Q1. Patrick J.

Robinson and his associates identified the organizational

buying process. Explicate the organizational buying stages and give
appropriate examples for each stage.

Organization buying is the decision making process by which formal organizations

establishes the need for purchased products and services and identifies, evaluate, and
choose among alternative brands and suppliers.(Webster and Wind)
Patrick J. Robinson and his associates identified eight stages and called them buy phases.
In the first stage the company identifies a need, for which the answer is the purchase of
product. The final step is the execution of purchase contract. The objective of this process
is to purchase the right product for the company need from a qualified supplier.

Stage 1. Problem recognition

The buying process begins when someone in the company recognizes a problem or need
that can be met by acquiring a good or service. It associates with the attainment of an
organization’s objectives. Both business and non-profit organizations purchase goods and
services in order to either directly or indirectly help them achieve their organizational
objectives. Consequently, any type of organization will be motivated to make a purchase
only if the purchase fills a need which is somehow linked with the attainment of their
objectives. The procurement process is triggered when the organization recognizes a need
or a problem that can be filled or satisfied with the purchase of a good or service.
E.g. East Africa’s biggest Cement factory Dangote Cement Ethiopia recognizes
its shortage of heavy vehicles for distributing its cement product from its location
of Muger town to Addis Ababa and the rest of Ethiopian regions.

Business marketers can stimulates problem recognition by direct mail, calling on

prospects and by other kinds of means.

Stage 2. General need description

The buyer determines the needed items general characteristics and required quantity. For
standard items, this stage is simple. For standard items, this process presents few
problems. For complex items, the buyers will work with others professionals, to define

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 ncerpsifioltiutadgf-vwbhm
characteristics of an item. The team may want to rank the importance of reliability,
durability, price, and other attributes desired in the item.
E.g. After communicating and analyzing daily production plan and expected
activity the Buying Center or DMU of Dangote Cement Ethiopia decide the
purchase of 500 heavy trucks that will transport cements.

Business marketers can help by describing how their products meet or even
exceed the buyers need, and provide information about the value of different
product characteristics.

Stage 3. Development of specification to guide

procurement

At this stage of the business buying process

buying organization decide on the product and
specifies the best technical product characteristics
for a needed item. The buying organization now
develops the item’s technical specifications.
Often the company will assign a product value
analysis team to the buying project. Product
Value Analysis (PVA) is an approach to cost
reduction that study whether components can be
redesigned or standardized or made by cheaper
methods of production without adversely impacting product performance.

Fig. 1. Stages of business buying process

E.g. the technical department of Dangote Cemenet Ethiopia made a specification

of what kind, capacity and needed vehicles to solve their problem of distributing
their cement. They agree on relatively cheaper price vehicles which meet the
required standard in order to reduce capital expenditure cost.

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 Stage 4. Search for and qualification of potential sources

At this stage of the business buying process buyer tries to find the best vendors. The
buyer next tries to identify the most appropriate suppliers through trade directories,
contact with other companies, trade ads, trade shows, and the internet.

E.g. the Buying Center or DMU of Dangote Cement Ethiopia announce

international bid and found three potential suppliers. They are IVECO, SINO
TRUCK, and MERCEDES.

stage 5. Acquisition and Analysis of Proposal/Proposal Solicitation

The buyer next invites qualified suppliers to submit proposals for complex and expensive
products. The proposal will be written and detailed. After evaluating the proposals the
buyers will invites a few suppliers to make formal presentation.

E.g. the Buying Center of Dangote Cement Ethiopia arrange meeting for the
chosen three potential vehicle suppliers to submit their proposals and make
presentation about the general business agreement.

Business marketers must be skilled in researching, writing and presenting

proposals. Written proposal should be marketing documents that describes values
and benefits in customer terms. Oral presentation must inspire confidence and
position the company’s capabilities and resource so they stand out from the
competitors.

Stage 6. Supplier selection

Supplier selection stage is the stage of the business buying process in which the buyer
reviews proposal and selects a supplier or suppliers. Before selecting suppliers, the
buying center will specify and rank desired supplier attributes, often using a supplier
evaluation methods.

e.g. the Buying Center of Dangote Cement Ethiopia chose SINO TRUCK after
reviewing the different attributes, including price, of the products and things

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 which make the company benefit from the vehicle comparing with the other
compiting products of IVECO and MERCHEDIS.

stage 7. Order Routine Specification

After selecting suppliers, the buyers negotiated the final order listing the technical
specifications. The quantity needed, the expected time of delivery, return policies,
warranty and so on.

