An Analysis of the Fundamentals of Marketing (part 30)

New Approaches to Business-to-Business Buying Behavior

by

Charles Lamson

A number of researchers have commented on the dramatic changes which have taken place in B-to-B purchasing over the past thirty years. For example, Wilson (1996) discusses environmental changes which in her opinion led to profound changes in the business environment affecting buying behavior.

Under the new approach, organizations must work more efficiently in order to stay competitive and survive. Costs must be lowered on all fronts, from operations/production, buying and inventory management, supplier development and management to customer service. Buyers and sellers take a more long-term view of  their business activities and the satisfaction of joint goals (a 'win-win' approach) is the desired outcome. For example, to achieve efficiencies in operations, many customers are using fewer supplies than in the past. Xerox went from 2,000 suppliers of copier parts to 350 in its desire to build vendor loyalty/supplier partnerships. Each supplier gets a larger share of Xerox's orders and in return must provide high-quality parts and service to this increasingly important customer.

Other elements of the new model are increased communication and information sharing. 'Open communication also increases the speed and flexibility of new product development for the buying firm when the supplier can help solve potential problems before they arise' (Wilson, 1994). Changes in competition have driven firms to operate more efficiently and effectively. More cooperative and mutually beneficial relationships between buyers and sellers are one result. Lewin and Johnston (1996) noted the following responses to environmental changes which they felt were having a major effect on buyer behavior:

• Move from high volume to high value.
• Experimentation with novel organization structures and processes in order to accommodate the process of change.
• Knowledge-based economy move from large hierarchical organizations to small flexible structures.

The aim in the emerging 'knowledge'-based businesses of the twenty-first century is to add value by thinking smarter than the competition. Within manufacturing industry, where prices are moving inexorably downwards, value can be created by reengineering the production processes to remove bottlenecks and maximize throughput (the amount of material or items passing through a system or process) and flexibility. This has led to experimentation with new 'flatter' forms of organization which place an emphasis on team working. Senior management needs to take care to ensure that it retains the knowledge base at the same time as it reduces organizational complexity. In the short term, cost savings may be affected by reducing the need for several layers of middle management (Bahrami, 1992), further enhancing organizational competitiveness by providing additional reductions in overall operating costs. However, it is possible to go too far and to lose a valuable store of knowledge and experience. Beyond the anticipated cost savings, 'flatter' organizations are expected to be more flexible and responsive to market and competitive dynamics by reducing the time lag between decision and action (Bahrami and Evans, 1987).

Another way in which firms are trying to increase 'flexibility' and generate 'high value' is through outsourcing (Gupta and Zhender, 1994). Firms which successfully manage to stick to their core competences, and which form relationships for supply with others for other work are more flexible and responsive to fluctuations in demand.

Technology is initiating major changes within retailing. In this sector the advent of loyalty initiatives has generated a wealth of customer information. The successful retailers of the next few years will be those which make full use of these data by using IT effectively to understand and serve their customers' needs better. The benefits will be in reduced costs and increased customer satisfaction. One means of achieving this goal will be through Effective Consumer Response (ECR) and effective supply chain management, involving close collaboration between retailers, suppliers and service companies. many differences can be observed in the development of this concept across Europe. In the Netherlands suppliers and retailers are making great efforts to become partners, with joint programs in logistics, sales and product development. By contrast, France and Spain exhibit a much less cooperative approach, with less evidence of collaboration.

*SOURCE: FUNDAMENTALS OF MARKETING, 2007, MARILYN A. STONE AND JOHN DRESMOND,  PGS. 107-108*

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