B2B - (2.2) Characteristics of organizational buying

Question 1

What is a buying center?

Answer 1

= group of individuals who particiapte in an organizational purchase decision
> Informal
> Roles:
Decider, initiater, user, influencer, gatekeeper, buyer

Question 2

Describe the promotors-opponents model

Answer 2

Promotors : people that support a purchase decision, they drive the process
Opponents : people that try to prevent or slow down the purchase process, they are against the purchase
» Further distinction in both groups: power, expert or process

Question 3

Why are buying networks in and between companies complex?

Answer 3

• Vertical participations: the amount of levels that is involved
• Lateral participation: number of people or departments that are involved

Question 4

What are key areas to question and analyze buying centers?

Answer 4

• Formalization = processes, approval needed from which levels
• Buying criteria = systematic checklist?
• Composition = influences, budget authority, final decision, technical decision, who is the boss?
• Characteristics and preferences of members: background, in need of technical or commercial info, personal benefits, help justify choice of supplier
• Evaluation: perceive other suppliers as reference

Question 5

What are the phases of the buying process?

Answer 5

> Recognition of demand
Determination of product features
Supplier search and evaluation
Obtaining offers and evaluation
Supplier preselection
Negotiation phase
Final supplier selection and signing of contract
Product development / service provision and evaluation

Question 6

What is the link with internet sources and technologies during the organizational buying ?

Answer 6

Every step in the buying process has internet tools to provide information.
- Company website
- Reverse auctions
- Electronic data intercharge
- ….

Question 7

What are the main criteria of organizational buying decisions?

Answer 7

• Quality
• Cost
• Terms of delivery
• Relationship

Question 8

Describe the criterium of quality =

Answer 8

• Functionality / performance
• Reliability
• Durability
• Ease of service
• Design (but more relevant in B2C)
• Brand (image, equity, awareness)

Question 9

Relationship between purchase risk and brand sensititivity

Answer 9

Study by Brown et al
> U-shaped relation
> Less pronounced U-shape whan competitive intensity is high

Question 10

How are risks used in B2B?

Answer 10

Risk reduction motive is used to promote B2B services&raquo_space; “Nobody ever got fired for buying IBM”

Question 11

Describe the criterium of cost =

Answer 11

2 ways to measure:
» buyer chooses lowest price - easy, but cheap products may be time and cost intensive - used for commodities
» buyer chooses offer based on total cost of product’s life cycle - more comprehensive approach but difficult accounting methods - used for machines, plants and service contracts

Question 12

Describe the criterium of terms of delivery=

Answer 12

• Speed of delivery
• Reliability and flexibilty
• Goodwill
• Experience with quick delivery in B2C has now been transferred to B2B
• Incoterms

Question 13

Describe the criterium of relationship =

Answer 13

• Trust
• Exchange of info
• Cooperation
• Investments into relationship (time and money)

Question 14

How do suppliers get evaluated in general?

Answer 14

Scoring model to evaluate the suppliers based on the 4 criteria categories all together.

Question 15

What are 3 theoretical models that explain why businesses buy what they buy?

Answer 15

• Structural model by Seth
• Interaction model by IMG Group
• Business relationship model

Question 16

Explain the structural model by Seth

Answer 16

Autonomeous and joint decisions in the organizational buying process are influenced by:
* Psychological decision determinants (background, role behavior, expectations)
* Communication of the seller
* Conditions for decision making (risks, time pressure, size, degree of centralization)

Out of the decisions, and after conflict resolution&raquo_space; supplier or brand choice (including situational factors)

Question 17

What are benefits and criticism for the structural model of Seth?

Answer 17

BENEFITS
> Systematic categories of influnces
> Clear relations between the described elements
CRITICISM
> Only considers the reaction of the buyer to the seller, not of a joint buyer/seller or product development impulses

Question 17

Explain the interaction model by IMG Group

Answer 17

Interaction proces between 2 organizations and their individuals.
> Short term= info, exhange
> Long term= institutionalization of relations, adaption
All framed in an atmosphere = power, dependence, cooperation, proximity, expectations
Framed again in a bigger environment = market structures, dynamics, culture, legal determinants

Question 17

What are benefits and criticism on the interaction model by IMG Group?

Answer 17

BENEFITS
> General frame of reference
> Integration of important contextual concepts
CRITICISM
> Very general
> Not concrete enough regarding the relationships between constructs

Question 18

Explain the business relationship model

Answer 18

Awareness > exploration > expansion > commitment
Increasing mutual benefits & increasing mutual dependence

Question 19

What is the impact of long term relations on the performance of supplier firms?

Answer 19

Long term relations
» no impact on sales growth
» negative impact on inventory and control costs
» negative impact on prices
» postitive impact on profitability

Question 20

Explain the Buygrid model

Answer 20

3 classes of purchase

• NEW TASK
  = high novelty, much info needed, consideration of a lot of new alternatives
  = purchase process from beginning to end
• MODIFIED REBUY
  = limited info needed but still looking for some alternatives
  = purchase process: no recogniton of demand needed
• STRAIGHT REBUY
  = no info needed, no looking for new alternatives
  = purchase process: supplier preselection to final supplier selection and signing contract

Question 21

How is the number of suppliers expained in a quadrant?

Answer 21

• High economic importance, low complexity> high number of suppliers.
• Low economic importance, high complexity> low number of suppliers.