Using the same organization selected in Week 1 ‘EURO CAR’ for the course, address the following: Summarize the key product/service offered by your organization, including the role of

Organizational Buying Process / Service Delivery

© 2016 South University

Page 2 of 2

Strategic Marketing

©2016 South University

2 Organizational Buying Process / Service Delivery Process

MBA6011 Week 3 Lecture 3

Steps 1 and 2

The organizational buying decision process has the same five steps as the consumer buying decision process. The consumer and the organizational processes are compared below using the example of a car dealership as an organizational buyer purchasing new cars from car manufacturers.

Need Recognition

The main difference between the two processes at the first stage of decision making is in the number of people who are involved in the recognition of the need (problem). The decision-making unit (DMU) in the organization is more complex and is usually influenced by many people across the organization.

A typical car dealership has several departments: new-car sales, used-car sales, service, parts, accounting, and body shop. The requirement for the purchase of new cars in a dealership setting is usually recognized by the sales manager; however, the sales manager may have strong inputs from the owner and the chief financial officer (CFO) of the dealership chain. So for practical purposes, the sales manager, the owner, and the CFO constitute the DMU. Outside this unit, influences come from senior people working for different departments.

Another distinction is the amount of emotional investment by the two different types of buyers. A consumer will typically be more emotionally involved in the purchase. For an organizational buyer, the purchase would be just one of the many important decisions he or she makes on a daily basis.

Because buying a car is a large investment for most household consumers and the decision requires a great deal of deliberation

Page 3 of 2

Strategic Marketing

©2016 South University

3 Organizational Buying Process / Service Delivery Process

MBA6011 Week 3 Lecture 3

among family members, it can lead to emotional stress. On the other hand, a car dealer's DMU needs to keep a cool head and be as objective as possible while making the decision.

Information Search

An information search is more complicated for an organizational buyer than for a consumer. Depending on whether the organization is doing a straight rebuy or new task buying, the amount of time, effort, and money invested in the search for information is much higher.

Large dealerships, with a wide range of cars, may attend trade shows held around the world every year. Car dealerships sometimes make more money from the services they provide than from the sale of new vehicles. Additionally, along with auto shows, the DMUs of car dealerships may be attending auto accessories or testing equipment trade shows.

Another difference is that the demand for (or purchase of) products by organizations is more strongly influenced by environmental and economic conditions and changes in demographics. Therefore, an organizational information search includes determining which vendor (car models in the case of car dealerships) is better positioned to tackle the changes impacting the marketplace.

Environmental regulations and government financial incentives may persuade car dealerships to keep environment-friendly models in their showrooms. Also, the dealerships would like to identify those car models or brands that are better equipped to handle sudden variations in the market.

Evaluation of Alternatives

Page 4 of 2

Strategic Marketing

©2016 South University

4 Organizational Buying Process / Service Delivery Process

MBA6011 Week 3 Lecture 3

The main difference between consumers and organizations here is that an organizational buyer's evaluation criteria are more elaborate and stringent than a consumer's. There is an emphasis on obtaining good postpurchase services.

Another difference is that an organizational buyer is more concerned about the financial stability of its vendors than a consumer. A key vendor who unexpectedly files for bankruptcy can spell disaster for the client company (i.e., the car dealership). How final consumers perceive a vendor's brands is also of primary importance for an organizational buyer.

Decision makers in a dealership setting are always looking for innovative and stable vendors who can help them bring greater traffic to their dealerships to both buy vehicles and have vehicles serviced. Therefore, car dealers look for car manufacturers or wholesalers who can offer a unique purchase experience for their customers, different payment options, and solid finances.

Purchase Decision

An established organizational buyer typically has contracts already worked out with vendors. Therefore, the purchase process for an organizational buyer tends to be less complicated than that for a new buyer.

When the purchase is a straight rebuy, the organizational buyer would just place an open-ended purchase requisition, where the amount of product needed is called in by a procurement agent or automatically reordered when inventory levels are down to the acceptable minimum. When the purchase is a modified rebuy, the organizational buyer needs to evaluate purchase options every year.

Page 5 of 2

Strategic Marketing

©2016 South University

5 Organizational Buying Process / Service Delivery Process

MBA6011 Week 3 Lecture 3

A straight rebuy for an auto dealer may constitute the purchase of parts and accessories for car repairs and maintenance services. However, a more likely scenario is a modified rebuy. The car dealership would evaluate purchase options annually, which is about the same frequency at which car manufacturers change their models and sales terms. In the end, the sales manager's goal is to order enough cars with the right colors, packages, and options to appeal to the largest number of new-car consumers.

Postpurchase Behavior

Postpurchase evaluations of a product are more formal for an organizational buyer than for a household consumer. A major component of a postpurchase evaluation is the service provided by the vendor.

