Day 1 – 2nd Session Sven Moeller

1 The ”Character” of Business

2 The Purchasing Function

3 Buyer Behaviour and Decisions in

Organizations
The High Level Purpose

The high level purpose of ALL MARKETING:

ü Create a “positioning” (image / perception) in the minds of customers of the item
being marketed

ü Significantly influence customers to spend their money on the item being marketed.

ü Thereby “managing profitable customer relationships “

1/2 What is it?

} Is the marketing of Goods and Services to CUSTOMERS such as

§ Companies / Producers / OEMs
§ Institutions (Hospitals, Universities, NGO’s, Charity)
§ Distributors (Wholesaler, Retailer)
For the Purpose…

} Use in producing their products and/or to facilitate their

operations by “adding value”.
2/2 What is it?

} “Adding value“ always from the CUSTOMER’S point of view.

} CUSTOMER only pays for:

1.

2.

3.

} For B-to-B the customer is an organisation not an individual

2/3 What is it?

} Business Marketing is about “adding value” to a direct

customer’s own process
v Value = what the customer is prepare to pay for
v Process = Input Process Output

} By understanding the direct customer’s position in the

Supply Chain
Demand

} The law of demand says that at

higher prices, buyers will demand
Supply
less of an economic good.
Supply curve is a symbolic

D
The law of supply says that at higher

em
}
representation of the

an
Equilibrium means relationship between price of
prices, sellers will supply more of an

d
there is a balanced goods and its available supply.
economic good. quantity for both
demand and supply
pply
} These two laws interact to determine Su
the actual market prices and volume
of goods that are traded on a Price Demand

market. Demand curve illustrates the

relationship of the amount of
} Several independent factors can goods people are willing and
affect the shape of market supply able to purchase and the price,
considering that all other
and demand, influencing both the factors remain constant. .
prices and quantities that we observe
Quantity
in markets.

IT IS ALL ABOUT DEMAND! (Wants & Need + Affordability)

Derived Demand

} DERIVED DEMAND
v Derived demand is related solely to the demand placed on a good or service for
its ability to acquire or produce another good or service.
v The demand for a company’s products comes from the (derived) demand for their
customers products.
Example: The demand for BASF’s carpet treatment product is derived from the demand
for building (new homes), vehicles and other products that use carpets as well as the
demand for remodelling existing facilities and homes
v Ultimately the END CONSUMER determines ALL demand!
v Need to understand the “demand” links along the “supply chain”!
} JOINT DEMAND:
v Two (or more) products are used together Textbook Chapter 1 Introduction to Business
Marketing:
Pages: 18 – 20
Relationship Management

} IT IS ALL ABOUT RELATIONSHIPS (Exhibit 2-2 pg 36 ) !

B2B Marketing depends on: ROUG H

} T
TO
E ADS
L

C AUSE
BE
Unique, personalized
promotional
strategies and the of
Emphasis on IT and Internet
Personal Selling
Fewer customers, Shorter
Distribution Channels &
Complexity of the Buying Process
Close Business and
Personal Relationships
Relationship Management

} IT IS ALL ABOUT RELATIONSHIPS

} The horizontal axis represents the
possibilities of buyers. The buyer
can be highly motivated to
establish & maintain a relationship
with a sole source supplier or a
small set of vendors.
} The vertical axis shows that a seller
has a similar range of stakes in a
relationship.

Textbook: Chapter 2 (Exhibit 2-2)

pages 35& 36
Critical Questions

Four critical questions for a successful – more retained & new

customers – B2B Marketing Programme:
1. Who are our Customers ?
2. What do our customers want / need and why?
3. How do the Buyers make their Buying Decisions?
o What is the process & who are the Participants

4. What STRATEGY (using marketing mix 4 P’s) is most

appropriate??
• The Offering, product variety • Cost to customer
• How it meets customer wants & needs • Cost & profit to Seller
• Features & Design & Size • Payment & Credit Terms
• Quality • Discounts
• Branding & packaging & Labeling • Allowances
• Services & warranties & Returns • Pricing & Strategy

MARKETING MIX

• Sales promotion: How product • The Way product meets the custom
benefits & features are conveyed • Location & Transport
to potential buyers • Assortment & Inventory
• Advertising / Sales Force • Market Coverage
• Public relations • Channels
• Direct marketing
Relationship Development Process

} Aim at developing a HIGH PERFORMANCE RELATIONSHIPS

} from PURE transactional to FULL partners!

