Analyzing

Business Markets

11/26/2009 Dr. Ranjan Kantha, KBS 1

What is Organizational Buying?

It is the decision-making process by

which organizations establish the
need for products and services,
and
identify, evaluate, and choose among
alternative brands and suppliers.

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Organization Typical Buying Situation
Manufacturer of consumer Sona Steering supplies steering wheels to Maruti Udyog
products Limited.

Manufacturer of Industrial Tata Timken supplies bearings to Alsthom motor

Goods manufacturers who supply to Cummins Engineering

Health care Johnson and Johnson supplies surgical staplers to

Apollo Hospitals in Hyderabad

Information and Entertainment Sony Television decides whether to sell Sony Max signals
to Bhaskar Television for cable distribution in Indore

Service Industries Infosys decides to sell its financial software Finnacle to

Bank of Baroda

Non-profit Organization Child Relief and You (CRY) makes cards for UNO’s India
office

Government The Government of India asks for sealed bid for Golden
Quadrilateral Golden Highway project

Mining, Forestry and Fishing Oil and Natural Gas Corporation (ONGC) purchases
drilling machines and off shore platform equipments for
oil exploration
Agriculture A farmer’s cooperative Society purchases a Sonalika
11/26/2009 tractors for Kantha,
Dr. Ranjan its members
KBS 3
Difference between Consumer and Business Markets
Decision Variables Organizational Consumer Marketing
Marketing
Appeal Rational Dramatic

Platform Logical Emotional

Brand Excitement Not Desired Imperative

Brand Personality Mostly Corporate Essential and both Product

and Corporate
Pre-launch Research Not Vital Vital

Span of Distribution Narrow Wider

Control
Number of Orders Small Large

Size of the Order Large Very Small

Cost of Order Low High

Processing
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Top Business Marketing
Challenges
„ Expand understanding of customer needs
„ Compete globally as China and India reshape
markets
„ Master analytical tools and improve quantitative
skills
„ Reinstate innovation as an engine of growth
„ Create new organizational models and linkages

11/26/2009 Dr. Ranjan Kantha, KBS 5

Characteristics of Business
Markets
„ Fewer, larger buyers „ Multiple sales calls
„ Close supplier- „ Derived demand
customer „ Inelastic demand
relationships „ Fluctuating demand
„ Professional „ Geographically
purchasing concentrated buyers
„ Many buying „ Direct purchasing
influences

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The Buying Center
Initiators
Initiators

Users
Users

Influencers
Influencers

Deciders
Deciders

Approvers
Approvers

Buyers
Buyers

Gatekeepers
Gatekeepers
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 Organizational Buyer Behavior
Role and Responsibility of Buying Center
™ Initiators: These are the people who request for something to be purchased. They may
be users or others in the work organization.
™ Users: They use the products thus, initiating the purchase process. They report on the
product performance e.g. worker.
™ Influencers: Individuals in the organization, influence the decision-making process by
providing information on criteria for buying consultants e.g. Research and
Development specialists inside the organization and consultants outside the
organization.
™ Deciders: Organizational members with decision-making power who decide about the
purchase e.g. engineers deciding specifications or vice-president (finance) who
decides in favor of the purchase.
™ Gatekeepers: People in the organization who have the power to prevent sellers or
information from reaching the members of buying centers e.g. purchasing agents,
receptionist, secretaries and telephone operators.
™ Approvers: People in the organization who authorize the proposed actions of deciders
or buyers.
™ Buyers: These are the people who have formal authority to select the suppliers and
arrange the purchase terms. Buyers help in product specifications, in selection of
suppliers and negotiating purchases and include senior people in purchase
department.

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 Organizational Buyer Behavior

Buying Motives of Business Buyers

Motive Objective

Efficiency In performance, practicability and increased capacity

Economy In money, in use or in time

Good Quality In materials and workmanship

Simplicity In construction, operation and application

Saleability In Increasing saleability of user's product

Ease of operation In easier handling, greater convenience, handiness

Space saving In compactness, ease for storage and holding

Obsolescence In which it needs improvement, replacement or additions

Safety In providing safety to employees, clients and customers

Cleanliness In plant, user's product, or for the workmen

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Buying Situation

Straight
Straight rebuy
rebuy

Modified
Modified rebuy
rebuy

New
New task
task

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Buying Decision Phases
Organizational Buyer Behavior
Buying New Task Modified Rebuy Straight Rebuy
Decision
Phases
1. Problem Anticipate problem, use In supplier: Maintain In supplier; Maintain
recognition advertising and creative quality service close relationship of
sales people to convince standards users and buyers.
buyers of problem solving Out supplier; Watch for Out supplier: Convince
capabilities. developing trends. firm to recognize
alternatives.
2. Solution Provide technical assistance In and out supplier - same -
determination and information stress capability,
reliability, and problem
solving capabilities

3. Determining Provide detailed Same as phase 2. - same -

needed item product/service information
to decision-maker.
4. Searching for In supplier: maintain
and qualifying dependability, Out supplier:
supplier demonstrate ability to
perform task.
In supplier, watch for - same -
problem out supplier;
demonstrate ability to
perform task.

5. Analyzing Understand details of Understand details of Make timely proposals.

proposals customer problems/ needs: customer
make timely proposals. problems/needs; make
11/26/2009 Dr. Ranjan Kantha,
timely KBS
proposals. 11
 Organizational Buyer Behavior

Steps in Organizational Buying

Recognizing an Organizational Need

Determining Products Specifications

Identifying Suppliers

Searching for Information and

Evaluating Suppliers

Negotiating a Purchase Order

Evaluating Performance of the

Product & Supplier

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Stages in the Buying Process:
Buyphases
„ Problem recognition
„ General need description
„ Product specification
„ Supplier search
„ Proposal solicitation
„ Supplier selection
„ Order-routine specification
„ Performance review
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 Buygrid Framework

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 Vendor Analysis

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Handling Price-Oriented
Customers
Limit
Limit quantity
quantity purchased
purchased

Allow
Allow no
no refunds
refunds

Make
Make no
no adjustments
adjustments

Provide
Provide no
no services
services

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 Methods for Researching
Customer Value

„ Internal engineering „ Conjoint analysis

assessment „ Benchmarks
„ Field value-in-use „ Compositional
assessment approach
„ Focus-group value „ Importance ratings
assessment
„ Direct survey
questions
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 Trust Dimensions
Cooperating
Transparent
Design

Product/Service Product
Quality Comparison

Incentive Supply Chain

Pervasive
Partnering
Advocacy

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Factors Affecting
Buyer-Supplier Relationships

Availability of Importance of
alternatives supply

Complexity of Supply market

supply dynamism

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