MKT 304 Ch 6

Federal Business Opportunities website

(www.fbo.gov) provides a single point of entry through which commercial vendors and government buyers can post, search, monitor, and retrieve opportunities solicited by the entire federal contracting community.

Business Buyer Activity

1. Buying Center 2. Buying Decision Process

Influences on Business Buyers

1. Environmental 2. Organizational 3. Interpersonal 4. Individual

The supplier's task

1. Get listed in major directories 2. Create a robust online presence 3. Build a good reputation.

Business-to-business e-procurement

1. It shaves transaction costs and results in more efficient purchasing for both buyers and suppliers. 2. Online-powered purchasing program eliminates the paperwork associated with traditional requisition and ordering procedures and helps an organization keep better track of all purchases. 3. Beyond the cost and time savings, e-procurement frees purchasing people from a lot of drudgery and paperwork. Instead, they can focus on more-strategic issues, such as finding better supply sources and working with suppliers to reduce costs and develop new products.

Stages of the Business Buyer Decision Process

1. Problem Recognition 2. General Need Description 3. Product Specification 4. Supplier search 5. Proposal solicitation 6. Supplier selection 7. Order-routine specification 8. Performance Review used for new tasks buying situation In the modified rebuy or straight rebuy situation, some of these stages would be compressed or bypassed. Each organization buys in its own way, and each buying situation has unique requirements. a customer relationship might involve many different types of purchases ongoing at a given time, all in different stages of the buying process. for most business customers, individual purchases are made within the framework of an ongoing, long-term customer relationship.

3 Major Types of Buying Situations

1. Straight Rebuy 2. Modified Rebuy 3. New Task

Business Buying Behavior 4 Questions

1. What buying decisions do business buyers make? 2. Who participates in the business buying process? 3. What are the major influences on buyers? 4. How do business buyers make their buying decisions?

New Task

A company buying a product or service for the first time the greater the cost or risk, the larger the number of decision participants and the greater the company's efforts to collect information. The new task situation is the marketer's greatest opportunity and challenge.

reverse auctions

Auctions in which one buyer, usually an organization, seeks to buy a product or a service, and suppliers submit bids; the lowest bidder wins.

Economic Environment

Business buyers are heavily influenced by factors in the current and expected economic environment. such as: 1. the level of primary demand 2. the economic outlook 3. the cost of money. 4. Supply of key materials 5. technological, political, and competitive developments 6. culture and customs

Nature of the Buying Unit

Compared with consumer purchases, a business purchase usually involves more decision participants and a more professional purchasing effort.

Organizational Factors

Each buying organization has its own objectives, strategies, structure, systems, and procedures, and the business marketer must understand these factors well. Questions: 1. How many people are involved in the buying decision? Who are they? 2. What are their evaluative criteria? 3. What are the company's policies and limits on its buyers?

extranet links

For instance, they can create direct procurement accounts with suppliers such as Dell or Staples through which company buyers can purchase equipment, materials, and supplies directly.

General Need Desciption

Having recognized a need, the buyer next prepares a general need description that describes the characteristics and quantity of the needed item. For standard items, this process presents few problems. For complex items, however, the buyer may need to work with others—-engineers, users, consultants—to define the item. Teams may rank the importance of 1. Reliability 2. Durability 3. Price 4. Other attributes desired in the item In this phase, the alert business marketer can help the buyers define their needs and provide information about the value of different product characteristics.

blanket contracts

In the case of maintenance, repair, and operating items, buyers may use blanket contracts rather than periodic purchase orders. creates a long-term relationship in which the supplier promises to resupply the buyer as needed at agreed prices for a set time period.

vendor-managed inventory

Many large buyers now practice vendor-managed inventory, in which they turn over ordering and inventory responsibilities to their suppliers. Under such systems, buyers share sales and inventory information directly with key suppliers. The suppliers then monitor inventories and replenish stock automatically as needed. For example, most major suppliers to large retailers such as Walmart, Target, Home Depot, and Lowe's assume vendor-managed inventory responsibilities.

