chap. 4 types of consumer

Producers OEM purchasers End users Resellers Government

agencies Institutions Consumers

They buy products and services to

manufacture and sell their products and

services to customers.

Buyers for original equipment

manufacturers (OEMs) purchase goods to use

in making their products.

When producer buy goods and services to support

their own production and operations.

CAPITAL EQUIPMENTSItems are major

purchases, such as mainframe computers and machine tools that the producer uses for a

number of years.

They buy finished products or services with the intention to resell them to business and customers.

Effective selling to government agencies requires a thorough knowledge of their unique procurement procedures and rules.

Another important customer group consists of public and private institutions as churches, hospitals and colleges.

Consumer purchase products and services for use by themselves or by their families.

The typical organizational purchase is much larger and more complex than the typical consumer purchase.

Organizational buying decisions often involve extensive evaluations and negotiations overtime.

DERIVED DEMAND means that purchases made by these customers ultimately depend on the demand for their products – either other organizations or consumers.

Steps in the Buying ProcessCreeping Commitment

1. Recognizing a need or a problem2. Defining the type of a product needed3. Developing product specification4. Searching for qualified suppliers5. Acquiring and analyzing proposals6. Evaluating proposals and selecting a

supplier7. Placing an order and receiving the

product8. Evaluating product performance

Someone realizes that a problem or a need exists.

Who can recognize the problem?

Employees in the customer’s firm or outside salespeople can trigger this recognition.

Developing general approach in solving the existing problem or a need.

The product solution is defined in terms of purchasing a product or service- the automated assembly needed.

The specifications for the product needed to solve the problem are prepared.

Potential suppliers will use these specification to develop proposals.

Color Size Price Warranty

Note:Step 2 and 3 offer great opportunities for salespeople to influence the outcome of the buying process.

Looking for the potential supplier is being held.

◦Contact pervious suppliers◦Go through extensive search procedure

Many organization nowadays use the internet to locate suppliers other than asking suppliers for proposals.

Suppliers are ask to submit proposals. Salespeople work with people in their company to develop their proposal.

Salespeople work with people in their company to develop their proposals.

Customer evaluates the proposals

After a preferred supplier is selected, further negotiations may occur concerning price, delivery or specific performance features.

Evaluating proposals and selecting a supplier

Order is placed with the selected supplier

Order goes to supplierThe product is shipped to the buying

firm.During this step the salespeople need

to make sure the paperwork is correct and their firm knows what has to be done to satisfy the customer’s requirements.

The product’s performance is being evaluated.the evaluation maybe formal or

informal assessment made by people involved in the buying process.

Customers:a Family

Recognition of a problem or need

◦They are hungry

Searching for qualified suppliers

◦Jollibee◦McDonald’s

Delicious meals

Affordable

Acquiring and analyzing proposals

Evaluating proposals and selecting a supplier

Means that a customer becomes increasingly committed top a particular course o action while going through the steps in the buying process.

New taskStraight RebuyModified Rebuy

New Task Straight Rebuy Modified RebuyFirst time Buyer

Same product; same source

Same product; unsatisfied needs

Limited knowledge

Considerable knowledge

Interest in obtaining new information

Initial buying process steps are critical

Satisfy with the suppliers performance

in-suppliers performs unsatisfactorily

SALES PEOPLE NEED TO KNOW THE NAMES AND RESPONSIBILITIES OF ALL PEOPLE IN THE BUYING CENTER FOR A PURCHASE DECISION, AND SOMETIMES THEY NEED TO MAKE SURE THAT THE RIGHT PEOPLE ARE PARTICIPATING.

SUCH AS THE MANUFACTURING AREA PERSONNEL FOR OEM PRODUCTS AND CAPITAL EQUIPMENT, TYPICALLY DO NOT MAKE THE ULTIMATE PURCHASE DECISION. HOWEVER, THEY OFTEN HAVE INLUENCE ON THE BUYING PROCESS.

ANOTHER ROLE OF THE BUYING PROCESS IS THAT OF INITIATOR, OR THE PERSON WHO STARTS THE BUYING PROCESS.

THIS IS THE PEOPLE INSIDE OR OUTSIDE THE ORGANIZATION WHO DIRECTLY OR INDIRECTLY PROVIDE INFORMATION DURING THE BUYING PROCESS.

IT CONTROLS THE FLOW OF INFORMATION AND MAY LIMIT THE ALTERNATIVES CONSIDERED.

IN ANY BUYING CENTER ONE OR MORE MEMBERS OF THE GROUP,DECIDERS, MAKE THE FINAL CHOICE.

THE OBJECTIVES OF BUSINESSES IS TO MAKE PROFIT. THUS BUSINESSES ARE VERY CONCERNED ABOUT BUYING PRODUCTS AND SERVICES AT THE KWEST COST.

QUALITY FIRMS RECOGNIZE THAT THE QUALITY AND RELIABILITY OF THEIR PRODUCT ARE AS IMPORTANT TO THEIR CUSTOMERS AS PRICE.

