Industrial Buying Process

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Supermercados Disco 1. Analyze Disco’s current performance and strategy. How well is it doing? 2. What is the nature of Disco’s competitive advantage? How transferable is this to other markets? 3. Should Disco be in international expansion? Which markets are most suitable? 4. Evaluate the potential of: a. the acquisition of Santa Isabel b. the alliance with Royal Ahold What do you recommend?

Transcript of Industrial Buying Process

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Supermercados Disco

1. Analyze Disco’s current performance and strategy. How well is it doing?

2. What is the nature of Disco’s competitive advantage? How transferable is this to other markets?

3. Should Disco be in international expansion? Which markets are most suitable?

4. Evaluate the potential of:a. the acquisition of Santa Isabelb. the alliance with Royal Ahold

What do you recommend?

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Consumer Behavior

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Culture and Buyer Behavior

Marketing and MaterialismMarketing actions are basically undertaken in the belief that

more and better goods will bring an increase in consumers’ standard of living, an increase in their satisfaction, and perhaps even more happiness

However, when anticipating customers’ reactions to new products and increased product choices, it is important to note the limits on the relationship between material affluence and personal happiness

“Money can’t buy you love.”

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Consumer Behavior & Marketing

ENVIRONMENT  

MARKETING

CONSUMER

STIMULI

BLACK

OUTCOMES

(4 P's)

BOX 

Stimulus Organism Response

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External Influences

Culture

Economics

Technology

Politics

Buyer

characteristics

“Models of Man”Product choice

Brand choice

Store choice

Supplier choice

Buyer Choices

Buyer decision process

Local Marketing

Effort

Local Buyer Behavior

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• James Duesenberry - Relative Income hypothesis – consumer’s well-being is a function of how much income they have relative to their peer groups, not the actual income

• Milton Friedman – Permanent income, defined as the regularly expected income, is what determines an individual’s consumption

• Thorstein Veblen – Conspicuous consumption – the notion that people make purchases of expensive brands & products in order to display their ability to afford them

Local Buyer Behavior

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•What does the product/service do for the buyer?

• How does it fit into the consumption and use pattern of the buyer?

• What are the core benefits?

• What is the perceived risk and how high is it?

The CORE BENEFIT often differs between local markets.

The generic function of a product depends more on the local environment than on innate individual preferences.

• Remember: Buyers are GOAL-ORIENTED – they buy for a reason. Point is to understand what that reason is.

Local Buyer Behavior

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Problemrecognition Search

Evaluation of

alternativesChoice Outcomes

The Buyer Decision Process

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The Buyer Decision Process

Problem RecognitionA problem is when an individual perceives a difference

between an ideal and an actual state of affairsNew products often lead to tension and a recognized

“problem”For the local marketer it is important to recognize that

education about the core benefits might be necessary in order to create a demand for the product

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The Buyer Decision Process

SearchA consumer’s search for alternative ways to solve the

problem is closely related to his or her level of involvement with the product category

For product with which involvement is high, search tends to be more comprehensive and time consuming

For convenience and habit purchases, the decision process is shorter, with little need for extensive searches or alternative evaluations

Search intensity is dependent on the perceived availability of the alternativeOne advantage for product with high global brand awareness

is that initial distrust is easier to overcome

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The Buyer Decision Process

Evaluation of AlternativesWhen a new product or service is in the “consideration set”

A highly involved individual will process the available information matching the pros and cons of the alternatives against preferences

Consumers can deal with multi-attribute evaluations in several ways:They can use gradually less-important features to successively

screen out alternatives A “hierarchical” decision rule

They can consider all features simultaneously:A “compensatory” rule – hard to do.

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Multi-attribute evaluation

(ΣBI)

Preference

Behavioral intent

Choice

Social norms

Social forces

Motivation to comply Situational

factors(P-O-P)

B = beliefs about product attributes; I = importance of the beliefs; P-O-P = point of purchase

Fishbein’s Multi-attribute Model

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The Buyer Decision Process

ChoiceThe final choice of which alternative to select or try is

typically influenced by social norms and by situational factors

Social NormsWhere group pressures to comply are strong social norms

influence is expected to override multiattributed evaluation The social norms can be usefully analyzed by the

extended Fishbein modelThe social norms involve two aspects

Social forcesMotivation to comply

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The Buyer Decision Process

OutcomesThe main question about the outcomes revolves around the

degree of customer satisfaction.Customer satisfaction is particularly important in mature

markets where choices are many and the needs are already well met.

Satisfaction engenders loyalty to the brand and to the company.Because buying is typically a risky choice between different

brands, the marketer has to make sure that the customer does not encounter cognitive dissonance, a sense of possibly making the wrong choice.

One approach is to get satisfied customers to endorse the product, a common strategy in advertising.