SELLERS BUYERS
• Large Volumes DEVELOP • Reliable Quality
A
• Same Amount • Reliable Delivery
COMMON
• Same Quality GROUND • Flexibility
• Limit Selling • Low Price
• Support Cost
The Relationship Development Process

Textbook: Chapter Exhibit 2-4

pages 42 onwards
Suggestions for Building Lasting Relationships

} Make regular site visits not just phone calls

} Swop personnel and offices! (Different venues)
} Manage “total” dependence with other “suppliers”
} Create joint venture etc.

} Develop a “relational” contract

} E.g. Tender for 3 years; long-term contracts

} Share functions / technology

} Share personal interests
} Family details, Celebrate birthdays, etc.)
Exercise

} Case study: Marketing in the Hardwood Industry

} Course Pack: Page 50 – 52
} Group Work

} Answer all 4 questions:

1. Why is it important for firms that produce and supply hardwood to adopt a
marketing concept?
2. What are some of the ways hardwood products can be adapted to meet value
added market needs?
3. What are the marketing mix variables that a hardwood supplier can control?
4. What are the target markets for US suppliers to the Canadian market?
Textbook – Chapter 3
Objective & Deliverables

The key objectives & deliverables for ANY Purchasing Function are:

1. Appropriate levels of product supply and its delivery timing (O.T.I.F.- SERVICE)
2. Appropriate level of “QUALITY”
Tolerances / Certificates / Specification / Criteria / Test / Packaging

3. Lowest level of TOTAL COST

Companies usually spend more than half of their sales on purchased parts, materials and services –
reduce cost lead to increase profits

4. Total Cost of Ownership

5. Improving the Return on Investment for the Business
Total Cost of Ownership

} Some “Buyers” miss the point of T.C.O

} They may only focus on “purchase” price
} T.C.O = PURCHASE PRICE
+ Delivery and Installation Costs
+ Storage Costs (Rent & Interest)
+ Service Cost (Maintenance, Repair, Service)
+ Operating Cost (Power, Life-Cycle Costs)
+ Possible ”Rework”
+ Possible Extra Costs (E.g. Training)
Purchasing Philosophy

Each Customer will have a unique “PURCHASING PHILOSOPY” that underlies the whole purchasing
function.
Some of these are:
} Adversarial also Multi-Sourcing: to have several vendors for each product
◦ Increase competition / lower prices / increased level of service / better account attention
◦ Due to its aggressive nature: Low levels of trust are characteristic of adversarial relationships
} Partnership Purchasing or Preferred Supplier System
o Seeks to maximise the benefits of collaboration between buyer and a few suppliers
o Benefit: Buyers often makes investments (same EDI system) to help bind partners together
} Single Sourcing
◦ Company selects one supplier to satisfy all needs in a given area
◦ Risk: Can be adversarial from both parties / need not bee a long-term collaboration / usually no partnering / can lead
to higher cost (e.g. defence contracts)
} Centralised Purchasing
} De-centralised Purchasing
Purchasing Is Important

Purchasing is an important contributor to the profit potential of any organisation.

Purchasing contributes to the profitability of the firm by

} Controlling acquisition costs
} Assisting in the control of manufacturing costs

} Influencing marketing costs

Purchasing also contribute by making sure that

} the right product / service is available when needed
} in the right quantity
} at the right quality
} all for the lowest total cost
Textbook – Chapter 4
 Buying Situation

All steps of the buying Less emphasis is on

process are taken, with product definition and
New Purchase Modified Rebuy
emphasis on product more emphasis is on
1st Time or Purchase
definition & development search and evaluation of
of product specification suppliers

BUY PHASE

Need recognition and Critical & Need recognition and

purchase are the only Non-critical Straight purchase are the only
steps used products / Rebuy steps used
service
 Marketing Implication of the Buy Grid
Advertising: Detailed,
educational; must try to get
users to try product,
substitute for old method
Promotion: Use demonstration
to trade shows to show how it
works. Offer free trials or
demonstration at the
customer’s site
Selling: Heavy emphasis on
understanding customer’s
needs and showing how new
product satisfies needs better
than old methods
Advertising: Use comparison
advertising to show difference
between your product and
similar products
New Purchase Modified Rebuy
Promotion: Customer site
1st Time or Purchase
demonstrations, hospitality
events at trade shows
Selling: Protect relationship
with current customers with
plant tours, special trade-in
pricing and other offers.
BUY PHASE
Anticipate or respond quickly to
changes in customer needs
Advertising: Use reminder
Critical & advertising. Build image for
Non-critical Straight company.
products / Rebuy Promotion: Hospitality events
service at trade shows
Selling: Any personal selling
is designed to build
relationships. Automate the
purchasing process, perhaps
through EDI
Textbook: Chapter 3, Exhibit 3-4, page 73
 Steps in the Buying Process (Buy-Phase Model)

