selling/negotiation chapter 3

An automobile firm wants to purchase either machine A or machine B. The initial cost of machines A and B are $40,000 and $50,000, respectively. The power consumption per year of machines A and B are 120 MWh and 100 MWh, respectively. The power cost is $40/MWh. The estimated life of both machines is 10 years. The estimated operating and maintenance cost over 10 years is $30,000 for machine A and $20,000 for machine B. According to the life-cycle costing approach, the overall cost of machines A and B are:

$118,000 and $110,000, respectively.

Alia is the logistics manager of a firm. She has recognized that her firm's poor performance is because of the faulty supply chain management software that the firm is currently using. According to the organizational buying process, which of the following should Alia do next?

Alia should define the type of management software needed

Automatic replenishment is a form of supplier relationship management (SRM).

FALSE

By increasing the rating of a competitive product, salespeople can improve customers' perception of their product.

FALSE

Customers usually view information from independent sources to be less credible than company advertising.

FALSE

Derived demand means demand is derived from an increase in GDP.

FALSE

During performance evaluations of various vendors, the importance weights of all characteristics are considered equal.

FALSE

Emotional needs are directly related to the performance of a product rather the personal gratification an individual gets from the product.

FALSE

End-user buying situations exclude the purchase of capital equipment and services.

FALSE

From a salesperson's point of view, the initial steps in the buying process are critical in straight rebuy situations.

FALSE

Gatekeepers are usually the ones who start the buying process

FALSE

In the context of developing the close coordination needed for just-in-time (JIT) inventory control systems, the selection criterion for manufacturers is the lowest cost, not the ability to be flexible

FALSE

Life-cycle costing is also known as quality-based costing

FALSE

Resellers consider two elements when making decisions about what products to sell: customer profiles and targeted return.

FALSE

The first step in supplier relationship management is to determine end-user spending patterns.

FALSE

The multiattribute model is usually not used in complex decisions involving several vendors.

FALSE

The primary objective of supplier relationship management (SRM) is to increase the profits

FALSE

When P.C. Logic, a fax machine manufacturer, purchases ceramic printing heads from Kyocera to install in its fax machines, it is acting as a(n):

Original equipment manufacturer

The need for risk reduction is one of the factors affecting an individual making an organizational buying decision. What can a salesperson do to help reduce the risk?

Provide the buyer with product information from independent sources not connected with the company for which the salesperson works

"Always a share" is a strategy for risk reduction employed by buying centers.

TRUE

1. Salespeople selling original equipment manufacturer (OEM) products need to demonstrate that their products help customers produce products that will offer superior value. TRUE

TRUE

A buying center is an informal, cross-department group of people involved in a purchase decision.

TRUE

A person's overall evaluation of a product can be quantified by multiplying the sum of the performance ratings of the product by the importance weight of each characteristic

TRUE

Creeping commitment means that a customer becomes increasingly committed to a particular course of action while going through the steps in the buying process.

TRUE

Global sourcing is a key factor in achieving a sustainable competitive advantage.

TRUE

In general, senior executives get more involved in important purchase decisions that have a greater effect on the performance of their organization

TRUE

In the context of the multiattribute model of product evaluation and choice, a company's final decision to select a product from among its alternatives is based on the relationship between the performance evaluations of the product's characteristics and the company's needs.

TRUE

One outcome of supplier relationship management (SRM) is the ability to consolidate purchases and negotiate better terms

TRUE

Salespeople often trigger the buying process by demonstrating how their products can improve the efficiency of the customer's operation

TRUE

Salespeople should not focus on the areas of superior product performance that are not important to their customer.

TRUE

Service level agreements (SLAs) are standards for minimum service delivery for specific measures of how a vendor will perform services, and are written into a contract.

TRUE

The ultimate goal of just-in-time (JIT) inventory control is to eventually eliminate all inventory except products in production and transit.

TRUE

When the office manager of an established dentist orders a case of the same brand of dental floss that the dentist's office has been using for years from the same source, it is considered a straight rebuy.

TRUE

ttribute model, salespeople decide how to alter the content of their presentation based on customer beliefs and needs.