In the case of maintenance, repair and operating items, buyers are moving forward
blanket contracts rather than periodic purchase orders. Blanket contract establishes a long
term relationship in which the supplier promises to resupply the buyer as needed, at
agreed upon prices, over a specified period of time. Companies that fear a shortage of key
materials are willing to buy and hold large inventories.

E.g. Dangote Cement Ethiopia finally agreed on the delivery time, warranties and
other needed contracts and ordered 500 heavy SINO TRUCKS to achieve its
distribution objective.

Business marketers are must setting up extranets with important customers to

facilitate and lower the cost of transaction.

stage 8. Performance reviews

The buyers periodically review the performance of the chosen supplier’s using one of
three methods. The buyers may contact end users and ask for their evaluation. Rate the
supplier on several criteria using a weighted score method, or aggregate the cost of poor
performance to come up with adjusted costs of purchase, including price. The
performance review may lead buyer to continue, modify, or end a supplier relationship.

e.g. Dangote Cemenet Ethiopia continually reviews the contract with SINO
TRUCK company and after looking same satisfactory situation it ordered another
6 SINO trucks which uses for bulk cement carriers.

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Q.2. Business-to-business marketing requires a special, unique set of
marketing concepts and principles vis-a-vis consumer marketing. Argue
in favour or against of this statement drawing sound evidences from the
practical world.

Business marketing is the marketing of products and service to organizations rather than
to households or ultimate consumers. The purchases are made, not for self gratification,
but rather to achieve organizational objectives. It consist all the organization that acquire
good and service used in the production of other products or service that are sold, rented,
or supplied to other.

Before going any further, look back at the various concepts stated in the marketing books.

What are the key concepts in many modern marketing? Indeed, it is satisfying
consumer need through the marketing mix (4P’s), putting the right product, in the
right place, at the right price, at the right time.

Marketing is about satisfying customer. Consumers may be divided in to ultimate

consumers and industrial/business consumers (ultimate consumers are end users and
business consumers are other businesses who buy a product to add values). Both
business marketing and consumer marketing uses modern marketing principle and
concept aimed at satisfying consumers’ need through applying the 4P’s of marketing
mix. The whole purpose of marketing (for both business and consumer marketing) is to
deal with consumer requirements and achieving their business objectives.

Almost all marketing concept lies on the sight of consumers. The modern marketing
concept is considers the consumer as the sole factor around whom the whole business
activity clusters. Every action is consumer-oriented. What consumer wants, at what price
the consumer wants, what satisfies the consumer and to what extent competitors are
trying to attract consumer are some of the concept which every marketing management
deal with. So, it is recognized that from the basic marketing concepts and the marketing
mix, there is a crucial element which a marketer must remember. That is satisfying
consumer need.

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 The above notion relate with the general and modern concept of marketing. The basic
marketing concepts and principles apply to both B2B and B2C market environment, so
there is no new and unique marketing concept and principle which differentiate B2B with
B2C. Only the application of the marketing strategy on B2B and B2C needs to be adapted
accordingly. The objective of marketing is to identify and satisfy the needs and wants of
targeted customers, better than competitors. The targeted customers of B2B are the
organizational buyers. Business marketer faces the same challenges of consumer
marketer.

However, there are a few aspects of business market which are undoubtedly differing
from consumer market. Here I described different factors and point that I believe
business-to-business marketing requires a special, unique set of marketing applications
vis-à-vis to consumers market.

In general, Business marketing is unique in their channels of distribution. It is shorter and

more direct; as a result it emphasizes on personal selling and negotiation rater other
promotional mix elements. In B2B the Web is fully integrated, and complex buying
processes result in unique promotional strategies. The business market also has few and
larger buyers, i.e. the purchase quantity will be large. And the buyer is unable to take any
risk of errors, because it may be part of the organization’s cost saving strategy. The
business market is conventionally involves the business market structure and market
demand; the nature of the buying unit within the organization; and the type of decisions
and the decision process involved. Among many unique characteristics of B2B some are,

 Business marketing have more complex decision making unit: in consumer

market usually involves one person. The decision marking unit in business
marketing is highly complex. The complexity and dynamism has implications
for business-to-business. The target audiences for B2B communications are
made up of groups of constantly changing individuals with different interests
and motivations. Buyers seek a good financial deal. Production mangers want
high throughput. Safety executives want low risk.

