CUSTOMER BEHAVIOR: A MANAGERIAL PERSPECTIVE
PART 3: Customer Decisions and Relationships
CHAPTER 9
Institution Customer Decision Making:
Household, Business, and Government
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1
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Conceptual Framework
Customer Behavior: A Managerial Perspective
PART 3
UNDERSTANDING
CUSTOMER
BEHAVIOR
CHAPTER 9
Household Buying Behavior
• Families and Households
• Family Decision Making Process
• Conflict in Family Decisions
Business Buying Behavior
Buyer
User
INSTITUTION
CUSTOMER
DECISION MAKING
• Components of the Business Buying
Process
Payer
Government Buying Behavior
• Government Buying Procedures
• Future of the Government as
Customer
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2
Household Buying
Behavior
Households are the basic unit of
buying and consumption in a society
A household is a consumption unit of one or more persons
identified by a common location with an address
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Families and Households
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
Family household

A group of persons related by blood and/or marriage. Four types
are most common:


Married couples alone
Married couples with children
 A single parent with children
 Extended family, which may include parents, children’s spouses,
and/or grandchildren, and occasionally cousins
Nonfamily household

A household that does not contain a family



A single person living alone in a dwelling unit
Roommates
Boarding houses
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4
The Family Decision-Making
Process
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
The same family member may not have all
three roles
A single role may be jointly held by more
than one individual
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5
Steps in Family Buying Decisions
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
Initiation of the purchase decision
Gathering and sharing of information
Evaluating and deciding
Shopping and buying
Conflict management
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6
Husband-Wife Decision Roles
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
Five patterns of relative influence are
possible:





Autonomous decision by the husband only
Husband-dominated decision
Syncratic decisions
Wife-dominated decision
Autonomous decision by the wife
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7
Decision Plan Nets For A Husband
And Wife
Customer Behavior: A Managerial Perspective
PART 3
Wife’s
Husband’s
Price
<$75,000
Insulation
Number of Y
bedrooms
(4)
Interior
design
N
R
Number of
bedrooms
(4)
N
Price
Y
<$75,000
R
N
Y
A
R
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N
Y
R
N
R
N
3 bedrooms
A
Y
N
A
Accept
R Copyright
Reject © 1999 by Thomas Southwestern.
Y
Y
1
1
A
CHAPTER 9
2
All rights reserved.
R
8
Factors Influencing Interspousal
Influence
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
Gender-role orientation
Wife’s employment status
Stage in family life cycle
Time pressure
Socioeconomic development of the
population
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9
Children’s Influence on Family
Decision Making
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
Children influence household buying in three
ways:



Children express individualistic preferences for
products paid for and bought by parents
Children in their teen years begin to have their own
money and become their own payers and buyers of
items of self-use
Children influence their parents’ choice of products
that are meant for shared consumption
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10
Family Orientation
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
Children’s influence in the family
decisions depends on whether the family
has a social or a concept orientation
Another way of classifying families is by
how authority is exercised in the family
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11
Children’s Role by Family Type
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
CHILDREN’S ROLE
FOR OWN-USE PRODUCTS
DIRECT
CONTROL
SHARED
INFLUENCE
FOR FAMILY-USE PRODUCTS
DIRECT
CONTROL
SHARED
INFLUENCE
FAMILY TREE
Authoritarian
Low
Low
Low
Low
Neglectful
High
High
Low
Low
Democratic
Moderate
Moderate
Moderate
Moderate
Permissive
High
Moderate
Moderate
Moderate
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12
Learning the Customer Roles
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
Primary modes of learning customer roles

Consumer socialization
 Intergenerational influence
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13
Consumer Socialization
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
Consumer socialization occurs when one or more
of the following are learned or acquired by
children:



Preferences among alternative brands and products
Knowledge about product features and the functioning of the
marketplace
Skills in making smart decisions
Two factors play a role in consumer socialization
of children

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
Cognitive
Environmental
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14
Learning Mechanisms
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
Instrumental Conditioning

Children learn those behaviors and the underlying values that
receive rewards from their parents
Modeling

