Needs versus Wants

NeedsProducts or services that are essential in order to survive. are essentials, those products and services you literally cannot live without. Food, shelter, clothing, transportation, and health care are all examples of needs. WantsProducts, services, or activities that enhance the quality of life, but which are not essential for survival., on the other hand, are products, services, and activities that can improve your quality of life; you don’t need them to exist, but rather you desire to have them because you think they will make you happy.Kristin Biekkola, “Needs versus Wants,” slide show, Wisc-Online.com, http://www.wisc-online.com/objects/index_tj.asp?objID=ABM3302 (accessed August 2, 2009). Cell phones, vacations, sporting events, restaurants, amusement parks, cable television, and fashion are all examples of wants. People are motivated differently depending on if they are making a purchase for a need or a want.

Needs and wants have different motivations. Think about buying a car; you could focus on the functional attributes of the car such as miles per gallon, maintenance costs, and safety ratings. Those are considered utilitarian needsFunctional needs that are served by objective, tangible attributes of products or services., or the objective, tangible aspects of a product or service.Michael R. Solomon, Consumer Behavior: Buying, Having, and Being, 8th ed. (Upper Saddle River, NJ: Pearson Prentice Hall, 2009), 133. So, if those were your only needs, you might choose a Smart Fortwo, Ford Focus, or Toyota Prius. But you might want to have something a bit sportier, maybe even hipper, to get around campus, and you might choose a Mini Cooper, a Scion, or even a Jeep. These cars would do more than simply provide transportation; they would meet your hedonic needsEmotional needs that are served by products or services that bring pleasure., which are subjective aspects of a product or service.Michael R. Solomon, Consumer Behavior: Buying, Having, and Being, 8th ed. (Upper Saddle River, NJ: Pearson Prentice Hall, 2009), 133. You might choose to buy a Mini Cooper because you can customize the design online. That would certainly meet a need other than providing basic transportation. Some people buy a BMW because they want the status that goes with owning that make of car, or perhaps they think that having a Mercedes-Benz means they have arrived.

When you understand the difference between needs and wants and between utility needs and hedonic needs, you are better able to tailor your selling communications. Listen to consumer behavior expert Dr. Michael R. Solomon discuss the difference between needs and wants and the impact it has on selling.

Producers

Companies that buy products to make or build a product or service to sell for a profit are called producersA B2B company that purchases parts, products, or ingredients for the production of other goods or services to sell at a profit.. For example, in the case of Reebok, the company purchases components for its athletic shoes from a variety of vendors around the world. Reebok uses the components to manufacture the shoes and sell them to retailers such as Foot Locker, which in turn, sell the shoes to consumers like you. In this example, Reebok is engaged in B2B buying as a producer because the company purchases parts or materials to make shoes and then sells them to other companies.Barton A. Weitz, Stephen B. Castleberry, and John F. Tanner, Jr., Selling: Building Partnerships, 7th ed. (New York: McGraw-Hill Irwin, 2009), 86. Reebok is a B2B purchaser but not a B2C seller; the company markets its brand directly to B2C consumers to gain recognition and drive consumers to participate in B2C buying at retailers that carry its brand.

Figure 6.4 Types of B2B Buyers

Resellers

ResellersA company that buys finished goods, to sell, lease, or rent to other companies or consumers. purchase finished goods to sell, lease, or rent to B2B or B2C purchasers. In the example above, Foot Locker is a reseller because the company buys finished products from manufacturers such as Reebok, Nike, New Balance, Ryka, and others. In other words, Foot Locker doesn’t manufacture products but rather buys them from other companies to sell them. It’s important to note that although Foot Locker buys in the B2B arena as a reseller, the company sells in the B2C arena because it sells its products to the ultimate consumer.Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart, Marketing: Real People, Real Choices, 5th ed. (Upper Saddle River, NJ: Pearson Prentice Hall, 2008), 180. Besides retailers, other types of resellers are wholesalers, brokers, and agents.

