ENT4122 Ch3 Understanding Your Buyer PDF

ENT4122: Go to Market Strategies Chapter 3: Understanding Your Buyer Types of Buyers Consumer market: A market in which consumers purchase goods and services for their use or consumption. Business market: Composed of firms, institutions, and governments who acquire goods and services: -...

ENT4122: Go to Market Strategies Chapter 3: Understanding Your Buyer Types of Buyers Consumer market: A market in which consumers purchase goods and services for their use or consumption. Business market: Composed of firms, institutions, and governments who acquire goods and services: - To use as inputs in manufacturing process. - For use in their day-to-day operations. - For resale to their own customers. 3-2 Characteristics of Business Markets Concentrated demand Derived demand - Demand in business markets that is closely associated with the demand for consumer goods. Higher levels of demand fluctuation Acceleration principle - When demand increases (or decreases) in the consumer market, the business market reacts by accelerating the buildup (or reduction) of inventories and increasing (or decreasing) plant capacity. 3-2 Characteristics of Business Markets Purchasing professionals Multiple buying influences Collaborative buyer–seller relationships Supply chain management - The strategic coordination and integration of purchasing with other functions within the buying organization as well as external organizations to manage the production flow of a good or service from raw component to final user. 3-3 The Buying Process Recognition of the problem or need Determination and description of the characteristics of the product/service and the quantity needed Search for and qualification of potential sources Acquisition and analysis of proposals Evaluation of proposals and selection of suppliers Selection of an order routine Performance feedback and evaluation Figure 3.2: The Needs Gap Desired states*: A state of being based on what the buyer desires. Actual states*: A buyer’s actual state of being. Needs gap*: A perceived difference between a buyer’s desired and actual state of being. 3-4 Types of Buyer Needs Phase 1: Recognition of the Problem or Need - Customer needs are grouped into five basic categories that focus on the buying situation and the benefits to be provided by the product or service being chosen: 1. Situational needs 2. Functional needs 3. Social needs 4. Psychological needs 5. Knowledge needs 3-4 Types of Buyer Needs 1. Situational needs The needs that are contingent on, and often a result of, conditions related to the specific environment, time, and place. 2. Functional needs The need for a specific core task or function to be performed. 3. Social needs The need for acceptance from and association with others 4. Psychological needs The desire for feelings of assurance and risk reduction, as well as positive emotions and feelings such as success, joy, excitement, and stimulation. 5. Knowledge needs The desire for personal development, information, and knowledge to increase thought and understanding as to how and why things happen Why would buyers buy to meet each of these needs? Figure 3.3: Complex Mix of Business Buyer Needs 3-4 Types of Buyer Needs Phase 2: Determination of the Characteristics of the Product/Service and the Quality Needed Phase 3: Description of the Characteristics of the Product/Service and the Quantity Needed 3-4 Types of Buyer Needs Phase 4: Search for and Qualification of Potential Sources through content marketing - A form of marketing that involves creating and distributing valuable, relevant, and consistent content to attract and retain buyers such as: – Information provided by salespeople – Advertising – Trade associations – Word of mouth – Trade shows – Social media – Product source directories – The internet Phase 5: Acquisition and Analysis of Proposals - Request for proposal (RFP)*: A form developed by firms and distributed to qualified potential suppliers. Helps suppliers develop and submit proposals to provide products as specified by the firm 3-5 Procedures for Evaluating Suppliers and Products Multiattribute model*: A procedure used for evaluating suppliers and products that incorporates weighted averages across desired characteristics. - Weighted averages incorporate: Assessments of how well the product or supplier performs in meeting each of the specified characteristics. The relative importance of each specified characteristic to the buying firm. Exhibit 3.4: Important Product Information Characteristics Holdstrong #99 QuickAd #55 ConnectFast #317 Ease of application Excellent Good Very good Bonding time 8 minutes 10 minutes 12 minutes Durability 10 years 12 years 15 years Reliability Very good Excellent Good Nontoxic Very good Excellent Very good Quoted price $28 per gallon $22 per gallon $26 per gallon Shelf-life in 6 months 4 months 4 months storage Service factors Good Very good Excellent Exhibit 3.6: Weighted Averages for Performance (P) Multiplied by Importance (I) and Overall Evaluation Holdstrong #99 Scores QuickAd #55 ConnectFast #371 Characteristics P I P×I P I P×I P I P×I Ease of application 10 8 80 5 8 40 8 8 72 Bonding time 8 6 48 6 6 36 4 6 24 Durability 6 9 54 8 9 72 9 9 81 Reliability 8 7 56 10 7 70 5 7 35 Nontoxic 8 6 48 10 6 60 8 6 48 Quoted price 5 10 50 9 10 90 7 10 