TRUE

To reduce the uncertainty and risk involved in buying raw materials from multiple vendors, Miguel always buys the raw materials for his firm from a preferred vendor. From the perspective of an out-supplier, Miguel's account would be treated as:

a "lost for good" account

Neil wants to buy raw materials for his automobile firm. After identifying the type of raw materials needed and their specifications, he compiles a list of new vendors. During the buying process, he becomes more involved with a specific vendor and focuses his attention more on buying from that vendor than from other vendors. This is an example of:

a creeping commitment

Handell has established a small company that manufactures decorative items for homes. One of the company's latest items is a line of thermometers reproduced from ones that were given away for free before World War II. Since quality is essential to the company's success, it has spent a great deal of time and effort locating the best suppliers for the metal, wood, paint, and mercury for its first round of production. The purchase of these components would be an example of a _____ buying situation.

a new-task

Which of the following types of purchase situations requires a longer time compared with others to arrive at a purchase decision in an organizational buying decision process?

a new-task situation

Using the life-cycle costing approach, salespeople can demonstrate that:

a product with a higher initial cost will have lower overall costs

Which of the following types of purchase situations requires the least number of people in the organizational buying decision process?

a straight rebuy situation

effective selling to government agencies requires

a thorough knowledge of their unique procurement procedures and rules.

Which of the following members of the buying center would typically be involved in a value analysis?

all of them

Jackson likes his major parts supplier for his automobile repair business but always buys some of the parts from another competitor. Jackson is using a(n) _____ strategy.

always a share

Rock-Tenn Corporation continually receives data on production schedules from its customers. It uses the information to determine the quantity of boxes to be shipped to them. Rock-Tenn has established a(n) _____ relationship with its customers.

automatic replenishment (AR)

Vincent is trying to analyze how important his suppliers are to his business. He wants to know which supplier is best for a long-term relationship. If he has to apply the supplier relationship management (SRM) strategy, Vincent should most likely begin the analysis by first:

calculating how much amount is spent with each vendor and for which products.

Which of the following is usually considered a major financial commitment for manufacturers?

capital equipment items

A hospital is considering changing its supplier of replacement joints. While surgeons make the final decision, the hospital's purchasing department is promoting Kyocera because it manufactures one of the cheapest and most durable hip joints on the market. In terms of the buying center, the purchasing department is a(n):

decider

When firms want to influence the perceived value of one of its products among customers, which of the following strategies is typically used as a last resort?

decreasing the price of the product

In the context of changing the perceived value of a product, which of the following could be considered a dangerous strategy if employed by a salesperson?

decreasing the rating of a competitive product

Almac Aluminum is a large manufacturer of can sheets that are used to manufacture beverage cans. Its ability to sell to Pearl Brewing Company is directly related to how many people buy Pearl Beer. This is an example of:

derived demand

Salespeople need to understand that purchases made by their customers' customers are based on:

derived demand

Weston makes uniforms and overalls for employees in any industry where there is a risk of fire injury. It uses fabric from Indie Fabric Co. for all of the uniforms it manufactures. If there is a decrease in the demand for products in the chemical industry, then there will be a decrease in employment in that industry. This will lead to a decrease in the demand for Weston's uniforms. Since fewer uniforms will be needed, the sales for Indie Fabric will decrease. This is an example of:

derived demand

Kenneth, the operations manager of a cosmetic firm, rejects a particular promotional strategy for use by the firm because he estimates that the financial costs of conducting such a campaign would be extremely high and the strategy would yield no return. According to Miller and Heiman, Kenneth is most likely a(n):

economic influencer

Hammond Inc. supplies its retailers with handheld Crownlink electronic data interchange terminals. All of its retailers use these terminals to transmit merchandise orders to Hammond in Kansas City. Their inventories are always stocked as needed. Shipments are made daily as required by individual retailers. This is an example of a(n) _____ system.

efficient consumer response

TMV Auto uses a computer-to-computer linkage, called HarpLink, to manage its annual export of 65,000 vehicles. HarpLink provides worldwide control, invoicing, and information about ports, carriers, and custom documentation. HarpLink exemplifies _____.

electronic data interchange

The business environment is changing dramatically, and organizational buying is also changing. As organizations are pressured to improve product quality, control costs, and minimize inventory, they are:

elevating their purchasing directors to reflect the increasing importance of this function.