Organizations

organizationsFederal, local, and municipal government bodies and nonprofit groups such as churches, schools, American Red Cross, Salvation Army, and others that purchase products or services to serve or sell to constituents. include government bodies (federal, local, and municipal, as well as the District of Columbia) and nonprofit groups (churches, hospitals, colleges, and cause-related groups like the American Red Cross). The government is a huge consumer, using over $1 trillion in goods and services annually.Barton A. Weitz, Stephen B. Castleberry, and John F. Tanner, Jr., Selling: Building Partnerships, 7th ed. (New York: McGraw-Hill Irwin, 2009), 88. In fact, according to the U.S. government budget in 2010, the government outlays are projected to be 24.4 percent of the U.S. gross national product.Office of Management and Budget, “Updated Summary Tables, May 2009: Budget of the U.S. Government, Fiscal Year 2010,” http://www.usgovernmentspending.com/us_20th_century_chart.html (accessed August 2, 2009). This makes the U.S. government the single largest customer in the world. In fact, government purchases are so large that when the Obama administration decided to replace its fleet of government vehicles in 2009, it purchased 17,205 cars for a total of $287 million—that’s just one government purchase!Jeremy Korzeniewski, “U.S. Government Buys 17,205 Cars for $287 Million, Ford Represents,” Autoblog Green, http://www.autobloggreen.com/2009/06/11/u-s-government-buys-17-205-new-cars-for-287-million-ford-repr (accessed August 2, 2009). As a result of the government being such a huge customer, there are processes for prospective vendors to apply to provide products or services to the government. The Web site https://www.fbo.gov provides information about federal business opportunities.Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart, Marketing: Real People, Real Choices, 5th ed. (Upper Saddle River, NJ: Pearson Prentice Hall, 2008), 181.

Nonprofit organizations such as the Salvation Army, the Susan G. Komen Foundation, the American Cancer Society, churches, schools, shelters, and others are also B2B purchasers of goods and services. Some may be producers, such as a soup kitchen that buys ingredients for soup and other meals, and some may be resellers, such as the yellow bands for LIVESTRONG, the Lance Armstrong Foundation.Lance Armstrong Foundation, http://www.livestrong.com (accessed August 2, 2009).

Figure 6.5

Nonprofit organizations such as the Lance Armstrong Foundation are purchasers of products and services.Lance Armstrong Foundation, http://www.store-laf.org (accessed August 2, 2009).

Size of Purchases

Because B2C buyers are purchasing only for their consumption or for the consumption of a limited number of people, the size of the purchases is relatively small. By contrast, B2B purchases are significant because the companies are purchasing to sell to other companies or to many consumers. Consider this difference: you might buy ten pairs of jeans in a year, but Nordstrom buys hundreds of thousands of pairs of jeans to stock in their inventory.Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart, Marketing: Real People, Real Choices, 5th ed. (Upper Saddle River, NJ: Pearson Prentice Hall, 2008), 177. The size of B2B purchases is always significantly larger than B2C purchases simply because a company is buying for more than one consumer.

Multiple Buyers

If you think it’s difficult to keep everyone in your apartment happy with the food purchases you make at the supermarket, that’s easy compared to the number of people involved in a B2B purchasing decision. In most B2B transactions, there are multiple decision makers involved in each purchase. Think about your trip to the supermarket from the B2B buyer’s perspective. The decision about which products to stock on the shelves was ultimately made by someone who holds the title of “buyer” in the company. However, she could not decide unilaterally what to carry in the bottled water section. She has to understand which bottled water her customers want, consult with the general merchandise manager, who is responsible for the shelf space, and the vice president of merchandising, who oversees all product choices. She may even need to make a presentation to a buying committee before she makes the decision to carry another flavor of Vitaminwater. She will need to get approval for the money to invest in the inventory and shelf space. Depending on the organization and the size and impact of the decision, several people from several different departments may be involved in a B2B buying decision.

Figure 6.6

The decision about which products are offered in a grocery store may involve several people.

© 2010 Jupiterimages Corporation

Number of Customers

There are over three hundred million people who live in the United States and approximately a hundred million households. However, there are less that half a million businesses and other organizations.Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart, Marketing: Real People, Real Choices, 5th ed. (Upper Saddle River, NJ: Pearson Prentice Hall, 2008), 177. Because B2B buyers are making decisions that may ultimately impact the sale of a product or service to millions of consumers, there are naturally fewer businesses. Consider the fact that according to the United States Census Bureau, there are only 7,569 hospitals in the country, yet there are over 110 million visits to emergency rooms annually.United States Census Bureau, http://www.census.gov/Press-Release/www/releases/archives/facts_for_features_special_editions/004491.html (accessed August 2, 2009).

