Purchase Influences
Purchase influences of B2B customers differ from those of the consumer market due to the high time and cost investments of B2B transactions.
LEARNING OBJECTIVES
Differentiate between business-to-business customer influences versus consumer market purchase influences
KEY TAKEAWAYS
Key Points
- Customer retention, customer relationship management, personalization, customization, and one-to-one marketing programs are instrumental in encouraging new and repeat purchases in B2B companies.
- Unlike consumer buyer markets, business customers are less emotional and more task-oriented during the buying and decision-making process.
- Quality, price, and delivery mechanisms heavily influence B2B buyer decisions.
Key Terms
- lead: Potential opportunity for a sale or transaction, a potential customer.
Purchase Influences
Similar to consumers, B2B purchase influences encompass different variables that affect business customers’ buying behavior. The purchase influences of business-to-business (B2B) customers differ from those of the consumer market due to the high time and cost investments of B2B transactions. Customer behavior study, which is based on consumer behavior, is helpful in analyzing how B2B sales and marketing activities reinforce the purchasing behavior of B2B customers.
Service Delivery: Delivery of goods or service may not be enough to allow a business to recognize revenue on a sale if there is doubt that the customer will pay what is owed.
Influential Assets in B2B Purchase Behavior
Customer retention, customer relationship management, personalization, customization, and one-to-one marketing programs are instrumental in encouraging new and repeat purchases in B2B companies. For example, sales and marketing professionals may implement promotional initiatives such as appreciation events, product discounts, and free upgrades to prompt word-of-mouth referrals. Depending on the industry, customer referrals can generate significant leads for B2B businesses.
Personalized customer service and marketing programs are also influential during the B2B evaluation and selection process. Brands can incorporate personalization features with communication tools including product brochures, email newsletters, and social media to help prospects and existing customers evaluate product offerings.
The option of a straight “re-buy” can help to encourage customer retention. A straight “re-buy” occurs when a customer buys the same product, in the same quantity, from the same vendor.
Unlike consumer buyer markets, business customers are less emotional and more task-oriented during the buying and decision-making process. The potential risks that can result from a poorly executed B2B transaction often produce lengthy and complex sales cycles. To facilitate the evaluation and selection process, B2B customers specifically look for product attributes such as economy in cost and use, productivity, and functionality. Often, these variables are assessed during face-to-face, online meetings, or demonstrations with sales professionals.
Ultimately, B2B customers seek to partner with reliable, fair, consistent, responsive, and cooperative businesses. Quality, price, and delivery mechanisms, rather than emotional motives, tend to dominate the purchase decisions of B2B buyers. Customer testimonials, trade reviews, and industry analyst firms are all resources B2B buyers use to determine whether these factors are in line with the reputation and performance of B2B sellers.
Negotiating
B2B buyers and sellers use negotiating tactics to agree upon terms and pricing that benefit both the customer and the seller.
LEARNING OBJECTIVES
Discuss the primary purpose of negotiation in B2B organizations
KEY TAKEAWAYS
Key Points
- Typically, many departments and roles are involved in the decision-making process for business purchases.
- Client concerns and modification requests are often addressed during the contract stage to help guide the buyer-seller relationship throughout the life of the contract.
- Due to globalization and evolving business trends, more companies are adopting negotiation teams in order to take advantage of cross-departmental and cross-functional knowledge during the negotiation process.
Key Terms
- B2B: Acronym for commerce transactions between businesses, such as between a manufacturer and a wholesaler, or between a wholesaler and a retailer.
- information silos: A management system incapable of reciprocal operation with other, related information systems.
Negotiating
Negotiation is a dialogue between two or more parties, intended to reach an understanding, resolve differences, or gain advantages. It is also used to agree upon courses of action, bargain for individual or collective advantages, and satisfy the various interests of people or parties involved in the negotiation. “Negotiation” originates from the Latin expression negotiatus, the past participle of negotiare, which means “to carry on business. ”
Relevance of Negotiation in B2B Organizations
The negotiation process is an important step during the business-to-business (B2B) buying process. Both buyers and sellers use negotiating tactics to agree upon terms and pricing that will benefit both the customer and service provider. Typically, many departments and roles are involved in the decision-making process for business purchases. This is particularly true at the contract stage, where client concerns and modification requests are addressed to help guide the buyer-seller relationship throughout the life of the contract. Buyers may be interested in modifying their purchase via enhanced product features, price adjustments, or other customer benefits. Management, sales, marketing, quality control, and legal personnel may all play a part in negotiating buyer-seller contracts and agreements.