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  B2B marketing is more “Rational”: B2B marketing decision is based on the
principle of realistic decision. Not decide by their emotional benefit rather it
focus on economic and other rational benefit of the business.
 B2B has few but larger buyers: The business marketer normally deals with
far fewer, much larger buyers than the consumer market does. Purchases by
organizations such as companies, government agencies, and institutions
account for more than half of the economic activity in industrialized countries
such as the United States, Canada, and France, making business marketing an
important activity. Researcher estimate the B2B marketing is four times larger
than B2C market.
 B2B products are often more complex: where the purchase of a consumer
product requires little experts, the purchase of an industrial product frequently
requires a qualified expert. The key for the B2B marketer is to be fully
informed in relation to the product or service being sold. This understanding
must cover not only the ‘technical’ details of the offering, but also the
extended offer including after sales service, problem resolution, client
management team, etc. as a result, B2B salesperson are often extremely
experienced and originate from a technical discipline.
 Personal relationships are more important in B2B markets: an important
distinguishing feature of business-to-business markets is the importance of the
personal relationship. B2B marketing consist few buyers compare with B2C,
due to this marketers focuses on personal selling with close negotiation to
retain these few key customers.
 It is a formal activity: The purchases are made according to certain
procedures, rules and regulations. All the activities are carried out in a judicial
manner and with the consent of the committee.
 There is a longer time lag between efforts and results: In individual
buying, the sales and the purchase may not last more than a few minutes, but
in industrial buying, a lot of procedures have to be followed. These procedures
lead to time delays. It takes long to ask for quotations and tenders—once all

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 the tenders have been submitted, a date is fixed for opening the tenders, which
is intimated to the parties concerned.

In conclusion, a special and unique sets of marketing concepts and principles is not
necessary for B2B, only application process may be adapted. The objective of marketing
is to identify and satisfy the needs and wants of targeted customers. Such as, B2B’s target
customers are other businesses and B2C’s target customers are ultimate users.

Q.3. What do you mean by Business Market Segmentation? Examine the

different approaches of Business markets Segmentation and explain the
criteria of effective Business market Segmentation.

Many firms will have business target markets in addition to consumer target market. The
approach to business market segmentation is conceptually similar to the approach for consumer
marketing. As we know, while business markets have less potential customers (as opposed to
consumer markets),  B2B firms still need to be selective when determining their strategic
approach to the market. This is because it is common for a B2B firm to have substantial
investment costs and will often need to implement labor-intensive promotional strategies.

Business market segmentation is the practice of dividing a business market into distinct
groups of buyers with similar requirements and that will respond similarly to a specific
set of marketing actions. It is the foundation of the marketing strategy process and the
driver of resource allocation. The fundamental of marketing are the same fundamentals of
segmentation. Know your customers, know how they differ, and etc.

A B2B marketer must be able to distinguish between the industries it sells to and the
different market segments that exist in each of them. There are several basic approaches
to segmenting organizational markets, including type of customers, including type of
customer, standard industrial classification codes, end users, common buying factors, and
buyer size and geography.

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 Approaches to market segmentation
Fundamental means of segmenting business markets include:
Macro/Micro Segmentation:
Macro segmentation involves dividing the market into subgroups based on over
all characteristics of the prospect organization:
- The size of buying units
- Type of industry, and
- Location

Micro segmentation, on the other hand, involves dividing the market into
subgroups based on specific characteristics of the decision-making process and
the buying structure within the prospect organization: includes

- buying-center authority,
- attitudes toward vendors, and so on

Nested approach: the nested approach stresses segmentation according to the

amount of investigation required to identify and evaluate different criteria. Criteria
include company variables (operating and purchasing), situational factors, and personal
characteristics. The nested approach assumes a hierarchical structure that moves from
broad, general bases for segmentation to very specific bases. In other words, more
specific customer characteristics are nested inside the broader organizational basis.