Children look up to their parents as role models and try to
internalize and adopt their values, roles, aptitudes, etc.
Cognitive

Low involvement


There could be undeliberated adoption of product choices because
of familiarity or because these products were used by one’s parents
High involvement

Socialization influence can occur due to communication and
education by parents about various brands or buying strategies
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15
Intergenerational Influence
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
The transmission of values, attitudes, and
behaviors from one generation to the other
Forward IGI

From parents to children
Reverse IGI

From children to parents

Democratic justice
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16
Family Characteristics That
Influence IGI
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
Family Relationship
Relative Expertise
IGI across households

Expertise
 Lifestyle similarity
 Resource control
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17
Intergenerational Influences (IGI)
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
FAMILY RELATIONSHIP
Negative
Positive
High
Disaffected
IGI
High
IGI
Low
No
IGI
Discounted
IGI
PERCEIVED
EXPERTISE
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18
Conflict in Family Decisions
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
Distributed Roles
Shared Roles
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19
Types of Conflict
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
GOALS
Convergent
Divergent
Divergent
Solution Conflict
(Family vacation)
Compounded
Complex, Important
Purchases
(Home buying)
Convergent
No Conflict
(Daily consumption
items)
Goal Conflict
(What to buy)
(Product level conflict)
PERCEPTIONS/
EVALUATIONS
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20
Conflict Resolution
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
VALUES/GOALS
Convergent
Divergent
Divergent
Problem
solving
Politicking
Bargaining
Convergent
No
Conflict
Persuasion
EVALUATIONS
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21
Framework for Understanding Family Buying Decisions
Buyer/Payer/User Roles
Individual Characteristics
• Personality & Lifestyle
• Time Pressure
• Product Expertise
• Education
Separation vs.
Convergence of Roles
Nature of Purchase
• Importance
• Perceived Risk
• Urgency
• Shared Vs. Individual Use
Sources of Information
• Marketer
• Mass Media
• Word-of-Mouth
Decision Process
• Autonomous
• Joint
• Conflict Occurrence
• Conflict Resolution
• Problem Solving
• Persuasion
• Bargaining
• Politicking
CHOICE
Family Characteristics
• Family life cycle
• Socio-economic status
• Dual career
• Role specialization
• Sex role orientation
•
•
•
•
Family communication & interaction patterns
Democratic vs. authoritarian
Harmony vs. discord
Time consumption-joint vs. separate
Business Buying Behavior
A business is a licensed entity engaged in
the activity of making, buying, or selling
products and services for profit or
nonprofit objectives
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23
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Comparison of Household and
Business Buying
Customer Behavior: A Managerial Perspective
CHARACTERISTIC
PART 3
HOUSEHOLD BUYING
CHAPTER 9
BUSINESS BUYING
Specialization of customer
roles
Combined or slightly
specialized
Moderately to very specialized
Formalization of the buying
process
Informal
Accountability for decisions
Usually not formally measured
Slightly formal (small
businesses) to formal (large
businesses)
Strict measures
Internal capabilities
Weak
Weak (small businesses to very
strong (large businesses
Complexity of requirement
Little complexity
Operational and strategic
complexity
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24
Components of the Business
Buying Process
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
Procurement system





Nature of the purchase
Organizational characteristics
Buying center
Rules and procedures
A decision process
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25
Buying Behavior Associated with
Buyclasses
Customer Behavior: A Managerial Perspective
Buyclass
Description of Need
PART 3
CHAPTER 9
Buying Center Size
Information Search
Straight rebuy
Item is frequently needed
and has been satisfactorily
bought before
Very small; ordering may
even be automated
Brief or nonexistent; new
suppliers rarely considered;
technical expertise rarely
sought
Modified rebuy
Need is broadly similar to
one that has been fulfilled
before but requires some
change in specifications
Moderate
Some information is
gathered; new suppliers may
be considered; technical
experts may have input into
decision
New task
Need is completely new to
the organization
Large
Extensive; new suppliers
often considered experts
usually have major input
into decision
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26
Perceived Risk
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
Perceived risk refers to the expected
probability that the purchase may not
produce a satisfactory outcome
It is a product of two factors:

