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7.2.2 The Purchase Decision Making Process

7.2.1 Types of Buying Situations
7.2 How Organisations Make Purchase Decisions
7.1 Who is the Customer ?


Content


  1. ^ new supplier advantage
  2. ^ new products
  3. ^ long term collaboration
  4. ^ competitive advantage of the straight re buy option
  5. ^ ‘key account’ policies and
    appoint cross-functional teams to service
    major customers
    to help ensure their satisfaction and retention.

  6. ^ move the buyer away from relative routine ordering
  7. ^ modified rebuy purchase decision
  8. ^ mutual trust
  9. ^ the assets are not easily deployable elsewhere
  10. ^ long-term orientation toward a single supplier
  11. ^ technology will eventually become the industry standard








The extensive purchasing process we have been talking about applies primarily to
new-task purchases, where an organisation is buying a relatively complex product
or service for the first time. Buyers in such circumstances tend to collect a lot of
information about alternative products and suppliers and to engage in extensive
comparisons before making a final purchase decision.
through an effective sales pitch, a user-friendly website, or other promotional
efforts. (Good value means nothing if nobody knows about it.)
[1] Potential new suppliers may even be able to engage in product development efforts aimed at
winning the new customer. This is why entrepreneurial start-ups tend to prosper
in [2] where product designs are still in flux and there are few
entrenched competitors with close ties to potential customers; they are more likely
to get a full hearing and have a better chance to differentiate themselves from other
suppliers.
Onemajor reason for establishing [3] long-termcooperative relationships withmajor
customers is to become an active partner in designing – and setting the specifications
for – the next generation of the customer’s products.
In the process, the supplier may have a major influence on the purchase criteria for major materials
and components of the new product, thereby gaining the inside track on winning
the purchase contract for those new-task purchases.


At the other extreme is the straight rebuy, where the customer is reordering
an item it has purchased many times before.
These purchases tend to be more
routine and computerised.
From the seller’s viewpoint, being the established or
‘in’ supplier in such purchase situations provides a [4] major competitive advantage
because the customer spends little or no effort evaluating alternatives
. Therefore,
established suppliers should develop procedures to maintain and enhance
their favoured position with current customers. For instance, many firms have
developed [5] ‘key account’ policies and appoint cross-functional teams to service
major customers to help ensure their satisfaction and retention. New technologies
have made it easier for established suppliers to strengthen their ties to customers
through supply chain management systems and logistical alliances.



For ‘out’ suppliers who do not havewell-established relationships with an organisationalcustomer, however, the marketing challenge is more difficult.
Such competitorsmust try to[6] move the buyer away from the relatively routine reorderingprocedures of the straight rebuy toward the more extensive evaluation processesof a [7] . They must attempt to interest the buyerin modifying the purchase criteria either by promising superior product performance,better service on one or more dimensions, or an equivalent package at abetter price.15

Historically, ‘out’ suppliers – particularly small, unknown start-upswith few marketing resources – had a hard time surmounting this challenge. But the emergence of Web-based auctions may help level the playing field for suchsuppliers, at least for those efficient enough to compete largely on price.7.2.3.1 Developing Long-Term Buyer–Supplier RelationshipsFrom a supplier’s perspective, developing logistical alliances and computerisedreorder systems can help tiemajor customers to the firmand increase the proportionof purchases they make fromthe supplier.


7.2.3.1 Developing Long-Term Buyer–Supplier RelationshipsFrom a supplier’s perspective, developing logistical alliances and computerisedreorder systems can help tiemajor customers to the firmand increase the proportionof purchases they make fromthe supplier.16 But as Exel’s evolving relationship withOcé illustrates, long-term relationships between suppliers and their organisationalcustomers often involve much more than merely linking their computer systemsand sharing inventory data. Exel often gets involved in improvement projects aimedat developing customised services to meet Océ’s specific needs.----


