Organizational Buying Process

Organizational Buying Process

• Formal organizations establish the need for purchased products and services through a decision-making process.
• This process involves identifying, evaluating, and choosing among alternative brands and suppliers.

Participants in the Organizational Buying Process

• Users are those who use the product or service
• Influencers directly influence the buying decision, but don't make the final decision themselves.
• Deciders select product requirements and suppliers.
• Approvers authorize the actions proposed by deciders or buyers.
• Buyers have formal authority for selecting suppliers and arranging purchase terms
• Gatekeepers can prevent sellers or information from reaching members of the buying center.

Major Influencers on Organizational Buyers

• Environmental factors such as the current and expected economic environment influence organizational buyers.
• Organizational factors such as objectives, policies, procedures, organizational structures, and systems affect buying.
• Interpersonal factors in the buying center include participants with different levels of interest, authority, and persuasiveness.
• Individual factors such as personal motivations, perceptions, and preferences affect each participant.

The Organizational Buying Decisions

• Problem recognition starts the buying process when someone recognizes a need that can be met by acquiring a good or service.
• General needs description involves determining the requirements of the product
• Product specifications involve developing specific requirements once the general requirements have been determined.
• Supplier search aims to identify the most appropriate suppliers.
• Proposal solicitation invites qualified suppliers to submit proposals.
• Supplier selection invites qualified hotels to submit proposals after the meeting planner has made a short list.
• Order-routine specification involves the buyer writing the final order, listing the technical specifications.
• Performance review includes post-purchase evaluation of the product.

Group Business Markets

• Conventions feature annual meetings of an association, including general sessions, committee meetings, and special-interest sessions.
• Association meetings sponsor many types of meetings, including regional, special-interest, educational, and board meetings.
• Corporate meetings include command performances for employees of a company.
• Hotels and hotel chains are paying attention to smaller group meetings of less than fifty people.
• Incentive travel rewards participants for achieving or exceeding a goal.
• SMERF groups include social, military, educational, religious, and fraternal groups
• Group markets are segmented by meeting purpose
• Restaurants serve as meeting venues.

Target Marketing Process: Three Steps

• Market segmentation
• Market targeting
• Market positioning

Market Segmentation

• Market segmentation is the process of dividing the market into distinct groups of buyers with different needs, characteristics or behaviours.
• These groups might require separate products or marketing mixes

Bases of Market Segmentation

• There is no single way to segment a market, marketers have to try different segmentation variables, alone and in combination.
• Geographic Segmentation involves dividing the market into geographic units.
• Demographic Segmentation divides the market into groups based on demographic variables.
• Psychographic Segmentation divides buyers into groups based on social class, lifestyle and personality characteristics.
• Behavioral Segmentation divides and targets customers according to their behavior

Requirements for Effective Segmentation

• Measurability is the degree to how much a segment’s size can be measured.
• Accessibility is the degree to how much segments can be accessed and served.
• Substantiality is the degree to how much segments are large enough to serve the market
• Actionability is the degree to how much effective programs can be designed to attract and serve the segments

Evaluating Market Segments

• Segment size and growth involves analyzing the size and growth of a segment and then choosing the segment that provides the best opportunity
• Segment Structural Attractiveness involves examining major structural factors that can affect long run segment attractiveness
• Company Objectives and Resources involves considering the companies own objectives and resources in relation to market segments

Selecting Market Segments

• Segmentation reveals market opportunities available to a firm or business
• The company selects the most attractive segment or segments to serve as target markets for marketing strategies to achieve desired objectives

Market Segmentation (Examples)

• The market is segmented into the following;
  • SEGMENT A - Male and Female aged between 18-25 years old with a monthly income of P5,000-P10,000,this segment comprises of 60% of the whole market
  • SEGMENT B - Male and Female - aged between 26-35 years old with a monthly income of P1,000 -p15,000, this segment comprises of 21% of the whole market
  • SEGMENT C Male and female aged between 36-45 years old with a monthly income of P15,000 -P20,000, this segment comprises of 11% of the whole market
  • SEGMENT D: Male and Female aged 45 years old above with a monthly income of P20,000 above, this segment covers 8% of the whole market

Undifferentiated Marketing Strategy (Mass Marketing)

• A business targets the whole market, ignoring segments
• Product focus on aspects that customers need and want in common

Differentiated Marketing Strategy (Segmented)

• The firm targets several market segments and designs separate offers for each other
• Products are designed and targeted in each segment, this requires separate marketing plans and different product portfolios

Concentrated Marketing Strategy (Niche)

• The focus is on smaller segments or niches to achieve a strong market position within the niche

Choosing a Market Coverage Strategy

• Company resources determine the best marketing strategy
• Degree of Product homogeneity means products are more suited to differentiation or concentration
• Market Homogeneity is where buyers have the same taste and marketing efforts are undifferentiated
• Competitors Strategies mean segmentation requires differentiated or concentrated marketing to gain a competitive advantage

Market Positioning

• Market positioning is the process of formulating competitive positioning for a product and detailed marketing mix
• The product has a positioning relative to competing products

Product Attributes

• Specific product attributes e.g price can be used to position a product
• Needs the product fulfills or benefit a product offers can be used to position

Market positioning: users

• Positioning for certain classes of users, such as a hotel advertising itself as a women hotel
• Position Against an existing competitor

Selecting and Implementing a Position Strategy

• Identify a set of possible competitive advantages on which to build your position
• Selecting the right competitive advantages
• Delivering the chosen position to your selected target market

Some Positioning Strategies

• Offer more for less. Offering good quality products at a low price.
• Offer more for the same • Introducing new feature and better performance of the product for the same price
• Offer less for much less • Offering less product/service for lesser cost

Product Differentiation

• A hospitality company must differentiate its products/services from it’s competitors.
• Differentiation can occur by physical attribute, service,personnel, location and image

Selecting the right Competitive Advantage

• Consider the qualities that your brand possesses
• These may comprise of best quality, best service, lowest price, best value and best location

Major Positioning Errors

• Underpositioning leads to failing to position the company at all, so there is no special thing customers know about it
• Overpositioning gives buyers too narrow a picture of the company
• Confused Positioning leaves buyers with a confused image of a company

Selecting the right Competitive Advantage

• Important, distinctive, superior, communicable, preemptive, affordable and profitable brand differences meet customers criteria

Perceptual Mapping

• Perceptual mapping is a research tool used to measure a brands position

Final thought

• Market segmentation, targeting and positioning are key to successful marketing
• By understanding customer needs and strategically positioning products, companies can gain a competitive edge