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7/30/2019 Chapter 4 - Industrial
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Copyright 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
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OBJECTIVES
Explain, using the most prominent theories oforganizational buyer behavior, how individual
needs may override or influence the rational
decision-making process.
Predict marketing action based on the choice
of a particular buying theory.
Describe the influence of risk on buyerbehavior.
Illustrate how these theories work in concert
with partnering.
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SELLING BUSINESS TO BUSINESS SUCCESSFULLY.
UNDERSTANDING WHAT MAKES BUYERS BUY
THE THEORIES OF BUYER MOTIVATION
REWARD-MEASUREMENT (RM) THEORY
THINK: BENEFITS
BEHAVIOR CHOICE THEORY
THINK: SITUATION
ROLE THEORY
THINK: NORMS / EXPECTATIONS
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REWARD-MEASUREMENT (RM) THEORY
An expectancy theory of organizational buyer
motivation.
Buyers are motivated by both
intrinsic rewards (rewards they give themselves
e.g. feelings of satisfaction) and;
extrinsic rewards (rewards given by the
organization (e.g. salary, promotion)
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REWARD-MEASUREMENT THEORY
Valence degree of importance or valueattached to a reward ((e.g. the important
reward is raise extrinsic reward).
Perceived probability the perception thateffort on a particular set of tasks will lead to
accomplishment of performance outcome
that will lead to the desired reward.
Motivation the amount of effort that the
buyer is willing to expend to engage in the
set of tasks.
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MATHEMATICAL EQUATION
Motivation = Valence x Probability
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MARKETING AND REWARD-MEASUREMENT
THEORY
(Performance measurement) Marketers
understand what features are important and
how to promote their products.
(Valence) able to predict the amount of effort
expended by the buyer on tasks involving
information search, number of bids
requested, and other purchase activities
Might also understand which products might
be purchased in a given situation.
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BEHAVIOR CHOICE REWARD
Behavior choice theory the buyer go
through a choice process to arrive at
decisions ofhowthey will buy.
Orientation the degree to which the
individual works for personal benefits;
Company orientation - the degree to which
the individual works to achieve benefit for the
company.
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BEHAVIOR CHOICE MODEL
1. Identify situationdegree of company orientation
degree of personal orientation
2. Evaluate personal relevanceformal reward system
informal and social reward system
intrinsic rewards
3. Assess action alternatives and requirements
4. Choose behavior strategy4. Defensive: process -oriented, minimized threats
5. Offensive: results-oriented, maximize gain
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ROLE PLAY
People behave within a set of norms or
expectations of others due to the role in
which they have been placed.
Autonomous when a person makes a
purchase decision alone for an organization
Buying center when more than one person
is involved in purchase decision
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BUYING CENTER ROLES
PERSON
SECRETARY
VICE PRESIDENT
OFFICE MANAGER
SECRETARY & OFFICE
MANAGER
OFFICE MANAGER
VICE PRESIDENT OF
OPERATIONS
ROLE
Initiator-reports that fax keeps breaking
down
Controller-sets budget for purchase of
new fax Gatekeeper-gathers review from
vendors.
Influencers-view demonstrations narrow
choices
Recommender-recommends a particular
product to decision maker
Decision MakerSelects fax to purchase
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DIMENSIONS OF BUYING CENTERS
TIME DIMENSIONS TIME IS HIGHLY FRAGMENTED: Many participants for short
time participation
TIME IS NOT FRAGMENTED: Same people stay throughentire process
VERTICAL DIMENSIONS
How many layers of management are involved in decision-making
HORIZONTAL DIMENSIONS How many departments are involved in decision-making
FORMALIZATION DIMENSION
Purchasing tasks and roles are guided and enforcedby
written procedures and policies
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TIME FRAGMENTATION INFLUENCES SELLERS MARKETING
EFFORTS
INVOLVEMENT INFLUENCE
NUMBER OF DECISION MAKERS
HIGHLY MANY FEW MINIMALLY
FRAGMENTED A LITTLE A LOT FRAGMENTED
DECISION CYCLE TIME INFLUENCE
SIZE OF BUYING CENTER
LONGER LARGE SMALL SHORTER
DECISION CYCLE A LITTLE A LOT DECISION CYCLE
EXPERIENCE OF DECISION MAKERS
TIME SPENT ON DECISION STAGES
Sales objective is to move to the right on the continuum
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RECOGNIZING THE
BUYERS DILEMMA: RISK
THERE ARE THREE KINDS OF RISK TO OVERCOME
FINANCIAL RISK
POTENTIAL FOR LOST REVENUE WITH
FAULTY PRODUCT
PERFORMANCE RISK
PRODUCT WONT PERFORM AS INTENDED
SOCIAL RISK THE PURCHASE WILL NOT MEET APPROVAL OF A
REFERENCE GROUP
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OVERCOMING RISK
THREE OPTIONS BUYERS USE TO
REDUCE RISK
GATHER MORE INFORMATION FROM MORESOURCES
USING LOYALTY TO PRESENT SUPPLIERS
BUILD TRUST
SPREAD THE RISK BY USING MORE
DECISION MAKERS OR GETTING MORE
SUPPLIERS
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USING INFORMATION TO REDUCE RISK
ImpersonalPersonal
Trade publications
Word of mouth from
colleagues,
consultants, and
coworkers
Noncommercial
Sales literature
Advertising
Websites
Direct mail
Personal selling
Trade shows
Telemarketing
Commercial
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BUYING DETERMINANTS THEORY
Individualfactors
Organizationalfactors
Market factors
Environmental factors
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EXPANDED BUYING DETERMINANTS THEORY
Organizational Factors
Extrinsic reward systemsRole expectations
Corporate culture andintrinsic rewardsCross-functional
purchasing teams
Policies supportingvertical andhorizontal
dimensions
Individual factorsExperience: new buy straight rebuy
Choice of reward-Role orientationValence of reward
Probability perceptions
Environmental factorsMarket factors
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ANNOUNCEMENT
Next meeting Mr. Raymund Tan and his
group will do a video presentation of their
interview with the University purchasing
office.
God bless you all