The degree of uncertainty that a choice may be
wrong
 The amount at stake should a wrong choice
occur
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27
Importance
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
The importance of purchase is a
combination of the amount at stake and the
extent to which the product plays a
strategic role in the organization

The higher the amount at stake, and the more
strategic the product’s role, the more important
the purchase
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28
Complexity
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
Complexity refers to the extensiveness of
effort it takes to comprehend and manage
the product during its acquisition
Complexity has two dimensions:

The number of performance dimensions
 The technical and specialist knowledge
required to understand those dimensions
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29
Time Pressure
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
Time pressure refers to how urgently the
item is needed
When the item is needed urgently the
purchase decision will:

Short-circuit the usual process
 Make the process less deliberative
 Give more direct role to the user/requisitioner
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30
Organizational Characteristics
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
Four organizational characteristics of the
customer firm affect buying behavior:

Size
 Structure
 Purchase resources
 Purchase orientation
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31
The Buying Center
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
User
Buyer
Analyzer
Influencer
Gatekeepers
Decider
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32
Decision Process
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
Business buying decisions comprise the
following stages:






Need assessment
Developing choice criteria
Request for proposals (RFPs)
Supplier evaluation
Supplier selection
Fulfillment and monitoring
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33
Varying Influence of Buying
Center Roles
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
BUYING CENTER ROLES
USER
Need assessment

Choice criteria

BUYER
DECIDER
ANALYZER


INFLUENCER
GATEKEEPER








RFP
Supplier evaluation
Selection


Fulfillment/monitoring




 Influence
 Strong Influence
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34
Components of a Business
Customer’s Total Costs
Customer Behavior: A Managerial Perspective
Acquisition Costs
PART 3
Possession Costs
CHAPTER 9
Usage Costs
Price
Interest cost
Field defects
Paperwork cost
Storage cost
Training cost
Shopping time
Quality control
User labor cost
Expediting cost
Taxes and insurance
Product longevity
Cost of mistakes in order
Shrinkage and obsolescence
Replacement costs
Prepurchase product evaluation costs
General internal handling costs
Disposal costs
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35
Psychology of Decision Makers
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
The decision-making process is primarily
driven by two psychological processes
occurring in the decision makers:

Their expectations
 Their perceptual distortions
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36
Conflict and Its Resolution
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
Problem solving
Persuasion
Bargaining
Politicking
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37
A Comprehensive Model of Organizational
Customer Behavior
Organization Characteristics
Size
Centralization
Purchase Orientation
Rules and Procedures
Decision Process
Nature of Purchase
• Buying Task
• Straight Rebuy
• Modified Rebuy
• New task
• Perceived risk
• Importance
• Complexity
• Time pressure
Need Identification
Vendor Search
Evaluation Criteria
Vendor Evaluation
Information Sources
• Salespersons
• Advertisements
• Product literature
• Syndicated research
reports
• Trade/professional
journals
• Trade associations
• Word-of-mouth
• Vendor referrals
Conflict
Resolution
• Problem
solving
• Persuasion
• Bargaining
• Politicking
Decision
Government Buying
Procedure
In every country, the government buys a lot
of products and services; sometimes it is
likely to be the biggest single buyer
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39
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Government Buying Procedures
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
Government buys in two basic ways

Direct purchase


Request for proposal (RFP)
Competitive procurement

Invitation for bid (IFB)
 Request for proposal (RFP)
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40
Federal Acquisition Regulations
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
All government procurement has to
comply with FARs

The bid document will refer to particular
regulation numbers
 The bidder must become aware of what these
specific regulations are
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41
Invitation for Bid Procedure
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
A method of government procurement
wherein the government specifies the item
being sought exactly and invites sealed
bids
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42
Bid Specifications
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
For products and services that are needed
repeatedly, the government has established
standard specifications

