This document discusses the buying decision process for organizational/business purchases. It outlines a 5-stage model: 1) problem recognition, 2) information search, 3) evaluation of alternatives, 4) purchase decision, and 5) post-purchase behavior. It also discusses key participants in the business buying process like the buying center. Different types of business customers and solutions selling are also covered. Finally, it reviews typical stages in the buying process for business purchases.

1. Part 3: Connecting with Customers > The Buying Decision Process: The Five-stage Model > What is Organizational Buying? > Participants in the Business Buying Process > Stages in the Buying Process > Institutional and Government Markets Class Presentation | Session 9 | 20 Sep 2010

2. The Buying Decision Process The Five-Stage Model A Psychological Processwhich needs to beunderstood by Marketers MG 220 Marketing Management 2

3. The Buying Decision ProcessStage 1: Problem Recognition A buyer recognizes a problem……i.e. “a need” Either stimulated by Internal Stimuli (Hunger, Thirst, Tiredness) External Stimuli (Seeing an ad) Marketers: Need to identify circumstances that trigger a particular need Can Devise campaigns to generate external stimuliParticularly for high-end, luxury items MG 220 Marketing Management 3

4. The Buying Decision ProcessStage 2: Information Search An aroused/interested consumer will be inclined to search for more information Now (s)he wants to buy and is looking for information Two levels of interest: Milder: Heightened Attention (pays attention to communication) Sharper: Active information search (finding information) Information sources: Personal Commercial (most frequent) Public Experiential Role of internet Information Sets(buying a LCD) MG 220 Marketing Management 4

5. The Buying Decision ProcessStage 3: Evaluation of Alternatives While buying a consumer is: Trying to satisfy a need Looking for certain benefits from the product solution Seeing each product as a bundle of attributes with varying abilities for delivering the benefits Consumers pay most attention to products that deliver sought-after benefits Beliefs & Attitudes Evaluation reflects Beliefs & Attitudes People’s beliefs and attitudes affect their buying behavior Expectancy-Value Model Consumers Evaluate Products/Services by combining their brand beliefs – positives and negatives – according to importance Weighted Rating MG 220 Marketing Management 5

6. The Buying Decision ProcessStage 4: Purchase Decisions Five decisions during actual purchase: Brand Source/Shop/Retailer/Dealer Quantity Timing Payment Method Further Considerations Non-Compensatory Models of Consumer Choice Consumers not necessarily make exact choices They take “mental shortcuts” Intervening Factors Attitude of Others Unanticipated Situational Factors Different [perceived] risks Functional (does not perform up to expected) Physical (it can harm) Financial (may not be worth it) Social (embarrassing in front of others) Psychological (affects psychologically) Time (if product fails, time is wasted for a better alternative) MG 220 Marketing Management 6

7. The Buying Decision ProcessStage 5: Post-Purchase Behavior Impacts future engagement of customer Post-Purchase Satisfaction Satisfaction depends on expectation Post-Purchase Actions Subsequent re-buy or abandoning (forever may be) Telling to others Post-Purchase Use & Disposal Sales Frequency depends on product consumption rateQuickly finished => Quick re-buying Also observe how they “dispose” it. MG 220 Marketing Management 7

8. Other Theories of Consumer Decision Making Buying Process is not as structured and planned like this always. It may vary a lot and there are other theories (always evolving) to understand it. Not covered in syllabus of this course MG 220 Marketing Management 8

9. What is Organizational BuyingBusiness Market vs. Consumer Market Fewer, larger buyers Close supplier-customer relationships Professional purchasing Many buying influences Multiple sales calls Derived demand Inelastic demand Fluctuating demand Geographically concentrated buyers Direct purchasing MG 220 Marketing Management 9

10. What is Organizational BuyingBuying Situations Suppliers In-Suppliers: Those who are on approved list and are selling to the company Out-Suppliers: Those who are trying to penetrate Situations Straight Re-Buy Ordering again with same specs Generally to same seller or in-sellers Out-Sellers try to do something “new” to enter Modified Re-Buy Revised specs or requirements in any form New suppliers may be called | Critical for In-Suppliers New Task Buying for the first time Complete process is carried out starting from developing specs and requirements Strong evaluations and multiple reviews etc. MG 220 Marketing Management 10

11. What is Organizational BuyingSystems Buying and Selling Systems Buying: Buying a complete solution from a supplier/seller Going for Turnkey solution May even involve Systems Contracting – Even providing repairing & maintenance as part of sales Sales of F-16s to Pakistan from USA includes? MG 220 Marketing Management 11

12. Participants in the Business Buying ProcessThe Buying Center Buying Center All those individuals and groups who participate in purchasing decision-making process in any of following roles: Initiatorswho request purchase – may be “users” UsersWho are going to use the product/services directly InfluencersWho develop specs or influence buying process – technical teams, accounts, finance etc DecidersWho decide specs, requirements or suppliers ApproversHaving authority to approve BuyersWho execute the “purchase” process GatekeepersWho can prevent information/suppliers to reach to right person(s) Consider: a security guard or telephone operator not letting you in! MG 220 Marketing Management 12

13. Participants in the Business Buying ProcessBuyer Center Targeting Buying Center Targeting is all about understanding the buyer – their criterion, their requirements, their processes etc. Key types of business consumers Price-oriented customers | Transaction SellingPrice is everything Solution-oriented customers | Consultative Selling Going for solution and will listen to arguments for price vs. services/solution Gold-Standard customers | Quality Selling Want best performance, quality, specs, service etc. Strategic-value customers | Enterprise Selling Fairly permanent relationship – rather than just a buying activity MG 220 Marketing Management 13

14. Participants in the Business Buying ProcessBuyer Center Targeting (…contd.) Solution Selling Offer a complete “solution” Helps alleviate pricing pressure Helps becoming exclusive Key examples Solutions to enhance customer revenues Solutions to decrease customer risks Solutions to reduce customer costs MG 220 Marketing Management 14

15. Stages in Buying Process Typical Stages Problem Recognition General Need Description Product Specification Supplier Search Proposal Solicitation Supplier Selection Order-Routine Specification Performance Review MG 220 Marketing Management 15

16. TOPICS IN CHAP 7 Purchasing/Procurement Process Managing Business-to-Business Customer Relationships Institutional and Government Markets Not covered in syllabus of this course MG 220 Marketing Management 16

17. Part 3: Connecting with Customers > Overall Review of Chap 5,6 & 7 > Levels of Market Segmentation > Segmenting Consumer Markets > Quiz 3 (Chap 5-7 | Session 7-9) Class Presentation | Session 10 | 23 Sep 2010