Essay, Pages 5 (1159 words)
Who does the buying of the trillions of dollars’ worth of goods and services needed by the business organizations? Purchasing agents are influential in straight -re-buy and modified re situations, whereas other department personnel are more influential in the new-buy situations. Engineering personnel usually have a major influence in selecting the product components, and purchasing agents dominate in selecting suppliers.
Webster and Wind call the decision making unit of a buying organization the buying center. The buying center is composed of “all those individuals and groups who participate in the purchasing from the decision”.
The buying center includes all members of the organization who play any of seven roles in the purchase decision process.
Several roles of organization buying:
Initiators: Those who request that something be purchased. They may be users or others in the organization.
Users: Those who will use the product or service. In many cases, the users initiate the buying proposal and help define the product requirements.
Influencers: People who influence the buying decision.
They often help define specifications and also provide information for evaluating alternatives. Technical personnel are particularly important influencers.
Deciders: People who decide on product requirements or on suppliers.
Approvers: People who authorize the proposed actions of deciders and buyers.
Approvers: People who authorize the proposed actions of deciders or buyers
Buyers: People who have formal authority to select the supplier and arrange the purchase terms. Buyers may help shape product specifications, but they play major role in selecting vendors. Buyers may help shape product specifications, but they play their major role in selecting vendors and negotiating.
In more complex purchases, the buyers might include high-level managers.
Gatekeepers: People who have the power to prevent sellers or information from reaching members of buying center. For example, purchasing agent, receptionists, and telephone operators may prevent salesperson from contacting users or deciders.
The average number of people involved in a buying decision ranges from about three (for services and items used in day-to-day operations) to almost five (for such high tickets purchases as construction and machinery). To target their efforts properly, business marketers have to figure out: who are the major decision participants? What decisions do they influence? What is the level of their influence? What criteria do they used?
When a buying center includes many participants, the business marketer will not have time or resources to each out to all of them. Small sellers concentrate on reaching they key buying influencers. Larger sellers go for multilevel in-depth selling to reach as many participants as possible. Their salespeople virtually “live” with their high volume customers. Companies will have to rely more heavily on their communications program to reach hidden buying influences and keep their current customers informed. Business marketers must periodically review their assumptions about the buying center participants.
Major Influences on Buying Decisions
Business buyers respond to many influences when they make their decisions. When suppliers’ offerings are similar, business buyers can satisfy the purchasing requirements with any supplier, and they place more weight on the personal treatment they receive. Where supplier offering differs substantially, business buyers are more accountable for their choices and pay more attention to economic factors.
Business buyers respond to four main influences: environmental, organizational, interpersonal, and individual.
1. Environmental Factors
Business buyers pay close attention to current and expected economic factors, such as the level of production, investment, consumer spending, and interest rate. In a recession, business buyer reduces their investment in plant, equipment, and inventories.
Companies are fears of shortage of key materials are willing to buy and hold large inventories. They will sign long term contracts with suppliers to ensure a steady flow of materials.
2. Organization Factors
Every organization has specific purchasing objectives, policies, procedures, organizational structures, and systems. Business marketers need to be aware of the following organization trends in the purchasing area.
Purchasing Up Grading: The new, more strategically oriented purchasing departments have been changed, from old-fashion “fashion departments” with an emphasis on buying at the lowest cost, to “procurement departments” with a mission to seek the best value from fewer and better suppliers. Some multinationals have even elevated to “strategic supply departments” with responsibility for global sourcing and partnership.
Cross-functional Roles: Most purchasing professionals describe their job as less clerical, more strategic, technical, team oriented, and involving more responsibility than even before. Sixty-one percent of buyers surveyed said the buying group was more involved in new-product design and development than it was five years ago; more than half the buyers participate in cross-functional teams, with suppliers well represented.
Central Purchasing: In multidivisional companies, most purchasing is carried out by separate divisions because of their different needs. Some companies, however, have started to centralize their purchasing. Headquarters identifies materials purchased by several divisions and buys them centrally, thereby gaining more purchasing clout. The individual divisions can buy from another source if they can get a better deal; in general, centralized purchased purchasing produces substantial savings. For the business marketer, this development means dealing with fewer and higher-level buyers and using a national account sales group to deal with large corporation.
Decentralized Purchasing of Small-Ticket Item: At the same time, companies are decentralizing some purchasing operations by empowering employees to purchase small-ticket items such as binders, coffeemakers, etc.
Internet Purchasing: Forrester Research estimates that B2B transactions over the net reached $2.7 trillion in 2004. The move to internet purchasing has far reaching implications for suppliers and will change the shape of purchasing for years to come.
Other Organization Factors:
Long Term Contract. Business buyers are increasingly initiating accepting long -term contracts with reliable suppliers. Business markets are using internets to set-up extranets with important customers to facilitate and lower the cost of transactions. Their customers enter orders directly on the computer, and these orders are automatically transmitted to the supplier. Some companies go further and shift the ordering responsibility to their suppliers in system called vendor-managed inventory. These suppliers are privy to the customer’s inventory levels and take responsibility to replenish automatically through continuous replenishment programs.
Purchasing-Performance Evaluation and Buyers’ Professional Development: many companies have set up incentive system to reward purchasing managers for good buying performance, in much the same way that sales personnel receive bonuses for good selling performance. These systems are leading purchasing managers to increase pressure on sellers for the best terms.
Improved Supply Chain Management: Purchasing executives are increasingly involved in working with marketing and other company executives in building a seamless supply chain management system from the purchase of raw materials to the on-time arrival of finished goods to the end users.
Interpersonal and Individual Factors
Buying centers usually include several participants with differing interests, authority, empathy and persuasiveness. Each buyer carries personal motivations, perceptions, and preferences, which are influenced by buyer’s age, income, job position, personality, attitudes towards risk, and culture.
Buying factors vary from one country to another. Here are some rules of social and business etiquette that marketers should understand when doing business in other countries.