Ruth markets rock concerts. She is looking for a company that will handle all of the various mailing needed to promote the purchase of concert tickets. She wants to use Graham Mail House because she is a good friend of the mailing house's operations manager, but others involved in the decision making want to take bids from other mailing houses. In this example, Ruth is expressing a(n) _____ need in the buying process.

emotional

The evaluation and selection of products and suppliers are affected by the needs of both the organization and the individuals making the decision. These needs are categorized as:

emotional and rational

the last step in the organizational buying process is the

evaluation of product performance

_____ control the flow of information and limit the alternatives considered in the organizational buying decision process.

gatekeepers

Eva is considering adding new products to her store and is concerned about her profit margin. She is concerned about:

how much she will make on each sale

Which of the following statements is true about automatic replenishment (AR) management?

it allows suppliers to handle inventory in industrial settings

Automatic replenishment (AR) and electronic data interchange (EDI) are elements of:

just-in-time inventory control

Mike's Autos uses a supply chain management system to schedule the delivery of auto parts to arrive at its plants exactly thirty minutes before the parts are to be used in the assembly process. The company uses a(n) _____ system.

just-in-time inventory control

Ryan wants a vendor who will provide ingredients for his restaurant each day according to the number of reservations he has for that evening. Ryan is looking for a vendor who will provide:

just-in-time inventory control

Foster has decided to buy all his maintenance, repair, and overhaul (MRO) supplies from Alexia's Supply House. For competitors, Foster's account is:

lost for good

A salesperson for the Big Apple Sign Corporation was trying to get the owner of a hardware store to buy a new kind of advertising tool called floor graphics—an opaque vinyl film that applies directly to the floor, is easy to remove, and can be used to promote in-store specials. Since the store owner has purchased advertising before—just not this particular kind of advertising tool—this is an example of a _____ situation.

modified rebuy

Kevin works for Irish Pub Company, a design and construction outfit that sells completely finished, made-in-Ireland pubs—with everything from beer taps to mosaic floors to decorative pieces like antique whiskey bottles—to American entrepreneurs. Kevin is trying to sell the Irish pub concept to a retired New York City business executive who wants to run his own business, but he is not an experienced pub owner and is reluctant to invest $300,000 in the project. Kevin should consider this a _____ buying situation.

new-task

Plasto is a Spanish company that manufactures stadium seating for sports venues. It is one of many such manufacturers. The city of Marsia, which is going to host the next Olympic Games, forms a committee to make purchases of equipment that would be required at its venues. The committee has limited knowledge of the available products, but eventually decides to purchase Plasto stadium seating for the venues. This purchase by the recently formed committee is an example of a _____ situation.

new-task

A manufacturer of aquariums for consumers' homes is most likely to go through all eight steps of the organizational buying process when it is:

purchasing a new computerized system

The chief executive of Norell, an agency that supplies businesses with temporary workers, realizes that the health care industry requires temporary workers as much, if not more, as goods-oriented businesses. Which of the following stages of the buying process does this illustrate?

recognition of a need

Which of the following sources of information would customers usually view to be less credible than the others?

sales literature

_____ is a strategy by which organizational buyers evaluate the relative importance of suppliers and use that information to determine with whom they want to develop partnerships.

supplier relationship management

Maynard, the head of the research and development department of a pharmaceutical firm, rejects a new drug manufactured by the firm because the drug does not meet the required quality standards. According to Miller and Heiman, Maynard is most likely a(n):

technical influencer

To develop the close coordination needed for just-in-time (JIT) inventory control systems, manufacturers tend to rely on one supplier. Based on which criterion is the supplier selected?

the ability to be flexible

Regan wants to develop a long-term relationship with his customers. To accomplish this objective, Regan will need to pay close attention to:

the evaluation of product performance

The supervisor of an automated teller machine (ATM) facility learns that the machine is not functioning efficiently because it uses an old software. According to the organizational decision buying process, which of the following should the supervisor do next?

the supervisor should identify and define the type of update needed

Clara is the head of the sales department of a firm. She wants to know the volume of sales generated by her sales department and how quickly the firm's products are sold in the regional market. In this case, Clara is most likely calculating the:

turnover of the products

LifeStream Industries has used BrightLight light bulbs for years. When it needs new light bulbs, it uses a straight rebuy. The distributor of Tungsram LED light bulbs would like an opportunity to get his product considered by LifeStream. A(n) _____ would be particularly useful for Tungsram, the out-supplier.

value analysis

Vincent has been purchasing goods for his firm from a single supplier for many years. On every purchase, the supplier gives him reasonable discounts. Even though other vendors sell the same goods at lower rates, Vincent states that he has never considered an alternate supplier because the quality of goods provided by his existing supplier has always been exceptional. This is an example of:

vendor loyalty