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Buying center and environmental & organizational influences

Lecture 4 by Shilpa Singh

Learning Objectives

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Describe the buying-center concept Explain roles of various participants within a buying centre What are Buying Center Dimensions Clues for Identifying Powerful Buying Center Members Determinants of influence within the buying center Buying Centre Analysis
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Buying center concept

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Major task industrial marketer facing is identifying those individuals who are involved in purchasing decision process. In industrial marketing, group of individuals involved in purchasing decision process are referred to as - Buying center

The Buying Center

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Consists of those individuals who participate in the purchasing decision and who share the goals and risks arising from the decision Average buying center includes more than 4 persons per purchase
Buying Centre is an informal, cross-departmental decision unit in which the primary objective is the acquisition, impartation, and processing of relevant purchasing related information
Speckman and Stern, p56 - Journal of Marketing 43, 1979

Buying Centers Members

Buyer User Influencer Gatekeeper Decider

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Buyer

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Formal authority in the selection of suppliers and in the implementation of procedures involved with purchasing Member of purchasing department Influences the vendor selection (not in technical details) Main criteria: price + terms and conditions of the contract In complex purchasing, buyers might include high level officers of the company who may welll be the decision makers. Major role is in selecting suppliers and negotiating purchases within buying constraints.

User

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Person using the product Interested in benefits and unobstructed function of the product to buy Large knowhow and preconceived opinion May exert from a minor to a significant degree os influence on the purchasing decision May play an important role in defining product specifications

Influencer

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Individuals inside or outside the organization who influence the decision making process (directly/indirectly) by providing information on criteria for evaluating buying allternatives or by establishing product specifications Normally a person with high technical knowledge and practical experience Technical people, such as Design Engineers and Quality Control Inspectors, typically have significant influence on the purchase decision Individuals outside the organization, such as architects who draw up buliding specifications, may also assume this role

Gatekeeper

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Controls the flow of information within the buying center Done by controlling printed information and controlling which sales persons are allowed to speak to individuals within the buying centre Influence by preparing the relevant documents Assistant of decision maker Often, P.A. / Junior person attached to purchase head is the gatekeeper.

Decider

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Members who have formal or informal authority who atually make the buying decision Right to say yes or no Identifying deciders or decision makers is often the most difficult task In routine purchases of standarad items, the buyer is usually the decider (can be a junior person) In complex purchasing decisions, the officers of the company are often the deciders. An engineer who designs specifications such that only one vendor can meet them, becomes in effect an informal decision maker.

Buying center Roles

Primary roles Deciders Influencers Secondary roles Users Buyers Gatekeepers - CONTROLLER - R&D ENGINEER

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- WORKER - PURCHASER - Asst to PURCHASING MANAGER

Contribution to Purchase Decisions byABS Buying Centre Members

Who originates the initial decision? Who surveys alternatives and determines the basic characteristics of the product required? Who identifies potential suppliers? Who collects tenders/information from suppliers? Who evaluates products offered? Who authorises the purchase? Who finally chooses the supplier? Who monitors and evaluates the performance of both the product and the supplier? Who is most likely to initiate decisions to change supplier? Who finally decides on a change in supplier and selects the new supplier?

Buying Center Dimensions

Time

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Time fragmentation: length of time people are in the buying center. Limits members influence Can lengthen decision making time due to inexperience

Vertical
Layers of management involved

Horizontal
Number of departments involved

Activity

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As a Automobile manufacturer you want to buy three things Tyres ( Straight Rebuy) Alloy Wheels (Modified Rebuy) Engine ( New Task Buy) As a Supplier please identify various members of the buying centre and highlight their role in the purchase for each of the specified items

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Buying Center Influence Matrix

Phase
Need identification

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New Buy
Engineering Purchasing R&D Production Engineering Purchasing Production R&D Engineering Purchasing R&D Purchasing Engineering R&D Quality control

Modified Rebuy
Purchasing Production Engineering Engineering Purchasing Production R&D Quality control Purchasing Engineering Production Purchasing Engineering Production

Straight Rebuy
Production Purchasing

Establishment of specification

Purchasing Engineering Production

Modification & evaluation of buying alternatives Supplier selection

Purchasing Engineering Production Purchasing Engineering Production

Source: Industrial Marketing Management Vol 13: by Naumann, Lincolln Mc Williams

Influence patterns vary

Type of company
Chemical manufacturer

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Equipment purchase
Heat exchanger

Central Figure
Purchasing manager

Industrial safety products mfr. Cement Manufacturer

Automatic drilling machine Forklift truck

Engineer & VP of mfg.

General Manager and VP

Water transportation and construction companies

Locomotive Crane

Purchasing manager

Influences on Business Buyer Behaviour ABS

Organizational:
How does the company buy? Who is involved? What are their primary objectives? Companies will differ in their culture and the importance they attach to the purchasing process Large companies tend to be more formal

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Influences on Business Buyer Behaviour ABS

Interpersonal:
Regardless of process, companies are still made up of people Finding the real decision maker within an organization can be a challenge for the salesperson Authority to buy may be different from responsibility to buy Companies today want value-added relationships: What can you do for me today? Which of my problems can your companys products solve?

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Influences on Business Buyer Behaviour ABS

Individual:
Buying styles will vary depending on the age, education, personality, and attitude towards risk of the buyer The needs of the situation, and the consequences of making a bad decision will play a role in how purchasing is handled Policies and procedures in use will influence how much discretion an individual will have in the buying process

Clues for Identifying Powerful Buying Center Members

Isolate the personal stakeholders Follow the information flow Identify the experts Trace the connections to the top Understand purchasing managers role

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Buying Centre Analysis

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Buying centre members selectively participate in purchasing decision processes They have different choice criteria They possess different levels of purchase knowledge Their degree of involvement shift with the phases of the buying process Their influence and authority shift from one buying activity to the other

Special dealings between buyer and seller

RECIPROCITY. It means buying a product / service from a customer and selling a product / service to a supplier. eg. Computer manufacturer buys all computer paper from forest products company that uses their computers eg. Ford executives rent cars from Hertz - cause Hertz uses Ford cars !

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DEALING WITH CUSTOMERS CUSTOMERS With coordination and planning, a business marketer can promote its products to customers customer, if a need arises. Eg. Aircraft engine manufactures promote their engines to Air lines (aircraft buyers), in addition to aircraft manufacturers.