94 terms

personal selling chapter 3


Terms in this set (...)

Gross sales- returns and allowances
= net sales(100%)- cost of goods sold(60%)
= Gross profit(40%)- expenses(32%)
= Gross Profit Before Taxes(8%)- taxes(2%)
= Net profit(6%)
Net profit equation
cost of goods sold/ 1-percent margin
selling price=
sell price- variable cost per unit
contribution per unit=
fixed cost in dollars/ contribution per unit
Break even volume (units)=
total fixed cost/ (sell price- variable cost per unit)/selling per unit
Break even in Dollars (currency)=
Buy products and services to manufacture and sell their products and services to customers
1. Products included in manufacturing
2. Products and services to support the manufacturing operation
2 Types of buying situation
Original equipment manufacturer (OEM)
Purchase goods to use in making their products
End users
Producers who buy goods and services to support their own production and operations
1. Capital equipment
2. Maintenance, repair, and overhaul (MRO) supplies
3. Services
End-User Buying Situations (3)
Capital equipment
- Major purchases such as Mainframe computers and Machine tools.
- Focuses on lifetime operating cost
Maintenance, repair, and overhaul (MRO) supplies
- Paper towels and replacement parts for machinery
- Cost is low, availability can be critical
- Internet and telephone connections, employment agencies, consultants, and transportation
- Purchased in a manner similar to capital equipment purchases
Buy finished products or services with the intention to resell them to businesses and consumers
Profit margin
How much they make on each sale?
How quickly a product will sell?
How much effort it takes to sell the product?
Maximize return on investment (ROI)
all resellers are interested in putting together an assortment of products that will yield the greatest
Government Agencies
- Purchase goods and services
- Develop detailed specifications for a product and then invite qualified suppliers to submit bids
- Contract is awarded to the lowest bidder
- Conduct small purchases without bidding
- Require a thorough knowledge of unique procurement procedures and rules
1. Institutions
2. Consumers
2 Types of Customers
- Consists of public and private such as Churches, hospitals, and colleges
- Purchasing rules and procedures are as complex and rigid as those of government agencies
Purchase products and services for use by themselves or by their families
Organizational Buying
is much larger and more complex than the typical consumer purchase. Organizations use highly trained, knowledgeable purchasing agents to make these decisions. These decisions often involve extensive evaluations over time.
Organizational Selling
is increasing as more customers become global businesses
global competitiveness
is a key factor increasing the complexity of organizational buying
global sourcing
a key factor for achieving a sustainable competitive advantage for organizational buying and selling
Derived demand
means that purchases made by these customers ultimately depend on the demand for their products-- either other organizations or consumers. Sales to OEMs and resellers are based on this
1. Recognition of a need
2. Definition of the product type needed
3. Development of detailed specifications
4. Search for qualified suppliers
5. Acquisition and analysis of proposals
6. Evaluation of proposals and selection of a supplier
7. Placing and receiving the order
8. Evaluation of product performance
8 Steps in the Organizational Buying Process
creeping commitment
means a customer becomes increasingly committed to a particular course of action while going through the steps in the buying process
Early procurement involvement or early supplier involvement
involving purchasing components or materials as part of new product development, buyers are more interested in early involvement by possible vendors than when buying other types of products. This strategy has potential suppliers participate in the actual design process for a new product
1. New Tasks
2. Straight rebuys
3. Modified rebuys
3 Types of Organizational Buying Decisions
New Tasks
Purchasing a product or service for the first time
Straight rebuys
Buying the same product from the source it was bought previously
Modified rebuys
Obtaining new information of a product or a similar product that was purchased in the past
New Tasks customer needs (information and risk reduction)
information about causes and solutions for a new problem; reduce high risk in making a decision with limited knowledge
Modified rebuys customer needs (information and risk reduction)
information and solutions to increase efficiency and/or reduce cost
Straight rebuys customer needs (information and risk reduction)
Needs are generally satisfied
number of people involved in buying process for New tasks
number of people involved in buying process for Modified rebuys
number of people involved in buying process for Straight rebuys
months or years
time to make a decision for New tasks
time to make a decision for Modified rebuys
time to make a decision for Straight rebuys
key steps in the buying process for New tasks
key steps in the buying process for Modified rebuys
key steps in the buying process for Straight rebuys
executives and engineers
key decision makers for New tasks
production and purchasing managers
key decision makers for Modified rebuys
Purchasing agent
key decision makers for Straight rebuys
New task selling strategy for in-supplier
monitor changes in customer needs; respond quickly when problems and new needs arise; provide technical information
Modified rebuy selling strategy for in-supplier
act immediately when problems arise with customers; make sure all of the customer's needs are satisfied
Straight rebuy selling strategy for in-supplier
reinforce relationship
New task selling strategy for out-supplier
suggest new approach for solving problems; provide technical advice
Modified rebuy selling strategy for out-supplier