Geographic Concentration

Since there are many fewer businesses and organizations compared to the number of ultimate consumers, it makes sense that there is a geographic concentration of B2B customers. For example, the fashion industry is primarily located in New York, filmmaking in Los Angeles, and technology in Silicon Valley. B2B buyers can determine where they want to be located based on resource or on access and can even choose where to build warehouses or call centers based on costs, transportation, and availability of labor.Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart, Marketing: Real People, Real Choices, 5th ed. (Upper Saddle River, NJ: Pearson Prentice Hall, 2008), 178.

Figure 6.7 Comparison of B2C and B2B Buyers

Users

The people in the B2B buying process may include some or all of the following roles. UsersPeople in a company who use the product or service but may not be the decision maker in the buying process. are the people who are actually using the product or service. In the case of a company purchasing a telecommunications system, the users are all employees of the company because each uses the telephone, Internet, and other communications technologies. But in the case of a company purchasing a security system, only the employees in the security department would be users of the product; other employees would simply enjoy the benefits of the product without actually using it. Because the users’ satisfaction is so important, many companies involve users at various points throughout the buying process, including gathering input, participating in product demonstrations, or even using the product as a test.

Initiators and Influencers

InitiatorsPerson who starts the buying process in a company but who may not be the decision maker in the buying process. are those people in the company who start the purchasing process for a particular product or service.Barton A. Weitz, Stephen B. Castleberry, and John F. Tanner, Jr., Selling: Building Partnerships, 7th ed. (New York: McGraw-Hill Irwin, 2009), 97. For example, the e-commerce manager in the marketing department may begin the process of seeking a new technology provider for e-mail and social networking services on the company’s Web site. However, he may not be the final decision maker. There may be several departments involved in the purchasing decision including marketing, IT, and customer service, just to name a few. The e-commerce manager will most likely be a user and will take part in the buying process. In fact, he may even be an influencerA person who has a role and perhaps some authority in the purchasing decision at a company but is not the sole decision maker. in the final buying decision because he can lend his expertise to the team of people who will be making the final decision. He may compare the offerings from competitive companies, do a competitive cost analysis, and even conduct a cost-benefit analysis to determine which product will provide the most benefit for the least amount of cost. He might have a preference of which vendor to choose as a result of this information and his knowledge of the different companies in the industry. His influence may be quite significant as to what choice the company makes for the purchase. There may be other people in the organization who are also influencers, such as the IT manager, customer service manager, and others.

Decision Makers

At the end of the day, it is the decision makerThe person or people who are responsible for making the final purchasing decision at a company. or decision makers who will make the final purchasing decision. Decision makers could be anyone who holds the responsibility or accountability for making buying decisions for the company. In the case of the e-mail and social networking technology purchase, depending on the company, the decision maker might be the CEO, the head of the marketing department, or even a committee of people from marketing, IT, and customer service. A smart decision maker involves the users and influencers in her decision-making process to make the best choice. An investment in technology will not only be expensive, but will last for years; once a company makes a commitment to integrate their systems with a technology company, it is not practical to make frequent changes. The decision making process in B2B can take days, weeks, months, or even years to make, depending on the company and the product or service being purchased.

Finding the “Power Level”

When you are selling in a B2B environment, you may not always have access to the ultimate decision maker. But building a relationship with the initiator, influencers, and users can be just as important and effective as meeting with the decision maker. However, you should always be aware of the “power levelThe level in a company or organization at which the buying decision is made.,” or exactly the level in the organization that is making the buying decision. Sometimes, salespeople don’t get to the power level, but instead stop at one or two levels below that critical level where the purchasing decision is being made. If the vice president of human resources is making the decision as to which vendor to choose for the company’s training programs, it’s important to build a relationship with her. Having a relationship with the director of training is critical, but a successful salesperson wouldn’t stop there; he would work to secure a relationship at the power level, which is the vice president. This video discusses the power level and its importance to success in selling.

New-Task Buy

If a company is moving its headquarters to a new building that does not come equipped with office furniture, the company will need to acquire furniture for all of its employees. This is a new purchase for the company, which would classify it as a new-task buyA purchase made by a company for the first time..Gerald L. Manning, Barry L. Reece, and Michael Ahearne, Selling Today: Creating Customer Value, 11th ed. (Upper Saddle River, NJ: Pearson Prentice Hall, 2010), 163. When a customer is contemplating a new-task buy, it is an excellent opportunity to use your consultative selling skills to bring information to your customer to help her make the best possible decision.