A car dealership usually has high expectations of the service provided by the financial arm of a car manufacturer after the cars arrive in the dealer's parking lot. However, if the service falls short of expectations, the dissatisfied car dealer tries to find a resolution to the conflict with the manufacturer. This is because the dealer depends entirely on the manufacturer for survival. Moreover, the manufacturer has a stake in the success of the franchised dealership of the car dealer. So correcting faulty cars or performing above-par services is to the manufacturer's own advantage.

Service Delivery Process

Every business sells either a product (a physical item) or a service (something intangible), or both. Many businesses develop one first, and extend into the second.

Product / Service

Page 6 of 2

Strategic Marketing

©2016 South University

6 Organizational Buying Process / Service Delivery Process

MBA6011 Week 3 Lecture 3

Optimizing your business’ product / service delivery requires analyzing what your customers are really buying. Sometimes, if you look past the obvious product / service that customers purchase, you can see their real need. By meeting that real need, you can open up new opportunities and also distance your business from its competitors. For example, Dell makes and sells computers, but so do lots of other companies; the difference is that Dell allows its customers to create a computer to their own specifications, adding or subtracting features to get exactly the machine they want within their budget. Other companies often force customers to buy computers that have already been assembled in pre-decided configurations. Dell understands that their customers are not just buying a computer, they are buying a computer that they have designed themselves to meet their own specific needs.

Maintaining Service Consistency

All businesses are “people” businesses. In other words, organizations depend on staff to deliver the product or service, whether it is a haircut, hamburger, automobile, accounting services, a meal, or a flight. The challenge faced by all businesses is consistency of service delivery. Businesses depend on the training they give their staff to ensure that similar transactions are handled the same way in the clients’ experiences every time.

The flow of activity from the potential customer’s first contact with the organization until the transaction or experience is completed can be described as the Service Delivery Process. Let’s consider a traditional brick and mortar example: Imagine that you walk into your local discount retailer to purchase a new writing pen (e.g., Walmart, K-mart). As you walk in the door, you are greeted by a person standing near the entrance. After you

Page 7 of 2

Strategic Marketing

©2016 South University

7 Organizational Buying Process / Service Delivery Process

MBA6011 Week 3 Lecture 3

walk past a couple of aisles, looking lost, an employee asks if he can help you find something. You describe your desired purchase, and the employee takes you to the correct aisle and shows you the pens. After asking further questions about color of ink and other details, the employee helps you narrow your choices to the pen you want. Later, you make your way to the check-out lanes where the clerk asks if you found everything you needed. Finishing the purchase, you walk back out the doors past the original greeter who now thanks you for shopping at the store. You’ve just experienced a service delivery process.

However, the service delivery process is not just a brick and mortar phenomenon. Let’s look at another example: Sue logs onto her computer and finds an email from her friend, Joe. The email subject line says, “The cloud drive we talked about.” When Sue opens the email, she finds a link to a wireless, personal cloud, back-up hard drive that she and Joe discussed at work earlier in the day. Sue had mentioned she was interested in a way to store photos and other important documents. Later that evening, Sue accessed her email again and noticed an advertisement in her browser window for the same drive. She also observed it was listed at a 25% discount. Clicking on the advertisement, Sue looked at several drives on the site, not sure which one was her best choice. Just before she exited the browser, a chat box opened with a header stating, “Hi, my name is Alexis, a customer service representative. How can I help you?” Sue started an online dialogue with Alexis, describing her computer, her goals, and her price range. Eventually, Sue decided to buy a mid-priced model. Going through the online shopping cart, Sue was pleased to see she could pay directly from her PayPal® account. A few clicks of her computer mouse, and Sue had a screen showing on her computer saying, “purchase confirmed.” About an hour later,

Page 8 of 2

Strategic Marketing

©2016 South University

8 Organizational Buying Process / Service Delivery Process

MBA6011 Week 3 Lecture 3

Sue received an email from the vendor saying that her order had already been processed and the package was on its way. The email provided a delivery tracking number. For the next couple of days, Sue checked the online tracking utility to see how soon her drive would arrive. Finally, the bundle showed up at Sue’s door. Sue opened the box, but had a little trouble figuring out how to set up the piece of hardware. Fortunately, the packaging included a help number, and a technician talked her through the steps to install her drive. Sue just experienced a service delivery process. Successful businesses spend a significant part of their time on each job checking and re-checking the quality of work done. The secret in providing consistently service is to develop a system, write it down, train staff and monitor delivery. Developing a system requires actually taking apart the service itself so you can see the elements that make it up. Training is an integral part of the process because you can never be “too good.” Once trained, staff needs to be monitored and rewarded to ensure that the system delivers what the customers want, in the way they want, when they want. Reducing the variability of service delivery is a key way to get customers coming back again and again and building organizational success.