Evolution of Negotiation Tactics
Due to globalization and evolving business trends, more companies are now using negotiation teams. Teams can effectively collaborate, pool resources, and brainstorm solutions to break down and manage complex negotiations. More knowledge and wisdom can be harnessed in cross-departmental and cross-functional teams than with individuals operating in information silos. Writing and noting customer specifications, listening to buyer concerns, and communicating specific actions are roles team members must satisfy during the negotiation process. The capacity base of a negotiation team can also reduce errors and strengthen the long-term buyer-seller relationship because of the improved accuracy and wider range of knowledge that can be brought to the negotiation.
Negotiating: Negotiating tactics in B2B transactions involve taking buyer and seller interests into account.
Leasing
In B2B transactions, leasing serves as an alternative financing method for customers looking to use high-priced products and services.
LEARNING OBJECTIVES
Discuss the advantages and disadvantages of leasing in business-to-business transactions
KEY TAKEAWAYS
Key Points
- One of the major benefits of business leasing is the ability for organizations to quickly take advantage of new products available on the market.
- Leasing can also help organizations manage their annual budgets, avoid dealing with depreciated and unusable equipment, and take advantage of the latest technologies available on the market.
- Some of the major disadvantages to leasing products include loss of control over the product, limited flexibility in contract modifications, and hidden fees and penalties for damaged products.
Key Terms
- depreciation: The measurement of the decline in value of assets. Not to be confused with impairment, which is the measurement of the unplanned, extraordinary decline in value of assets.
- lessee: An individual or a corporation who has the right of use of something of value, gained through a lease agreement with the real owner of the property.
Leasing
Leasing is a process by which a firm can obtain the use of certain fixed assets for which it must pay a series of contractual, periodic, or tax deductible payments. In business-to-business ( B2B ) transactions, leasing serves as an alternative method for customers looking to use high-priced products and services. For example, customers often lease software products. The process works similar to leasing a car, where customers pay a fee over time to use the technology without owning the equipment. At the end of the lease, the hardware is returned or purchased at a fair market price.
Leasing Sign: Leasing products is often a viable alternative for cash-strapped organizations.
Benefits Of Leasing
One of the major benefits of leasing is the ability for organizations to quickly take advantage of new products available on the market. Organizations such as schools and universities, which often rely on bonds to fund new hardware and software purchases, frequently take advantage of leasing programs. This keeps the hardware in schools current, and ensures that students are using the latest technology.
Leased Locomotive: A locomotive that Union Pacific Railroad leases. The locomotive is an ex-Long Island Railroad unit.
Business products also tend to depreciate quickly and have little value at the end of its life. Leasing allows organizations to avoid dealing with the depreciation of outdated products. When a piece of technology has reached the end of its life, the equipment is usually sent back to the vendor for disposal, saving the customer time and money. Organizations with smaller cash flows can also obtain technology at lower costs by leasing products rather than purchasing them.
Leasing can also help organizations manage their annual budgets. Depending on the organization, lease agreements are easier to administer and approve than purchasing agreements, since the cost of the equipment is spread out over the course of the lease. In contrast, organizational purchases require the availability of large sums of money within a single fiscal year. Leasing business products not only significantly reduces the length of the approval process for obtaining products, but makes it easier for organizations to balance their annual budget.
Additional advantages of B2B leasing agreements include flexible lease-to-own programs. A lease can be structured to allow the purchase of equipment at the end of the lease for fair market value of the hardware. Furthermore, lease agreements can be structured to include maintenance, installation, software, and other professional services. This can save the district time and money in the long run.
Potential Disadvantages Of Leasing
Without owning a product, organizations also lack full control over what can be done with the equipment. Whereas customers who purchase equipment wield influence over future product updates and modifications, leasing customers may have limited say in how products evolve for future releases.
Lease agreements are also set for a definite period of time, which locks organizations with certain vendors and equipment. If the needs of the lessee suddenly change, it might be difficult to modify the terms of the lease. However, some leases will allow product upgrades before the end of the lease.
In addition, lessees might not be able to return damaged products depending on the leasing conditions. Leasing terms sometimes include hidden fees and penalties at the conclusion of the lease, all of which can cost the organization extra money. Accounting and purchasing departments must be aware of both the pros and cons of the lease to avoid larger problems over the lifetime of the leasing contract.