B2B - (2.2) Characteristics of organizational buying Flashcards
What is a buying center?
= group of individuals who particiapte in an organizational purchase decision
> Informal
> Roles:
Decider, initiater, user, influencer, gatekeeper, buyer
Describe the promotors-opponents model
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
Why are buying networks in and between companies complex?
- Vertical participations: the amount of levels that is involved
- Lateral participation: number of people or departments that are involved
What are key areas to question and analyze buying centers?
- 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
What are the phases of the buying process?
> 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
What is the link with internet sources and technologies during the organizational buying ?
Every step in the buying process has internet tools to provide information.
- Company website
- Reverse auctions
- Electronic data intercharge
- ….
What are the main criteria of organizational buying decisions?
- Quality
- Cost
- Terms of delivery
- Relationship
Describe the criterium of quality =
- Functionality / performance
- Reliability
- Durability
- Ease of service
- Design (but more relevant in B2C)
- Brand (image, equity, awareness)
Relationship between purchase risk and brand sensititivity
Study by Brown et al
> U-shaped relation
> Less pronounced U-shape whan competitive intensity is high
How are risks used in B2B?
Risk reduction motive is used to promote B2B services»_space; “Nobody ever got fired for buying IBM”
Describe the criterium of cost =
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
Describe the criterium of terms of delivery=
- Speed of delivery
- Reliability and flexibilty
- Goodwill
- Experience with quick delivery in B2C has now been transferred to B2B
- Incoterms
Describe the criterium of relationship =
- Trust
- Exchange of info
- Cooperation
- Investments into relationship (time and money)
How do suppliers get evaluated in general?
Scoring model to evaluate the suppliers based on the 4 criteria categories all together.
What are 3 theoretical models that explain why businesses buy what they buy?
- Structural model by Seth
- Interaction model by IMG Group
- Business relationship model
Explain the structural model by Seth
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»_space; supplier or brand choice (including situational factors)
What are benefits and criticism for the structural model of Seth?
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
Explain the interaction model by IMG Group
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
What are benefits and criticism on the interaction model by IMG Group?
BENEFITS
> General frame of reference
> Integration of important contextual concepts
CRITICISM
> Very general
> Not concrete enough regarding the relationships between constructs
Explain the business relationship model
Awareness > exploration > expansion > commitment
Increasing mutual benefits & increasing mutual dependence
What is the impact of long term relations on the performance of supplier firms?
Long term relations
» no impact on sales growth
» negative impact on inventory and control costs
» negative impact on prices
» postitive impact on profitability
Explain the Buygrid model
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
How is the number of suppliers expained in a quadrant?
- High economic importance, low complexity> high number of suppliers.
- Low economic importance, high complexity> low number of suppliers.