ORGANIZATIONAL BUYERS WANT MORE THATN PRODUCTS THAT ARE EXPENSIVE, PERFORM RELIABLY, AND ARE AETHETICALLY PLEASING.

MEMBERS OF THE BUYING CENTER TEND TO BE MORE CONCERNED ABOUT LOSING BENEFITS THEY HAVE NOW THAN ABOUT INCREASING THEIR BENEFITS.

THIS IS TO CONTINUE BUYING FROM SUPPLIERS THAT HACE PROVE SATISFACTORY IN THE PAST.

BY CONVERTING BUYING DECISIONS INTO STAIGHT REBUYS, THE DECISIONS BECOME ROUTINE, MINIMIZING THE CHANCES OF A POOR DECISION.

THIS MEANS THAT THE BUYER WILL ALWAYS ALLOCATE ONLY A SHARE TO EACH VENDOR

Supply Chain ManagementThe Internet and Business-to-

Business Selling

Just- in- time Inventory SystemAdvantage and DisadvantageMaterial Requirements Planning (MRP)

systemAutomatic Replenishment (AR)

Supplier Relationship Management

Set of programs undertaken to increase the efficiency of the distribution channel that moves products form producer’s facilities to the end user.

used by a producer to minimize its inventory by having frequent deliveries, sometimes daily, just in time for assembly into the final product.

The ultimate goal is to eliminate all inventory except products in production and transit. Inventory is waste.

Rely on one supplier.

Funds that were tied up in inventories can be used elsewhere.

Areas previously used, to store inventories can be used for other more productive uses.

Throughput time is reduced, resulting in greater potential output and quicker response to customers.

Defect rates are reduced, resulting in less waste and greater customer satisfaction.

PCs Just In Time Management:

Del Computer Corporation has finally tuned its Just-in-Time system, Dell's low cost production system allows it to under price its rivals by 10% to 15%. How does the company's just in time system deliver lower costs? "While machines from Compaq and IBM can languish on dealer shelves for two months Dell does not start ordering components and assembling computers until an order is booked.

That may sound like no biggie, but the price of PC parts can fall rapidly in just a few months. By ordering right before assembly, Dell figures its

parts, on average, are 60 days newer than those in an IBM or Compaq machine sold at the same time. That can translate into a 6% profit

advantage in components alone."

JIT manufacturing also opens businesses to a number of risks, notably those associated with your supply chain. With no stocks to fall back on, a minor disruption in supplies to your business from just one supplier could force production to cease at very short notice.

Toyota the Developer of JIT System

Just-in-time manufacturing system has many advantages, but they are vulnerable to unexpected disruptions in supply. A production line can quickly come to a halt if essential parts are unavailable. Toyota, the developer of JIT, found this out the hard way. One Saturday, a fire at Aisin seiki Company's plant in Aichi Prefecture stopped the delivery of all break parts to Toyota. By Tuesday,

Toyota had to close down all of its Japanese assembly line. By the time the supply of break parts had been restored, Toyota had lost an estimated $15 billion in sales.

these systems are used to forecast sales, develop a production schedule, and then order parts and raw materials with delivery dates that minimize the amount of inventory needed, thereby reducing costs.

           Week 1 2 3 4 5 6 7 8Gross RequirementsScheduled ReceiptsProjected on hand IPlanned ReceiptsPlanned order releases                

A form of Just-in-time where the supplier manages inventory levels of the customer.

The materials are provided on consignment, meaning the buyer doesn’t pay for them until they are actually used. (industrial settings)

Computer-to-computer linkages between suppliers and buyers sharing information about sales, production and shipment and receipts of products.

Quote Order

Acknowledge

Shipping Notice

Invoice

Promotion Schedule

BUYER SUPPLIER

CARRIER

Sales Forecasts

Promotion Schedule

Request For Quote

Change Order

Material Release

Ship

men

t

stat

usPi

ck u

p or

derPick up order

Shipment Status

Advanced shipping

noticeBill of Landing

is a strategy by which organizational buyers evaluate the relative importance of suppliers and use that information to determine with whom they want to develop partnerships.

Step 1: Annual Spend

Step 2: Vendor Analysis

Step 3: Overall score is developed.

Is the amount that is spent with each vendor (supplier) and for what products.

The buyer rates the supplier and its product on a number of criteria such as;◦Price◦Quality◦Performance◦On- time Delivery

The ratings of suppliers can be affected by perceptions and personal needs of the buyers.

The ratings are weighted by importance of the characteristics.

Electronic ordering through EDI (Electronic Data Interchange) has been common practice in business for more than 10 years.

EDI activity, nowadays, was transacted over private networks that required buyers and sellers to use specialized software to communicate with each other.

Special secure Internet-based networks connecting buyers and suppliers are called extranets.

Reduced costs by making manuals and technical documentation available online to trading partners and customers

more effective collaboration between business partners - perhaps members of a project team - by enabling them to work online on common documentation

improved business relationships with key trading partners because of the close collaborative working that extranets support

improving the security of communications between you and your business partners, since exchanges can take place under a controlled and secure environment