The advantage of the nested framework is that encourages clear thinking about B2B
market and also serves to point out areas where more research is needed.

Segmentation for maturing markets: In mature markets, some try to segment

on size, industry, or products alone. However, segmenting on these variables alone, while
often done, is rarely sufficient. Customer behavior in terms of trade-offs between price
and service is an important additional criterion. Considerable value can often be gained
by attempting to move toward buying-behavior based segmentation.

Segmentation by purchase responsibilities of individuals within

organizations: Knowledge that a firm's market may be segmented by purchase

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 responsibilities may lead to more effective deployment of marketing resources. The use
of purchase responsibilities to classify organizations represents an attempt to reduce some
of the complexity involved in understanding the concept of the buying center. Different
kinds of organizations may give rise to different kinds of buying centers, at least insofar
as purchase responsibilities within the buying center are concerned.

Other Approaches to Market Segmentation:

- Type of Economic Activity

- Size of Organization
- Geographic Location
- Structure of the Procurement Function

Criteria of effective business market segmentation

Under listed criteria must be met for pinpointing a market and its subcategories. The
market and its specific segments should be:

Measurable: means that information on location and other characteristics of

buyers is available. The size, profile and other relevant characteristics of the
segment must be measurable and obtainable in terms of data.

It has to be possible to determine the values of the variables used for segmentation
with justifiable efforts. This is important especially for demographic and
geographic variables. For an organization with direct sales (without
intermediaries), the own customer database could deliver valuable information on
buying behavior (frequency, volume, product groups, mode of payment etc).

Substantial: a given market is substantial when it is sufficiently large in size

and /or is likely to have future potential. The segments should be generating
required returns. Activities with small segment will give a biased result or
negative results.

Accessible: means that a supplier can retain old customers and pinpoint new ones.
The segments have to be accessible and servable for the organization. That means,
the customer segments may be decided considering that they can be accessed
through various target-group specific advertising media such as magazines or
websites the target audience likes to use.

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 Stable: implies that customers have staying power and that a relationship can be
established between supplier and clients. The segments must be stable so that its
behavior in the future can be predicted with a sufficient degree of confidence.

Compatible: is the degree of similarity between sellers and buyers in regard to

risk taking, service standards, and corporate style.

Actionable or feasible: it has to be possible to approach each segment with a

particular marketing programme and to draw advantages from that. The segments
that a company wishes to pursue must be actionable in the sense that there should
be sufficient finance, personnel and capability to take them all. Hence, depending
upon the reach of the company, the segments must be selected.

Q.4. Discuss the notion of telescopic marketing and explain the various
roles that the DMU (decision making units) play in the purchase of an
industrial product. Which party plays a critical role in the purchase of an
industrial product? Why?

Telescopic marketing is technique using promotion to increase derived demand for a

business marketer's product or service. In telescopic marketing, the marketer stimulates
direct demand for an end product containing the marketer's product. This in turn
increases derived demand for the business good or service. Thus telescopic marketing is
something more than a simple pull promotion strategy.

There are major factors that permit the use of telescoping marketing are the following:

- Telescopic marketing is a feasible strategy for products or processes that

are patentable or that have high entry barriers.
- Telescopic marketing is made much easier if the business marketer's
customers represent a high market share in the industry.
- Telescopic marketing is likely to bring the greatest derived-demand
benefits if current penetration of end markets is small.
- The state of the economy is another variable affecting the feasibility of a
telescopic marketing strategy. Since the marketer's benefits depend solely

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 on the sale of other companies; products, telescopic marketing is more
risky in a poor economy.
- It is extremely difficult to use telescopic marketing effectively if the
transition costs to channel members are high.

In organizational buying, it is rare for one person to be solely responsible for the buying
decision. Thus, understanding the dynamics of interpersonal influence that drive the buying
process may play a key role on formulating successful business marketing strategies. DMU
(decision making unit) or buying centers are groups of people within organizations who make
purchasing decision.

Buying center roles are those of initiator, user, decider, influencer, buyer, and gatekeeper.

Initiator: is the person who recognizes that the company has a problem or
requirement. The initiator is not always someone inside the buying
company because the company may not realize that it has a problem or
may be unclear as to its requirements. Buying companies often rely on the
technological knowledge of their suppliers. In this case a salesperson from
a potential supplier may initiate the buying process by pointing the current
problem or possible improvement. The potential users of a product may
also initiate the purchase process or may act to constrain the process.

