BIMM 12-14 - B2B MKTG - 02a Purchasing Styles (Students' Copy)

Session 02a
Organizational Buying
– Purchasing Styles
Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a
Agenda
 Purchasing styles of different customer segments

– Businesses
– Government bodies
– Institutions
1
Reading
 Business Marketing Management: B2B

(Hutt, Speh)
– Chapter 2: The Business Market – Perspectives on the
Organizational Buyer
 Industrial Marketing
(Krishna K Havaldar)
– Chapter 2: Understanding Industrial Markets and
Environment
– Chapter 3: The Nature of Industrial Buying and Buying
Behavior
Customer Segments
2
Customer Segments
 Businesses (Commercial enterprises)
 Government bodies
 Institutions
Businesses (Commercial Enterprises)
3
Businesses: Well-classified
 Examples of classification systems

– NAICS
• North American Industrial Classification System
– NACE
• Statistical Classification of Economic Activities in the
European Community
– UK SIC
• United Kingdom Standard Industrial Classification of
Economic Activities
– ANZ SIC
• Australian and New Zealand Standard Industrial
Classification
Businesses: Availability of Databases
 Examples
– Directories
• Industrial Directory of Pune (www.mcciapune.com)
• Directory of Indian Electronics Industry (www.elcina.com)
– Online interactive databases
• The Indian IT Industry (NASSCOM) (www.nasscom.in)
• Factiva (Dow Jones) (www.factiva.com)
• OneSource (www.onesource.com)
• Hoovers (D&B) (www.hoovers.com)
4
Businesses: Geographically Concentrated
 Examples:
– Automobile industry is concentrated in 4 clusters
• Pune, Nasik, Aurangabad (West)
• Gurgaon, Manesar, Delhi (North)
• Chennai, Bengaluru, Hosur (South)
• Jamshedpur, Kolkata (East)
– Diamond cutting industry is mainly in
• Surat, Bhavnagar, Ahmedabad, Navasari, Mumbai
– IT companies are mostly in and around
• Mumbai, Pune, Bengaluru, Hyderabad, Delhi, Gurgaon,
Kolkata, Chennai
Businesses: Availability of Marketing Platforms
5
6
7
Businesses
 So, for a B2B marketer…
… it is a fairly well-defined, identifiable and

approachable market
8
Purchasing in Businesses
 Goals of purchasing
– Business goals
– Personal goals
Ensure uninterrupted flow of materials
Achieve lowest total cost
Improve quality Advance

Business firm’s
Goals competitive
Manage inventory position
Develop and manage supplier relationships
Reduce administrative costs
9
– Personal goals
• Job security
• Promotions
• Increments
• Higher status
• Enhanced image among colleagues/peers/bosses
:
:
:
 Concept of “total cost”

– Total cost of ownership over the product’s life cycle
• Purchase price
• Cost of acquisition (incl. purchasing process, transportation)
• Inventory carrying cost
• Maintenance/repair cost (especially for foundation goods)
• Cost of changes to production processes, if any
• Training/retraining charges; Time costs (person-days
invested in training)
• Financing cost
• and so on…
10
 Involvement of several departments

– Purchasing
– Manufacturing
– R&D
– Stores
– Quality
– Finance
– Marketing
:
:
:
 Purchasing orientations
SCM Orientation
• Role of purchasing:
Strategic; Value-adding
Procurement Orientation operation
• Aim: Cost reduction and • Deliver value to end
quality improvement customers
• Collaborative relationships • Seamlessly work with
with major suppliers marketing, R&D,
Buying Orientation manufacturing…
• Lowest price • Outsource non-core
• Tactics used: Commoditization, Multisourcing activities
• Risk avoidance (risks such as criticism, penalization)
Source: “Marketing Management” by Philip Kotler
11
 Levels of procurement development
Leveraged Linked Value Buy Integrated

Buy Buy Sell
• Buy for • Buy • Consume • Sell
Less Better Better Better
Source: “Business Marketing Management: B2B” by Hutt and Speh
Government
12
Government Procurement
 Subject to public scrutiny (RTI)

 Susceptible to social, political pressures
 E-Governance
– Transparency, Accessibility, Efficiency, Customer service
 Quantum of government procurement

– Around 15% of GDP *
* Derived from: Websites of Planning Commission (India) and Office of the U.S. Trade Representative
Purchasing in Government Bodies
 Tendering process
– Open tenders
• Routine purchases
• Several suppliers
– Closed tenders
• Specialized equipment/services purchases
• Few suppliers
 e-Procurement
13
Purchasing in Government Bodies (e-Procurement)
14
15
16
 More bureaucratic process than in businesses
 May be open only to indigenous suppliers
 “Registered” suppliers
– “In” and “Out” suppliers
 Influenced by government’s policy guidelines
 Final decision based on lowest price (in most cases)
 Preference to certain categories, for example

– Suppliers from minority communities
– Rural entrepreneurs
– Women entrepreneurs
 Several “interested” parties
17
 Defense Procurement
– Two broad categories
• Core equipment, technology, arms, ammunition…
– Buy / Buy-and-Make / Make
– Highly specialized and “closed” procurement process
• Routine purchases (COTS products)
– More “open” procurement process
18
 Defense Procurement – “Make”
Ammunition Factory Khadki (AFK)

Cordite Factory Aruvankadu (CFA)
Engine Factory Avadi (EFA)
Field Gun Factory Kanpur (FGK)
Gun Carriage Factory Jabalpur (GCF)
Ordnance Clothing Factory Avadi (OCFAV)
Ordnance Factory Tiruchirapalli (OFT)
Rifle Factory Ishapore (RFI)
:
:
:
How to do Business with Government Bodies?
 In many cases, the information is available from the

government itself!
19
20
Institutions
21
Institutions
 Schools, colleges, universities, hospitals, R&D

organizations, libraries, museums…
 Bulk of the staff comprises of “professionals”

– Teachers, doctors, curators, scientists…
 Two broad categories

– Private institutions
– Government / public institutions
Purchasing in Institutions
 Private institutions
– Akin to purchasing in businesses
 Government / public institutions

– Akin to purchasing in government bodies
 Group purchasing for better bargaining power
22
What We Covered Today
What We Covered Today
 Characteristics of customer segments
 Purchasing in
– Businesses (Commercial enterprises)
– Government bodies
– Institutions
23

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Session 02a

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

 Purchasing styles of different customer segments

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

 Business Marketing Management: B2B

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

 Businesses (Commercial enterprises)

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

Businesses (Commercial Enterprises)

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

 Examples of classification systems

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

Businesses: Availability of Databases

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

Businesses: Availability of Marketing Platforms

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

Businesses: Availability of Marketing Platforms

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

Businesses: Availability of Marketing Platforms

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

 So, for a B2B marketer…

… it is a fairly well-defined, identifiable and

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

Achieve lowest total cost

Improve quality Advance

Develop and manage supplier relationships

Reduce administrative costs

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

 Concept of “total cost”

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

 Involvement of several departments

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

 Levels of procurement development

Leveraged Linked Value Buy Integrated

Source: “Business Marketing Management: B2B” by Hutt and Speh

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

 Subject to public scrutiny (RTI)

 Quantum of government procurement

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

Purchasing in Government Bodies

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

Purchasing in Government Bodies (e-Procurement)

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

Purchasing in Government Bodies (e-Procurement)

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

Purchasing in Government Bodies (e-Procurement)

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a

 More bureaucratic process than in businesses

 May be open only to indigenous suppliers

 Influenced by government’s policy guidelines

Girish Ketkar B2B Marketing @ BIMM 2012-14 Semester 1 Session 02a