Step 8

Step 7

Step 6

Step 5

Step 4

Step 3

Step 2

Step 1

Textbook; Chapter 3 Exhibit 3-3

Page: 71
Typical Organisational Buying Process

1. Problem 2. General 3. Product

Recognition Description Specifications

5. Receipt and
Analysis of 4. Supplier Search
Proposals

6. Supplier 7. Select Order 8. Performance

Selection Process Review
Typical Organisational Buying Process

Typical Buying Processes linked to buying situations:

} Request For Information (RFI)

} Request for Proposal (RFP) (Enquiry / Tender Documents)
} Straight quotation (3 different quotes)
Typical Organisational Buying Process

Initiator
Often
Key is to understand BOTH: END USER

1. Customers Buying Process

Decision Maker
Gate-Keeper
often
as well as SENIOR
often
SPECIFIER
MANAGEMENT

2. ROLES in the Buying Structure

Typical
(“the BUYING CENTER”). Roles in
“Buying
Centre”

Typical “unspecified” ROLES include: Purchasing

Influencer
Often
Agent often
SUPPORT
BUYER or CPP
STAFF

Controller
often in
FINANCE
Forces Influencing Organisational Buying Behaviour

Environmental:
Economy, Politics,
Governmental Policies
Social Factors, Legal
Market Factors: Factors Technology
Number & relative size of
• Competition
• Customers
Organisational Factors:
Size of company, strategy,
profitability, corporate culture,
distribution of power, organisational
Individual Factors influencing buying behaviour policy – purchasing, corporate
Demographic (age, education, title or experience
organisational level of the buyer
Psychological factors (propensity to take risk)
Forces Influencing Organisational Buying Behaviour

Textbook: Chapter 4
Exhibit 4-7
Expanding Buying Determinants Theory
Page 111
1/2 Trends in International Strategic Purchasing

1. Becoming Business Shift from pure

Partners Admin to value-add
Not just Buyers competitive advantage

2. Explore New Value T.C.O and long-term

Frontiers value creation
Its not just about
the price
2/2 Trends in International Strategic Purchasing

3. Putting Suppliers Fewer, deeper relations

Inside
with suppliers involve in
The Best Value
Chain Wins more decisions

4. Pursuing Low-Cost
Search the Globe
Sources
A world wide approach
Questions for the B2B Salesperson / Marketer

1. Who are the people taking part in the buying process?

2. What is each person’s relative influence?

– Relate to “ROLES” mentioned earlier

3. What criteria are important to each member in the

evaluation / decision process?
Questions for the B2B Salesperson / Marketer

Remember: Members of the “buying centre” can assume

different roles through the procurement process.

} Clues for 1. Isolate Personal Stakes

2. Follow Information Flow
identifying
3. Identify the experts
powerful
4. Trace the ”connection to
member
the top
5. Understand the purpose
} Case study: “S C Johnson’s Professional Division”

} Course Pack: page 53

} Group work!

} Answer all questions on page 54

} The “Character“ of Business Marketing

Relationships Key!
} The Purchasing Function

Process and Participants!

} Buyer Behaviour / Decisions in Organizations

Situations and Culture !

} B-2-B marketing has the same basic PRINCIPLES as CONSUMER marketing -
Differences:

Focus is strongly on RELATIONSHIPS

} The “Character“ of Business Marketing

Relationships Key!
} The Purchasing Function

Process and Participants!

} Buyer Behaviour / Decisions in Organizations

Situations and Culture !

} B-2-B marketing has the same basic PRINCIPLES as CONSUMER marketing -
Differences:

Focus is strongly on RELATIONSHIPS

 INTERNAL
STRENGTHS WEAKNESSES
Things your company does well Things your company lacks

NEGATIVE
POSITIVE

OPPORTUNITIES THREATS
Thing where you could win Things where you could loose
EXTERNAL