Purchasing approaches

Purchasing function organizations. Should we focus on companies with highly centralized or decentralized purchasing organizations?

Power structure. Should we focus on companies that are engineering dominated, financially dominated or marketing dominated?

Nature of existing relationships. Should we focus on companies with which we already have strong

relationships or simply go after the most desirable companies? General purchase policies. Should we focus on companies that prefer leasing? Service contracts?

Systems purchases? Sealed bidding? Purchasing criteria. Should we focus on companies that are seeking quality? Service? Price?

Situatkmal factors Urgency, Should we focus on companies that need quick delivery or service? Specific application. Should we focus on certain applications of our product rather than all

applications? Size of order. Should we focus on large or small orders?

Personal characteristics Buyerseller similarity Should we focus on companies whose people and values are similar to

ours? Attitudes towards risk. Should we focus on risktaking or riskavoiding customers? Loyalty. Should we focus on companies that show high loyalty to their suppliers?

SOURCES: Adapted from Thomas V. Bonoma and Benson P. Shapiro, Segmenting thu Industrial Market (Lexington, MA: Lexington Books, 1983); see also John Berrigan and Car] Finkbeiner, Segmentation Marketing: tfeua methods for capturing

business (New York: Harper Business, 1992),

industrial laboratories typically differ in their purchase criteria for scientific instru ments. Government labs need low prices (because they have difficulty in getting funds to buy instruments) and service contracts (because they can easily get money to maintain instruments). University labs want equipment that needs little regular

service because they do not have service people on their payrolls. Industrial labs need highly reliable equipment because they cannot afford downtime.

Table 9.4 focuses on business buyer characteristics. However, as in consumer segmentation, many marketers believe that buying behaviour and benefits provide the best basis for segmenting business markets. For example, a recent

study of the customers of Signodc Corporation's industrial packaging division revealed four segments, each seeking a different mix of price and service benefits;

1. Programmed buyers. These buyers view Sign ode's products as not very important to their operations. They buy the products as a routine purchase,

Market Segmentation • 403

usually pay full price and aceept belowaverage service. Clearly this is a highly profitable segment for Signode.

2. Relationship buyer*. These buyers regard Signode's packaging products as moderately important and are knowledgeable about competitors' offerings. They prefer to buy from Signode as long as its priee is reasonably competitive. They receive a small discount and a modest amount of service. This segment is Signode's second most profitable.

3. Transaction buyers. These buyers see Signode's products as very important to their operations. They are price and service sensitive. They receive about

a 10 per cent discount and aboveaverage service. They are knowledgeable about competitors' offerings and arc ready to switch for a better price, even if it means losing some service.

4. Bargain hunters. These buyers see Signode's products as very important and demand the deepest discount and the highest service. They know the alternative suppliers, bargain hard and are ready to switch at the slightest dissatisfaction. Signode needs these buyers for volume purposes, but they

are not very profi table. ZH

This segmentation scheme has helped Signode to do a better job of designing marketing strategies that take into account each segment's unique reactions to varying levels of priee and service. 29

Purchasing approaches