Dynamics of industrial buying behavior

Presented By-

Rajnish Kumar

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

Industrial buying behavior

Consumer vs. Industrial buying behavior

Main types of buying situations in B2B Stages of decision in B2B Roles in B2B procurement Influences on organizational behavior Buying centres in summary

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

Consumer vs. Industrial buying behavior

Decisions made by consumers are quite simple Industrial buying processes are more complicated,

there are several phases and steps Different buying behavior for different products and

target groups Simple consumer goods like food and beverages are

bought very spontaneously – influenced by advertising and product presentation

For premium consumer goods (expensive clothes, computers) – buying behavior is getting more rational – comparison

Private investment goods – price bargaining

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

B2B products –Industrial procurement starts

More than one person involved Buying process follows certain rules Price comparison, standardisation,

tenders = Ausschreibungen)

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

B2B systems

involve more capabilities and greater workloads

From the buyer‘s and the supplier‘s side decision has more extensive consequences

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

B2B facilities

Industrial plants Manufacturing installations Office buildings

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

Main types of buying situations in B2B Straigtht rebuy – routine decision, repetitive process

(energy, office supplies, raw materials, wood, cigarettes), component suppliers for the automotive industry – little or no new information

Modified rebuy – more complicated but less sophisticated: cars, trucks, computers, consulting – modified rebuys are often treated too uncautious

New task – calls for thorough research – industrial plant – highest level of uncertainty. Strategic new tasks are of extreme strategic and financial importance (aircrafts, military equipment, infrastructure) – re-evaluation of alternatives and search for new information and new alternatives

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

Buying phases

Problem recognition General need description Product specification Supplier search Proposal solicitation Supplier selection Order routine specification Performance review

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

Stages of decision in B2B procurement

Backhaus developed a widely usable model to distinguish between 5 phases of procurement

Preliminary application (initiation phase) Tender proposal Negotiation Processing of order Warranty and services

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

Preliminary application

Recognition of a problem (need) and a general solution

Released by top management = operating department or external consultants

Result request for an offer addressed to a number of potential suppliers

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

Tender preparation phase

Determination of characteristics and quantity of needed items

Search for and qualification of potential sources

Supplier has to provide an offer Tries to be incomparable with his

competitors Customer tries to make the offer best

comparable

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

Negotiation phase

= core selling process Comprises acquisition and analysis of

proposals, evaluation of proposals and selection of suppliers

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

Processing phase/warranty/ service phase

Contains selection of an order routine Realisation of the transaction along

with the fixation of after sales service tasks

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

Roles in B2B procurement – buying center concept

Group of people involved in the buying process – buying center

Webster/Wind model shows 5 different roles – not institutionalised

This causes probleme in identifying and targeting the right people within the decision process

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

Buying center

Role keepers have different tasks – not mandatory

Buyer User Initiator Gatekeeper Influencer

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

Buyer

Formal authority to sign contracts Member of purchasing department Influences the vendor selection Not in technical details Main criteria: price + terms and

conditions of the contract

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

User

Person working with the product Interested in benefits and

unobstructed function of the product to buy

Large knowhow and preconceived opinion

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

Influencer

A person with high technical knowledge and practical experience

definition of minimum requirements on technical or company standards

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

Gatekeeper

Controls the flow of information within the buying center

Assistant of decision maker Influence by preparing the decision

and the relevant documents

(Scriptum p 33-34 + summary)

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

Decider

Right to say yes or no Mightiest person

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

Initiator

Person who brings new ideas and solutions into the company

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

Specific marketing considerations in the industrial facilities business Long decision taking process High risk Complex buying center The specific competitive situation

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

Product policy

Focuses on innovation Has to care for high flexibility in

research and development And manufacturing and assembling

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

Price

Strict bid and tender rules High transparency Add value with service offering to

achieve a differentiating position Another aspect: financing and

sourcing models

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

Distribution policy

Focus on negotiation phase Provide excellent people in the selling

center High technical knowledge

Rajnish Kumar Accman Institute of management

PGDM-MKT (2011-13)

Communication

Problem solver! Proving success with comparable

tasks Reference projects!

THANK YOURajnish Kumar

Accman Institute of management PGDM-MKT (2011-13)