Deciders

People in an organization's buying center who have formal or informal power to select or approve the final suppliers.

buying center

The decision-making unit of a buying organization The buying center is not a fixed and formally identified unit within the buying organization. It is a set of buying roles assumed by different people for different purchases. It consists of all the individuals and units that play a role in the business purchase decision-making process. This group includes the actual 1. users of the product or service 2. those who make the buying decision 3. those who influence the buying decision 4. those who do the actual buying 5. those who control buying information. The business marketer must learn who participates in the decision, each participant's relative influence, and what evaluation criteria each decision participant uses. This can be difficult.

Business Market Structure and Demand

The business marketer normally deals with far fewer but far larger buyers than the consumer marketer does. many business markets have inelastic and more fluctuating demand. The total demand for many business products is not much affected by price changes, especially in the short run. A drop in the price of leather will not cause shoe manufacturers to buy much more leather unless it results in lower shoe prices that, in turn, increase consumer demand for shoes.

Problem Recognition

The buying process begins when someone in the company recognizes a problem or need that can be met by acquiring a specific product or service. can result from internal or external stimuli. ex) Internally, company decides to launch new product that needs new machinery or equipment. Externally, the buyer may get some new ideas at a trade show, see an ad or website, or receive a call from a salesperson who offers a better product or a lower price In fact, business marketers often alert customers to potential problems and then show how their products and services provide solutions.

systems selling (or solutions selling)

The sale often goes to the firm that engages business customers deeply and provides the most complete system for meeting a customer's needs and solving its problems.

Order-routine specification

The stage of the industrial buying process in which a buyer writes the final order with the chosen supplier(s): 1. listing the technical specifications 2. quantity needed 3. expected time of delivery 4. return policies, warranties, and so on

Product value analysis

an approach to cost reduction in which components are studied carefully to determine if they can be redesigned, standardized, or made by less costly methods of production.

business buying process

business buyers determine which products and services their organizations need to purchase and then find, evaluate, and choose among alternative suppliers and brands

Business buyer behavior

buying behavior of organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others

company buying sites

can be set up to post buying needs and invite bids, negotiate terms, and place orders For example, GE operates a company trading site on which it posts its buying needs and invites bids, negotiates terms, and places orders.

trading exchanges

companies work collectively to facilitate the trading process

Buying Center

composed of all the people involved in the buying decision

Gatekeepers

control the flow of information to others. For example, purchasing agents often have authority to prevent salespersons from seeing users or deciders. Other gatekeepers include technical personnel and even personal secretaries.

Defense Logistics Agency

offers an Internet Bid Board System (www.dibbs.bsm.dla.mil) for purchases by America's military services.

Influencers

often help define specifications and also provide information for evaluating alternatives. Technical personnel are particularly important influencers.

Department of Veterans Affairs

facilitates e-procurement through its VA Advantage! website (https://VAadvantage.gsa.gov).

performance review

the stage of the business buying process in which the buyer assesses the performance of the supplier and decides to continue, modify, or drop the arrangement The seller's job is to monitor the same factors used by the buyer to make sure that the seller is giving the expected satisfaction.

government market

governmental units - federal, state, and local - that purchase or rent goods and services for carrying out the main functions of government To succeed in the government market, sellers must locate key decision makers, identify the factors that affect buyer behavior, and understand the buying decision process. Government organizations typically require suppliers to submit bids, and normally they award the contract to the lowest bidder.

Buyers

have formal authority to select the supplier and arrange terms of purchase. Buyers may help shape product specifications, but their major role is in selecting vendors and negotiating.

interpersonal factors

it is often difficult to assess such interpersonal factors and group dynamics. Buying center participants do not wear tags that label them as "key decision maker" or "not influential." Nor do buying center participants with the highest rank always have the most influence. articipants may influence the buying decision because they control rewards and punishments, are well liked, have special expertise, or have a special relationship with other important participants. Interpersonal factors are often very subtle.

derived demand

it ultimately derives from the demand for consumer goods business demand is derived demand or example, demand for Gore-Tex fabrics derives from consumer purchases of outdoor apparel brands made from Gore-Tex. If consumer demand for these products increases, so does the demand for the Gore-Tex fabrics they contain. So to boost demand for Gore-Tex, Gore advertises to final consumers to educate them on the benefits of Gore-Tex fabrics in the brands they buy.