7.2.3.2 Trust between Supplier and Customer Develops Person-to-PersonSumutuch complex relationships not only involve a great deal of cooperation between theparties, but they also require mutual trust.[8] Before making a substantial investmentin training its employees to perform pre-installation testing of Océ’s copiers, Exelhad to trust Océ to continue purchasing its services long enough to recoup thatinvestment. Similarly, Océ had to trust Exel to measure up to its own high standardswhen servicing its copier customers. In other words, both parties must trust oneanother to avoid opportunistic behaviours thatwould advance their ownshort-termself-interest at their partner’s expense.17Organisations develop trust through the actions of individual members of thefirm. Therefore, company salespeople, account teams, logistics managers, andcustomer service personnel often play crucial roles in winning customer trust andloyalty. Unfortunately, this can make buyer–supplier relationships vulnerable topersonnel turnover. Suppliers can minimise such problems by (1) developingeffective corporate policies and performance standards with respect to customerservice, (2) instituting training programmes and succession planning for customercontact personnel, and (3) fostering and rewarding a strong customer orientationwithin the corporate culture.

7.2.3.3 Conditions Favouring Trust and CommitmentWhile mutual trust is important for the development and maintenance of long-termcommitments between suppliers and their organisational customers, it is not always
easy to develop.


First, trust tends to build slowly.18 Thus, the parties must have
some history of satisfying experiences with one another to provide a foundationfor trust.
It also helps if each party brings an established reputation for fair-dealing
within its industry.,19
From the customer’s perspective, a firm is more likely to trust and develop a longterm
commitment to a supplier when that supplier makes dedicated, customerspecificinvestments, as Exel has done in developing customised services for individualcustomers.
Such investments send a powerful signal about the vendor’s credibility
and commitment to the relationship since[9] the assets are not easily deployable elsewhere.

In markets characterised by complex and uncertain technical environments, suchas where competing technologies are emerging simultaneously, as in the networkingsoftware industry,
customers are less likely to develop a[10] long-term orientation toward a single supplier.

Because firms in such circumstances cannot tell which supplier’s[11] technology will eventually become the industry standard, they are more likely to keep their options open by spreading their purchases across multiple suppliers if it is economically feasible to do so





Tags
  1. client contact systems
  2. collector bias
  3. competitive advantage
  4. competitive intelligence
  5. computerised reorder system
  6. consumer behaviour
  7. data sources
  8. evidence based forecast
  9. experienced user
  10. internal records
  11. just in time
  12. logistical alliance
  13. market potential
  14. market segmentation
  15. market segments
  16. marketing program
  17. marketing research
  18. mass market
  19. mass market strategy
  20. michelin; us west;
  21. micro segmentation
  22. middleman
  23. modified rebuy
  24. multi-functional sales teams
  25. multilevel selling
  26. multiple buying
  27. multiple level relationships
  28. mutual trust
  29. narrow market segment
  30. narrow niche
  31. nationalisation of producers
  32. nerve center
  33. new task buy
  34. nine west group
  35. observation;direct observation' tanzania mobile;
  36. on-time delivery
  37. opportunity; research
  38. order handling
  39. organisation market
  40. organization marketing behaviour
  41. organizational behaviour
  42. organizational customers
  43. organizational demand
  44. organizational market
  45. organizational purchasing behaviour
  46. organizational purchasing process
  47. paperless exchange
  48. parity pricing
  49. personal selling
  50. personal use
  51. political risk
  52. potential market; penetrated market
  53. pre-delivery inspection
  54. pre-sale service
  55. prestige buyer
  56. pretender
  57. primary data
  58. procurement costs
  59. purchasing criteria
  60. qualitative data
  61. qualitative research
  62. quality assurance
  63. quality standards
  64. quantitative data
  65. quantitative research
  66. research objectives
  67. retention programme
  68. routine purchase
  69. sales forecast
  70. semantic differentiation scale
  71. sequence of information
  72. shared costs
  73. short term contracts
  74. social construction
  75. status oriented consumers
  76. stock availability
  77. straight rebuy
  78. supplier bargaining power
  79. supplier performance
  80. supplier reputation
  81. survey
  82. tabulation errors
  83. tanzania mobile
  84. target customers
  85. target market
  86. target marketing
  87. technical experts;
  88. test markets
  89. transaction cost
  90. trend forecasting
  91. trusting patron
  92. underlying consumer demand
  93. unethical demands
  94. unstated but implicit assumptions
  95. users
  96. value analysis
  97. value shopper
  98. vertical integration
  99. visceral thing that cannot be trained
  100. wild guess