70 Shelf-life in storage 9 6 54 6 6 36 6 6 36 Service factors 5 8 40 8 8 64 10 8 80 Overall evaluation 430 468 446 score 3-5 Procedures for Evaluating Suppliers and Products Employing buyer evaluation procedures to enhance selling strategies: - Modify the product offering being proposed - Alter the buyer’s beliefs about the proposed offering - Alter the buyer’s beliefs about the competitor’s offering (competitive depositioning*) - Alter the importance weights - Call attention to neglected attributes 3-5 Procedures for Evaluating Suppliers and Products Phase 6: Evaluation of Proposals and Selection of Suppliers Phase 7: Selection of an Order Routine Phase 8: Performance Feedback and Evaluation Discussion Activity What are some of the advantages of using a multiattribute model for evaluating suppliers and products? When no single product or supplier stands out, what is usually the deciding factor? Figure 3.4: The Two-Factor Model of Buyer Evaluation  Two-factor model of evaluation*: Buyers evaluate a product purchase using functional and psychological attributes.  Functional attributes*: What the product does or is expected to do.  Psychological attributes*: How things are carried out and done between the buyer and seller.  Must-have attributes*: Features of the core product that the customer takes for granted  Delighter attributes*: The augmented features that go beyond buyer’s expectations. Exhibit 3.7: Three Types of Purchasing Decisions Straight Rebuy* Modified Rebuy* New Task* Decision Area Decision Type Decision Type Decision Type Newness of problem or need Low Medium High Information requirements Minimal Moderate Maximum Information search Minimal Limited Extensive Consideration of new None Limited Extensive alternatives Multiple buying influences Very small Moderate Large Financial risk Low Moderate High Figure 3.5: Continuum of Types of Purchasing Decisions Figure 3.6: Comparison of the Principal Characteristics of Assertiveness and Responsiveness  Assertiveness*: The degree to which a person holds opinions about issues and attempts to dominate or control situations by directing the thoughts and actions of others.  Responsiveness*: The level of feelings and sociability an individual openly displays. Figure 3.7 Communication Styles Matrix  Amiables*: Individuals who are high on responsiveness, low on assertiveness, prefer to belong to groups, and are interested in others.  Expressives*: Individuals who are high on both responsiveness and assertiveness, are animated, communicative, and value building close relationships with others.  Drivers*: Individuals who are low on responsiveness, high on assertiveness and detached from relationships.  Analyticals*: Individuals who are low on responsiveness and assertiveness, analytical and meticulous, and disciplined in everything they do. Understanding Communication Styles To enhance communication, salespeople need to flex their own communication style to adapt to that of the buyer. - Positively impacts: Salespeople’s performance Quality of buyer–seller relationships - Flexing should not be interpreted as meaning an exact match between a salesperson’s style and that of a customer. - When buyer’s style is unknown, assume the buyer is an analytical-driver and prepare for this style (especially if the buyer is new) and then adapt as necessary. 3-9 Buying Teams Buying teams*: Teams of individuals in organizations that incorporate the expertise and multiple buying influences of people from different departments throughout the organization. 3-9 Buying Teams - Initiators are individuals within an organization who Initiators identify a need. - Gatekeepers are those individuals or companies that hold the key to reaching particular customers; they control the flow of information. - Influencers are people who want to affect the purchase decision and whose approval is often required before a decision to purchase is made. - Deciders are people who make the final decisions about purchases, usually for a company and usually based on a budget. - Purchasers are those who have the actual authority to buy. - Users are the ultimate beneficiaries of the purchase. 3-10 Engaging Customers Insight selling*: Anticipating and fulfilling customer needs necessary for them to adeptly face the future. Both buyers and sellers are using technology to enhance the effectiveness and efficiency of the purchasing process. - Transactional exchanges can be automated. - Customer relationship management (CRM) systems integrated with the web allow reps to have a more informed conversation with prospects and customers. - Applications are being used to distribute product and company information. - Buyers are utilizing information technology to demand access to relevant information. 3-10 Engaging Customers Buyers depend on salespeople to provide unique and value-added solutions. - Expect salespeople to personally manage their business Outsource*: The process of relegating to a supplier certain activities that were previously performed by the buying organization. Salespeople must have: - Comprehensive knowledge about their products and the competitors’ products. - Thorough understanding of the needs of the customers and ability to solve problems that may arise after sale. Why We Buy What We Buy Conclusion Professor Roberts Email: [email protected] Office: 144 RSB