Federal specifications
 Commercial item descriptions (CIDs)
 Military specifications
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43
Uniform Contract Format
Customer Behavior: A Managerial Perspective
SECTION
A
B
C
D
E
F
G
H
I
J
K
Copyright
L © 2002
M
All rights reserved.
PART 3
CHAPTER 9
TITLE
Part I - The Schedule
Solicitation/Contract Form
Supplies or Services and Price/Costs
Description/Specifications/Statement or Work
Packaging and Marking
Inspection and Acceptance
Deliveries or Performance
Contract Administration Data
Special Contract Requirements
Part II - Contract Clauses
Contract Clauses
Part III - List of Documents, Exhibits, and Other Attachments
List of Attachments
Part IV -Representations and Instructions
Representations, Certifications, and Other Statements or Offerors or Quoters
Instructions, Conditions, and Notices to Offerors or Quoters
Evaluation
Factors
for Award
Copyright
© 1999
by Thomas
Southwestern. All rights reserved.
44
Acquisition Team
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
The government sets up an acquisition
team, to prepare the bid document
There is a designated contact person to
clarify any queries the bidder may have
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45
The Proposal
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
Technical proposal
Price proposal
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46
Awarding the Contract
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
Generally, the vendor with the lowest cost
whose product would meet the agency’s
need is awarded the contract
Contracts are awarded in two forms:

Annual purchasing agreements
 Maintenance/labor agreements
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47
Procurement by State Governments
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
State governments are responsible for a
huge procurement budget
Each state has its own guidelines for doing
business
Many states now have vendor information
available on their Internet web site
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48
Similarities Between Government
and Business Procurement
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
Buyclass
Buying steps
Procurement management goals
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49
How Government Customers
Differ from Business Customers
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
Size of the average purchase and
standardization
Legal restrictions and compliance reviews
Solicitation of sellers
Open-access information
Diffusion of authority
Procedural detail and paperwork
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50
Major U.S. Laws Governing
Procurement in Government
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
The Walsh-Healey Act
Requires federal contractors to comply with (1) the wage and
hours requirements for its workers on the contract and (2) the
health and safety regulations of the state
The Davis-Bacon Act
Establishes labor standards (wages and hours) for labor
working on federal construction projects.
Equal Employment Opportunity Act
Forbids discrimination in employment and requires
affirmative hiring practices.
Buy American Act
Requires that preference be given to domestic suppliers.
Small Business Act
Promotes contracting with small businesses, and stipulates
that solicitation be “set aside” for small businesses if
adequate competition can still be expected.
Federal Acquisition Streamlining Act of 1994
Loosens restrictions on acquisition of more items available
commercially and simplifies acquisition procedures through
electronic commerce, reporting of contract awards and
amounts to unsuccessful bidders, and loosening certified cost
and pricing data holds
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51
The Travails and Rewards of
Selling to the Government
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
Although there is room for reform in government
procurement, there are unique benefits of doing
business with government