Are the people within the organization who first see the need for product.
Buy they don’t stop there; whether they have the ability to make the final
decision of what to buy or not, they get the ball rolling. Sometimes thy
initiate the purchase by simply notifying purchasing agents or what is
needed; other times they have to lobby executives to consider making a
change.

Users: Those who will use the product in question. Their influence on the
purchasing decision can range from minimal to major. In some cases users
begin the purchase process and even develop product specifications. They
may favor a particular supplier so strongly that they act as de facto
deciders.

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 An example of a user might be AAU Commercial School’s teachers who
want to adopt an electronic book and integrate it into their online course.

Gatekeeper: Those who keep a tight control on the flow of information to other
members of the buying center. They can open the gate to members of the
buying center for some salespeople, yet close it for others. Most
commonly, the buyer is the gatekeeper, or first point of contract for the
salesperson.

If you want to sell a product to a larger company like Ethiopian Air lines,
you can’t just walk in the door of its corporate headquarters and demand
to see a purchasing agent. You will first have to get past of a number of
gatekeepers, or people who will decide if and when you get access to
members of the buying center. These are people such as buying assistants,
personal assistants, and others individuals who have some say about which
sellers are able to get a foot in the door. Gatekeepers often need to be
counted as hard as prospective buyers do. They generally have a lot of
information about what’s going on behind the scenes and a certain amount
of informal power. If they like you, you are in a good position as a seller.
If they don’t, your job is going to be much harder.

Influencer: Those who provide information to buying center members for evaluation
alternative products or who set purchasing specifications. Normally,
influencers operate within the buying center, such as quality control or
research and development personnel. Yet, at other times influencers
operate outside the buying center, such as architects who create very
specific building requirements.

Decider: Those who, in reality, make the buying decision, regardless of whether
they hold the formal authority. A decider often is quite difficult to identify
since a decider can be a company president, a purchasing director, or a
research and development analyst.

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 The decider is the person who makes the final purchasing decision. The
decider might or might not be the purchasing manager. Purchasing
managers are generally solely responsible for deciding upon routine
purchases and small purchases. However, the decision to purchase a large,
expensive Business product that will have a major impact on a company is
likely to be made by or with the help of other people in the organization.
Sellers pay special attention to what deciders want. “Who makes the
buying decision?’’ is a key question B2B sales and marketing personnel
are trained to quickly ask potential customers.

Buyer: Those who are assigned the formal authority to select vendors and
complete the purchasing transaction. Sometimes other more powerful
members of the buying center take the prerogative of the buyer. A
purchasing manager who carries out the clerical duties of the purchase
order is the role of the buyer. For many repeat purchases or lower-value
items, the buyer will be the sole member of the buying center. For the
purchase of major capital equipment, the buyer's role may simply be to
search for and evaluate suppliers and to present this data to other center
members.

Business product buying processes are characterized by multi-person involvement levels,

extensive internal and external coordination effort, and long lead times. All parties play a
critical role. But the level of critical role may differentiate among member participants.

Perhaps most of the time influencers play a critical role in the purchase of an
industrial product. Influencers are central to the information flow that surrounds
the purchase decisions. They do know products’ information more than any other
member participant. They include a lot of powerful individuals like engineers,
researchers and product manager. These powerful individuals have direct access
to top management that provides a direct link to valuable information and
resource and enhances the status and influence of those individuals within the
buying center. They have the ability to affect what is ordered such as setting order
specifications.

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 For example, let exclude one buying center role from a single buying decision.
Initiator may recognize need/problem, but the company could recognize
need/problem without initiators based on different mechanism (e.g. estimating
machinery production level). If there is any machinery need/problem it could be
recognized by observing the outcome of current operating machine. The same is
applied on different roles. If there is no buyer the company may outsource buying
specialist to supply existing need. Deciders could be participated form different
company’s department. We can get the service of gatekeepers from outside as
well. But it is difficult to get influencer role either form outside or inside the
company. They are specialist and know what product can fulfill the existing need.
So influencers play critical role than any other member in purchase of industrial
product. As thump is powerful as compare with our other fingers, influencers are
powerful when compare with other buying centers.

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