respond more quickly than present supplier when problem arises; encourage customer to consider an alternative; present information about how new alternative will increase efficiency
Straight rebuy selling strategy for out-supplier
convince customer of potential benefits from reexamining choice of supplier; secure recognition and approval as an alternative supplier
- Manufacturing personnel for OEM products and capital equipment
- Do not make the ultimate purchase decision
- Start the buying process
- Could be an executive making a decision
Directly or indirectly provide information during the buying process
Economic influencer
Concerned about the financial aspects of a decision
Technical influencer
Makes sure the technical requirements are met
Advises and directs a salesperson in a buying process leading to sale
- Control the flow of information and limit the alternatives considered
- Ensure that purchases are consolidated under one contract
- Reduce costs and increase quality
(purchasing agents often play this role)
- Make the final choice
- For straight rebuys the purchasing agent usually selects the vendor and places the order
1. Organization
2. Individuals making the decisions
Evaluation and selection of products and suppliers are affected by the needs of: (2)
1. Rational needs
2. Emotional needs
2 Categories of organizational and personal needs
Rational needs
Directly related to the performance of the product
Emotional needs
associated with the personal rewards and gratification of the person buying the product
1. Economic criteria
2. Quality criteria
3. Service criteria
Organizational Factors Influencing Organizational Buying Decisions (3)
1. Needs of buying center members
2. Personal risks
3. Personal needs
Individual Factors Influencing Organizational Buying Decisions (3)
economic criteria
The objective of businesses is to make a profit. Thus, businesses are very concerned about buying products and services at the lowest cost. Organizational buyers are now taking a more sophisticated approach to evaluating the cost of equipment. Rather than focusing on the purchase price, they consider other financial factors such installation costs, maintenance costs, etc..
Life-cycle costing
Method for determining the cost of equipment or supplies over their useful lives. This method proves that a product with a higher initial cost will have a lower overall cost
Quality criteria
Firms expect their suppliers to support their efforts to provide quality products. To satisfy customer quality needs, salespeople need to know what organizational buyers are looking for
Service criteria
Organizational buyers want suppliers that will work with them to solve their problems.
Value analysis
Suppliers and customers work together to reduce costs and still provide the required level of performance.
- Used by salespeople to get customers to consider a new product
- Useful for the out-supplier in a straight rebuy situation
1. Financial Security
2. Self-esteem and recognition
3. Risk reduction
Individual Needs of Buying Center Members (3)
Risk reduction
Buying center members may collect additional information, develop a loyalty to present suppliers, or spread the risk by placing orders with several vendors
vendor loyalty
Continuing to buy from suppliers that proved satisfactory in the past. This reduces uncertainty and risk
Lost for good
- Minimizing the chances of a poor decision by converting buying decisions into straight rebuys
- Decision becomes routine
supply chain management
began as a set of programs undertaken to increase the efficiency of the distribution channel that moves the products from the producer's facilities to the end user
1. Just-in-time (JIT) inventory control
2. Automatic replenishment
3. Electronic data interchange
4. Material requirements planning
Strategy of managing inventory while containing costs (4)
Just-in-time (JIT) inventory control
Minimizes the inventory by having frequent deliveries just in time for assembly into the final product
Automatic replenishment
Form of JIT where the supplier manages inventory levels for the customer
Electronic data interchange
Computer systems that share data across companies
Material requirements planning
Used to:
- Forecast sales
- Develop a production schedule
- Order parts and raw materials with delivery dates
Supplier Relationship Management (SRM)
Strategy by which organizational buyers:
- Evaluate the relative importance of suppliers
- Determine with whom they want to develop partnerships
Annual spend
Amount that is spent with each vendor and for what products.
-One outcome is the ability to consolidate purchases and negotiate better terms
1. Annual spend
2. Vendor analysis
3. Sustainability
3 types of Supplier Relationship Management
Vendor analysis
Summarizes the benefits and needs satisfied by a supplier
1. Price
2. quality
3. performance
4. on-time delivery
Buyer rates the supplier and its products on following criteria (4)
(vendor analysis)
Making purchasing decisions that do not damage the environment
1. Performance evaluation of characteristics
2. Importance weights
3. Overall evaluation
4. Value offered
5. Supplier section
5 parts of the Multiattribute Model of Product Evaluation and Choice
Multiattribute Model of Product Evaluation and Choice
Used to understand the factors individual members of a buying center consider in: Evaluating products and Making choices.
Used in complex decisions involving several vendors. Based on the idea that people view a product as a collection of characteristics or attributes
1. Suppliers or brands the customer is considering
2. Product characteristics being used in the evaluation
3. Customer's rating of each product's performance on each dimension
4. Weights the customer attaches to each dimension
Information needed for salespeople to develop a sales strategy (4)
1. Increasing the performance rating for the product
2. Decreasing the rating for a competitive product
3. Increasing or decreasing an importance weight
4. Adding a new dimension
5. Decreasing the price of the product
Approaches for changing perceived value (5)