Stability
Security
Size
Breakthrough R&D work
Challenge
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52
Future of the Government as
Customer
Customer Behavior: A Managerial Perspective
PART 3
CHAPTER 9
Downsizing and restructuring
Globalization
Economic pragmatism
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53
Household Customer Decision Making and
the Three Customer Roles
Customer Behavior: A Managerial Perspective
CONCEPTS
USER
PAYER
PART 3
CHAPTER 9
BUYER
HOUSEHOLD CUSTOMERS DECISIONS: UNIQUE ASPECTS
Family and nonfamily
households
Family decisions
Children’s influence
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All rights reserved.
• In nonfamily
• In families where user
households user and
payer roles often
payer roles reside more
separate users need to
likely in the same
persuade payers.
individual.
• User values normatively
influences by nonuser
family members.
• Users initiate and gather • Payers approve or
information about
disapprove category
desirable alternatives.
purchase.
• In nonfamily
households, members
may alternate buyer role
across situations, but
users may not surrender
their choice decision
responsibility.
•Very young children as
users depend on parents
as payers and buyers.
•Adolescent children
influence user decisions
on products for common
use.
•Teenagers assume
purchase task, including
brand decisions, for
routine shopping and
seek convenience value
the most.
•Children on allowances
look for price and value.
Copyright © 1999 by Thomas Southwestern. All rights reserved.
• Buyers often influence
brand choices.
54
Household Customer Decision Making and
the Three Customer Roles (cont’d)
Customer Behavior: A Managerial Perspective
CONCEPTS
PART 3
USER
PAYER
CHAPTER 9
BUYER
HOUSEHOLD CUSTOMERS DECISIONS: UNIQUE ASPECTS
Consumer socialization
of children
• Observation of adults
and mass media
socialize children into
becoming users.
• Payer role socialization
is the hardest to come.
• Debt accumulation on
credit card is a major
concern of parents.
• Accompanying parents
on shopping trips
socializes children into
buying roles.
Intergenerational
influence
• Users values
considerably influenced
by and between the
generations. Influence
base on product
expertise or taste.
• Financial resources
enable payers to
influence user choices
across generations.
• Types of stores one
shops at can be
influenced by
intergenerational
influence.
Conflict resolution
• User-user conflict on
items for common use.
• Usually resolved by
problem solving
• User-pay role separation • Buyers imposing their
principal source of
own user values can
conflict.
cause conflict.
• Often resolved by
bargaining.
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55
Business Customer Decision Making and
the Three Customer Roles
Customer Behavior: A Managerial Perspective
CONCEPTS
PART 3
USER
PAYER
CHAPTER 9
BUYER
BUSINESS CUSTOMERS DECISIONS: UNIQUE ASPECTS
Role
specialization
Formalized
process
Users focus on
performance value
evaluation.
Users submit a formal
requisition and technical
specifications.
Accountability
Users accountable for
correct specifications.
Internal
capabilities
User capabilities may lead
to in-house production.
Complexity
Need identification may be
an extended process.
Payers focus on budget
allocations.
Payers use sound
budgeting practices.
Buyers accountable for
professional buying.
Strong financial position
can gain favorable terms
for suppliers.
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Buyers, often separate from
users and payers, specialize
in buying task.
Buyers follow well-laidout
policies and processes.
Copyright © 1999 by Thomas Southwestern. All rights reserved.
Buyers with low skills may
draw on external advice.
Buyers may need to
coordinate with multiple
suppliers.
56
Business Customer Decision Making and
the Three Customer Roles (cont’d)
Customer Behavior: A Managerial Perspective
CONCEPTS
PART 3
USER
PAYER
CHAPTER 9
BUYER
BUSINESS CUSTOMERS DECISIONS: UNIQUE ASPECTS
Buyclass
Users may automate the
requisition for rebuys.
For new task buys, payers
may have to juggle
money.
Rebuys may be routinized
and automated. New task
buys would require
professional talents to
buyers.
Buying center
Buying center brings all
roles together.
Buyers bring vendors and
users together.
Decision
process
Users most active at the
specification and vendor
screening stage.
Three roles often in
conflict.
Payers often are the
deciders in the buying
center.
Payers most active at the
decisions stage.
Conflict
resolution
Buyers active throughout the
decision process.
Payers often overly
concerned with cost
minimization.
Copyright © 2002
All rights reserved.
Copyright © 1999 by Thomas Southwestern. All rights reserved.
57
Government Customer Decision Making
and the Three Customer Roles
Customer Behavior: A Managerial Perspective
CONCEPTS
PART 3
USER
PAYER
CHAPTER 9
BUYER
GOVERNMENT CUSTOMER DECISIONS: UNIQUE ASPECTS
RFP’s
User specifications are
extensive in RFPs.
Bid evaluation
Users conduct technical
evaluation.
Acquisition
teams
Play important role on
acquisition teams.
Acquisition
reforms
Greater authority to users
for direct purchase.
Buyers act as gatekeepers.
Payers engage in cost
evaluation of the bid.
Buyers coordinate and
intensely participate in price
evaluation.
Buyers handle principal
responsibility for
acquisition.
With rising concern with
waste, payers would have
to do budget allocations
more conscientiously.
Buyers job made more
efficient.
Copyright © 2002
All rights reserved.
Copyright © 1999 by Thomas Southwestern. All rights reserved.
58