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A Strong Brand Simplifies the Decision Process

-- REDUCES INFORMATION SEARCH

-- REDUCES PERCEIVED RISK

-- PLACES A BRAND IN THE EVOKED CONSIDERATION SET MORE EASILY

-- BRAND LOYALTY MEANS DECISIONS GO FAST.

A GLOBAL BRAND CAN FOCUS ON:

-- ATTITUDES

-- NORMS

-- P-O-P (Point-of-Purchase Promotions)

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Problem definition

Sampling

Research design

Measurement/scaling

Exploratory

Descriptive

Causal Trade surveys

Observation

Experiments

Causal Models

Secondary data

Qualitative research

Consumer surveys

Questionnaireconstruction

FieldworkData

analysis

The Local Market Research Process

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Research Issues

Primary vs. Secondary DataCIA World FactBook:

http://www.cia.gov/cia/publications/factbook/

Qualitative vs. Quantitative

Survey vs. Observation

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Conditions for Using Observational Techniques

10-410-4

Condition Brief DescriptionInformation Current behavior patterns must be part

of the data requirements.

Type of data Necessary data must be observable.

Time frame Data patterns must meet repetitiveness, frequency, and predictability factors in a prespecified time frame.

Setting Behavior must be observable in some type of public or laboratory setting.

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Characteristics of Observational Methods

10-5a10-5a

Characteristic DescriptionDirectness of observation

The degree to which the researcher or trained observer actually observes the behavior/event as it occurs. Researchers can use either direct or indirect observation techniques.

Subjects’ awareness ofbeing observed

The degree to which subjects consciouslyknow their behavior is being observed and recorded. Researchers may use either disguised or undisguised observation techniques.

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Characteristics of Observational Methods

Characteristic

Description

Structurednessof observation

The degree to which the behavior activities or events to be observed are specifically known to the researcher prior to doing the observations.

Type of observing mechanism

Basically researchers have the option either of using a trained human observer or some type of mechanical device.

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SURVEY DATA & ERROR

State of the data Error type THEORETIC POPULATION | Definitional Error POPULATION OF REALITY

| Frame ErrorOPERATIONALIZED POPULATION

| Sampling ErrorSAMPLE SELECTED

| Not-At-Home ErrorSAMPLE REACHED

| Refusal ErrorSAMPLE RESPONDING

| Measurement ErrorSAMPLE MEASURED

| Statistical ErrorSTATISTICAL CONCLUSIONS

| Logic ErrorOPERATIONAL CONCLUSIONS

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Understanding Industrial Buyers

The Business-to-Business (B2B) Marketing Task:The marketer should help the buying organization succeed.

Industrial Buyers are influenced by the same forces as individual consumers, but also conditioned by the organizational culture in which they operate.

The organizational culture reflects company policies and ways of making decisions.

The industrial buying process involves several stages from problem recognition to performance review.

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Performance review

Order specificationOrder specification

Supplier selection

Proposal solicitation

Search for suppliers

Product specificationProduct specification

Problem recognitionProblem recognition

Industrial Buying Process

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Industrial Buyers: Building Relationship

“Relationship Marketing” is important in B2B.The term is applied to a marketing effort involving

Various personalized servicesCreation of new and additional servicesCustomizing a company’s offering to the needs of a special

buyerTakes a long-term view

Since without it, the effort required to build a relationship is not worth it.

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• ADOPT THE BUYER’S VIEWPOINT.

• GROW WITH THE RELATIONSHIP.

• ACCEPT AND DEMAND TRANSPARENCY.

• BE PROACTIVE.

THINGS A MARKETER CAN DO TO CREATE A WORKABLE RELATIONSHIP:

Always consider how the culture of the nation and the culture of the organization affect relationship marketing.

Relationship Marketing

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EMERGING NEW GROWTH MATURE

Three Market Environments

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Feature

Emerging

New growth

Mature

Life cycle stage Intro Growth Mature

Tariff barriers High Medium Low

Nontariff barriers High High Medium

Domestic competition Weak Getting stronger Strong

Foreign competitors Weak Strong Strong

Financial institutions Weak Strong Strong

Consumer markets Embryonic Strong Saturated

Industrial markets Getting stronger Strong Strong

Political risk High Medium Low

Distribution Weak Getting stronger Strong

Media advertising Weak Strong In-store promotion

Dominant Market Features

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product/market situationtask emerging new growth maturemarketing analysisresearch focus feasibility economics segmentationprimary data sources visits middlemen respondentscustomer analysis needs aspirations satisfactionsegmentation base income demographics life stylemarketing strategystrategic focus market development participation in growth compete for sharecompetitive focus lead/follow domestic/foreign strengths/weaknessesproduct line low end limited wideproduct design basic advanced adaptednew product intro rare selective fastpricing affordable status valueadvertising awareness image value-addeddistribution build-up penetrate conveniencepromotion awareness trial valueservice extra desired required

Dominant Marketing Tasks