Users

members of the organization who will use the product or service

B-to-B Types of Decisions and the Decision Process

more complex buying decision longer and more formalized buying process Large business purchases usually call for detailed product specifications, written purchase orders, careful supplier searches, and formal approval. Finally, in the business buying process, the buyer and seller are often much more dependent on each other.

General Services Administration

operates Business Service Centers with staffs to provide a complete education on the way government agencies buy, the steps that suppliers should follow, and the procurement opportunities available. Various trade magazines and associations provide information on how to reach schools, hospitals, highway departments, and other government agencies which influences more than one-quarter of the federal government's total procurement dollars, has set up a GSA Advantage! website (www.gsaadvantage.gov)

Individual Factors

personal motives, perceptions, and preferences affected by personal characteristics such as age, income, education, professional identification, personality, and attitudes toward risk. buyers have different buying styles Other buyers may be intuitive negotiators who are adept at pitting the sellers against one another for the best deal.

E-procurement

purchasing through electronic connections between buyers and sellers - usually online

institutional market

schools, hospitals, nursing homes, prisons, and other institutions that provide goods and services to people in their care

supplier development

systematically developing networks of supplier-partners to ensure a dependable supply of the products and materials that they use in making their own products or reselling to others.

straight rebuy

the buyer reorders something without any modifications To keep the business, "in" suppliers try to maintain customer engagement and product and service quality. "Out" suppliers try to find new ways to add value or exploit dissatisfaction so that the buyer will consider them.

modified rebuy

the buyer wants to modify product specifications, prices, terms, or suppliers. The "in" suppliers may become nervous and feel pressured to put their best foot forward to protect an account. "Out" suppliers may see the modified rebuy situation as an opportunity to make a better offer and gain new business.

proposal solicitation

the stage of the business buying process in which the buyer invites qualified suppliers to submit proposals In response, some suppliers will refer the buyer to their website or promotional materials or send a salesperson to call on the prospect. However, when the item is complex or expensive, the buyer will usually require a detailed written proposal or formal presentation from each potential supplier. Business marketers must be skilled in researching, writing, and presenting proposals in response to buyer proposal solicitations. They should be skilled at connecting digitally with buyers to understand their needs and requirements.

Supplier Selection

the stage of the business buying process in which the buyer reviews proposals and selects a supplier or suppliers During supplier selection, the buying center often will draw up a list of the desired supplier attributes and their relative importance. Supplier attributes include: 1. Product and service quality 2. Reputation 3. On-time delivery 4. Ethical corporate behavior 5. Honest communication 6. Competitive prices The members of the buying center will rate suppliers against these attributes and identify the best suppliers. Buyers may attempt to negotiate with preferred suppliers for better prices and terms before making the final selections. any buyers prefer multiple sources of supplies to avoid being totally dependent on one supplier and to allow comparisons of prices and performance of several suppliers over time. Today's supplier development managers want to develop a full network of supplier-partners that can help the company bring more value to its customers.

supplier search

the stage of the business buying process in which the buyer tries to find the best vendors The buyer can compile a small list of qualified suppliers by: 1. Reviewing trade directories 2. Doing online searches 3. Phoning other companies for recommendations For marketers, this has leveled the playing field—the internet gives smaller suppliers many of the same advantages as larger competitors.

product specification

the stage of the business buying process in which the buying organization decides on and specifies the best technical product characteristics for a needed item often with the help of a value analysis engineering team. The team decides on the best product characteristics and specifies them accordingly. Sellers, too, can use value analysis as a tool to help secure a new account. By showing buyers a better way to make an object, outside sellers can turn straight rebuy situations into new task situations that give them a chance to obtain new business.

B-to-B digital and social media marketing

using digital and social media marketing approaches to engage business customers and manage customer relationships anywhere, anytime B-to-B marketers know that they aren't really targeting businesses, they are targeting individuals in those businesses who affect buying decisions.