Marketing Management, Millenium Edition - epiheirimatikotita.gr

120 CHAPTER 6 ANALYZING BUSINESS MARKETS AND BUYER BEHAVIORplier selection. 24 Marketers can counter a buyer’s request for a lower price in a numberof ways. They may be able to show evidence that the “life-cycle cost” of using theproduct is lower than that of competitors’ products. They can also cite the value of theservices the buyer now receives, especially where those services are superior to thoseoffered by competitors.Hewlett-Packard, for example, has worked hard to become a “trusted advisor” toits customers, selling specific solutions to their unique problems. Along the way, HPdiscovered that some companies want a partner and others simply want a product thatworks. Still, the company estimates that the trusted-advisor approach has contributedto 60 percent growth of its high-end computer business. 25As part of the supplier selection process, buying centers must decide how manysuppliers to use. In the past, many companies preferred a large supplier base to ensureadequate supplies and to obtain price concessions. Out-suppliers would try to get inthe door by offering an especially low price.Increasingly, however, companies are reducing the number of suppliers.Companies such as Ford, Motorola, and AlliedSignal have cut the number of suppliersanywhere from 20 percent to 80 percent. The suppliers who remain are responsiblefor larger component systems, for achieving continuous quality and performanceimprovements, and for lowering prices annually by a given percentage.There is even a trend toward single sourcing, using one supplier. The KnoxvilleNews-Sentinel and the New York Daily News newspapers both rely on a single source for theirnewsprint. This makes it easier to control newsprint inventories and maintain paper consistencyto avoid the time and expense of changing presses for different papers. 26Stage 7: Order-Routine SpecificationAfter selecting suppliers, the buyer negotiates the final order, listing the technicalspecifications, the quantity needed, the delivery schedule, and so on. In the case ofMRO items, buyers are moving toward blanket contracts rather than periodic purchaseorders. A blanket contract establishes a long-term relationship in which the supplierpromises to resupply the buyer as needed at agreed-upon prices over a specifiedperiod. Because the seller holds the stock, blanket contracts are sometimes calledstockless purchase plans. The buyer’s computer automatically sends an order to the sellerwhen stock is needed, and the supplier arranges delivery and billing according to theblanket contract.Blanket contracting leads to more single-source buying and ordering of moreitems from that single source. This system locks suppliers in tighter with the buyer andmakes it difficult for out-suppliers to break in unless the buyer becomes dissatisfiedwith the in-supplier’s prices, quality, or service.Stage 8: Performance ReviewIn the final stage of the buying process, the buyer periodically reviews the performanceof the chosen supplier(s). Three methods are commonly used. The buyer maycontact the end users and ask for their evaluations. Or the buyer may rate the supplieron several criteria using a weighted score method. Or the buyer might aggregate thecost of poor supplier performance to come up with adjusted costs of purchase, includingprice. The performance review may lead the buyer to continue, modify, or end therelationship with the supplier. Therefore, to stay in the running for future purchases,suppliers should monitor their performance carefully using the same criteria appliedby the product’s buyers and end users. Smart suppliers also analyze the rivals who competefor the same business, as discussed in the next chapter.