chapter 4 Flashcards
the decision-making process by which formal organizations establish the
need for purchased products and services and by which they identify, evaluate, and choose among
alternative brands and suppliers
Organizational buying
consist of all the organizations that acquire goods and services used in the pro-
duction of products or services that are sold, rented, or supplied to others.
Business markets
Business markets contrast sharply with consumer markets in some ways, however. They have:
Fewer but larger buyers
Close supplier–customer relationships
Professional purchasing
Multiple buying influences
Derived demand
Inelastic demand
Fluctuating demand
Geographically concentrated buyers
Direct purchasing
TYPES OF BUYING DECISIONS
Straight rebuy
Modified rebuy
New buy
the purchasing department reorders items like office supplies and bulk chemicals on a routine basis and chooses from suppliers on an approved list. The suppliers make an effort to maintain product and service quality and often propose automatic reordering systems to save time. Suppliers attempt to offer prospective customers something new
or exploit dissatisfaction with a current supplier. Their goal is to get a small order and then enlarge their purchase share over time.
Straight rebuy
wants to change product specifications, prices, delivery requirements, or other terms. This usually requires additional negotiation and can lead to a new purchase agreement or, in some cases, to a disruption of the business relationship and a change in suppliers.
Modified rebuy
faces some risk when acquiring a product or service for the first time (e.g., an office building, a new security system). The greater the risk or cost, the larger the number of buying-decision participants, the greater their information gathering—and the longer
the time it takes to make a decision
New buy
The decision-making unit of a buying organization.
It consists of “all those individuals and groups who participate in the purchasing decision-making process, who
share some common goals and the risks arising from the decisions.
buying center
Users or others in the organization who request that something be purchased.
Initiators
Those who will use the product or service
Users
People who influence the buying decision, often by helping to define specifications
and providing information for evaluating alternatives.
Influencers
People who decide on product requirements or on suppliers.
Deciders
People who authorize the proposed actions of deciders or buyers.
Approvers
People who have formal authority to select the supplier and arrange the purchase terms.
Buyers
People who have the power to prevent sellers or information from reaching members
of the buying center
Gatekeepers
UNDERSTANDING THE BUYING DECISION PROCESS
- PROBLEM RECOGNITION
- NEED DESCRIPTION
- PRODUCT SPECIFICATION
- SUPPLIER SEARCH
- PROPOSAL SOLICITATION
- SUPPLIER SELECTION
- CONTRACT NEGOTIATION
- PERFORMANCE REVIEW
The buying process begins when someone in the company recognizes a problem or need that can be met by acquiring a good or service. The recognition can be triggered by internal or external stimuli.
PROBLEM RECOGNITION
the buyer determines the needed item’s general characteristics and the required quantity. The goal here is to identify the specific need(s) that the company aims to fulfill and the benefits it seeks
to receive from the offering.
NEED DESCRIPTION
The buying organization now develops the item’s technical specifications. Often, the company will assign a product-value-analysis engineering team to the project.
PRODUCT SPECIFICATION
is an approach to cost reduction that studies whether components can be redesigned, standardized, or made by cheaper methods of production without adversely affecting product performance.
Product value analysis
The buyer next tries to identify the most appropriate suppliers through trade directories, contacts with other companies, trade advertisements, trade shows, and the internet.
SUPPLIER SEARCH
The buyer next invites qualified suppliers to submit written proposals. After evaluating these proposals, the buyer will invite a few suppliers to make formal presentations.
PROPOSAL SOLICITATION
Business buyers seek the highest benefit package (economic, technical, service, and social) in relationship to a market offering’s costs.
SUPPLIER SELECTION
After selecting suppliers, the buyer negotiates the final order, which includes listing the technical specifications, the quantity needed, the expected time of delivery, return policies, and warranties.
CONTRACT NEGOTIATION
The buyer periodically reviews the performance of the chosen supplier(s) using one of three methods.
The buyer may contact end users and ask for their evaluations, rate the supplier on several criteria using a weighted-score method, or aggregate the cost of poor performance to come up with adjusted
costs of purchase, including price.
PERFORMANCE REVIEW
