added value.
A. What is Organizational Buying?
1. Organizational buying is the decision-making process by which formal organizations establish the need for purchased products and services and identify, evaluate, and choose among alternative brands and suppliers.
2. Oracle is a great example of an organization that owns many businesses. They not only sell products, they also produce many products that require vast quantities of raw materials to build components.
3. Organizations that produce goods and services must purchase many materials to operate. They are part of a complex system called a business market. In a business market, businesses buy from other businesses and face many key challenges in identifying new opportunities and measuring marketing performance and accountability. In the business market there are also many institutional (schools, hospitals, nursing homes, etc.) and government (local, state, federal and in Oklahoma – Indian tribes) organizations. There are three types of buying situations – the straight rebuy, modified rebuy and new task. Also, there is systems buying, which is when a firm prefers to buy a total problem solution from one seller and the seller handles everything involved and turns over a completed project at the end. Originating with government purchases, systems selling is a key marketing strategy in bidding to build large-scale industrial projects.
B. Participants in the Business Buying Process
1. There can be many people involved in the business buying process, including purchasing agents, who help select suppliers, department personnel, who initiate the requests and engineers who often select the product configurations.
2. In my organization I worked for six years in the purchasing department as a supervisor of the employees, including the staff of buyers. We frequently had vendors who would initiate their contact with the department who would be most likely to use their products. I’ve been involved in many issuances of requests for proposals and I recognize the seven roles. Often, much of the work leading up to the actual award has already been completed by the time the request came to my procurement department.
3. In a buying organization there is always a buying center, which consists of all the people involved in the buying process. There are typically seven roles in a buying center: Initiators, users, influencers, deciders, approvers, buyers and gatekeepers. Sometimes, one person may fulfill more than one role. Each participant in the buying center may have different levels and amounts of influence on the purchases. Successful marketing to organizations requires knowing which type of organizations to focus on in the selling efforts and figuring out who are the major decision participants and who are the right people to reach.
C. Stages in the Buying Process
1. The business buying-decision process includes eight stages called buyphases. These are the phases that occur: problem recognition, general needs description, product specification, supplier search, proposal solicitation, supplier selection, order-routine specification and performance review. Some stages in the process can be skipped under certain circumstances.
2. An example of this is when a buyer already has a favorite supplier or a ranked list of suppliers and can skip the search and proposal solicitation phase.
3. Someone in the organization recognizes a need or a problem and starts the buying process. The buyer decides what and how much of a product is needed, sometimes getting input from others such as for configurations and budget restraints. Once the buyers know the details of the needed product, he or she begins a search for a vendor or supplier. This can be done by searching the internet, reviewing information received at trade shows or conferences, recommendations from others, or past experience and knowledge. Large and complex orders may require issuing a request for proposal from qualified suppliers or requests from approved suppliers may be sufficient. Some purchases are given to the lowest bidder, but many awards are made only after a complex scoring and evaluation process which also looks at quality, past experience of the supplier and post-award service. The orders are placed with all the specifics of quantity, price, etc. in place for the one purchase or a blanket order may be placed after a price is negotiated that allows a company to make many routine purchases under the same contract. Supplier performance is reviewed and evaluated periodically to ensure the supplier is still performing in a manner that meets the organizations qualifications.
D. Managing Business-to-Business Customer Relationships
1. Managing relationships means cultivating the right relationships to improve effectiveness and efficiency.
2. A large organization may need an automated timekeeping system. This can involve input and planning of several departments in the organization and a lot of customizations may need to be made to allow the timekeeping system to run on a company’s network. Because this is a lengthy process and involves much effort on both sides, a company may insist on training and technical support from the supplier.
3. A number of forces influence the development of a relationship between business partners and four relevant factors are availability of alternatives, importance of supply, complexity of supply, and supply market dynamism. From these four factors we can classify relationships into eight categories: 1) basic buying and selling; 2) bare bones; 3) contractual transaction; 4) customer supply; 5) cooperative systems; 6) collaborative; 7) mutually adaptive; and 8) customer is king. Sometimes a strong customer-supplier relationship can increase risk to the customer and the supplier’s specific investments, which is time and money spent on endeavors tailored to a specific company. When buyers can’t easily monitor a supplier’s performance, they aren’t always aware of opportunism, which is some form of undersupply (or cheating) on the part of the supplier.
No comments:
Post a Comment