Straight Rebuy

What if your customer is already purchasing the product or service regularly? Although he may currently be purchasing the product from you, he already knows about the product or service, how to use it, and how much he is currently paying for it. This is called a straight rebuyA routine repurchase of a product or service.,Gerald L. Manning, Barry L. Reece, and Michael Ahearne, Selling Today: Creating Customer Value, 11th ed. (Upper Saddle River, NJ: Pearson Prentice Hall, 2010), 163. a routine repurchase of a product or service. Usually, straight rebuys are consumable products or supplies such as office supplies, maintenance supplies, or parts. This is an opportunity for you to shine, whether the customer is currently purchasing from you or not. When purchases are on “auto pilot,” sometimes the salesperson gets lazy, takes the business for granted, and doesn’t go the extra mile to suggest something new or better. If a prospective customer is already buying from someone else, you have the opportunity to win her over by suggesting a better or more efficient product, a different pack size or method of replenishment, or other ideas that will help the customer save time or money or increase quality. For straight rebuys, it is often price that gets the customer’s attention, but it is service (or lack of it) that makes the customer switch providers.

Modified Rebuy

Sometimes, your customer may already be purchasing the product but wants to change the specifications; this is called a modified rebuyA product or service that is already being purchased, but the specifications are changed..Gerald L. Manning, Barry L. Reece, and Michael Ahearne, Selling Today: Creating Customer Value, 11th ed. (Upper Saddle River, NJ: Pearson Prentice Hall, 2010), 163. For example, when the magazine Vanity Fair did a split run of their magazine cover for their September 2009 issue, they printed half of the copies with Michael Jackson on the cover and half with Farrah Fawcett.Lorena Bias, “Fawcett, Jackson Get ‘Fair’ Magazine Play,” USA Today, August 3, 2009, life 1. Although they print the magazine monthly, they modified the printing specifications for that issue. Therefore, the sales rep from the printer sold the September 2009 print run as a modified rebuy. Selling to a customer who is purchasing a modified rebuy is an excellent opportunity to demonstrate your flexibility and creativity. Many times, customers have an idea in mind for a modification, but if you can bring them ideas and insights that will help them increase their business profitably, you will have the upper hand in securing the buy.

Figure 6.8

The September 2009 issue of Vanity Fair magazine is an example of a modified rebuy because the normal print order was adjusted to print two different covers.“Vanity Fair’s Two September 2009 Covers: Michael Jackson, Farrah Fawcett Split Cover,” Huffington Post, August 3, 2009, http://www.huffingtonpost.com/2009/08/03/vanity-fairs-two-septembe_n_249809.html (accessed February 20, 2010).

Strategic Alliance

Although most B2B selling depends on relationships, some selling situations go above and beyond the traditional relationship between a salesperson and the customer. Some relationships go to the next level and actually create a partnership that puts both parties at risk and provides opportunities for all parties to gain; this is called a strategic allianceA business partnership in which all parties have something at risk and have something to gain.. The relationship between Yahoo! and Microsoft is an example of a strategic alliance. The two companies finally decided to join forces in July 2009 in an effort to leverage resources as a stronger competitor to industry leader Google. As part of the relationship, Microsoft will power Yahoo!’s search with its new engine called Bing; Yahoo! will receive 88 percent of the search-generated advertising revenues from Bing.“Yahoo-Microsoft Deal,” New York Times, July 30, 2009, http://topics.nytimes.com/top/news/business/companies/yahoo_inc/yahoo-microsoft-deal/index.html (accessed August 3, 2009). Both Microsoft and Yahoo! have “skin in the game,” which means that each party has something at risk and much to gain. The strategic alliance represents a way for both companies to prosper in the Internet search business. Separately, each represents less than one-fifth of the searches done in the United States. Together, their market share is 28 percent, still a far cry from industry-leading Google at 65 percent.Patricia Resende, “Microsoft Keeps Watchful Eye on Yahoo’s Earnings,” Yahoo! Tech, July 20, 2009, http://tech.yahoo.com/news/nf/20090720/tc_nf/67859 (accessed August 3, 2009). Despite spending billions, neither company has been successful overtaking Google alone; the strategic alliance gives these companies a chance to compete.“Yahoo-Microsoft Deal,” New York Times, July 30, 2009, http://topics.nytimes.com/top/news/business/companies/yahoo_inc/yahoo-microsoft-deal/index.html (accessed August 3, 2009).

Figure 6.9

Bing, the search engine created by Microsoft, is now also the search engine used on Yahoo!

Who Makes the Buying Decision?

In many companies, there is a function called buyer, purchasing manager, materials manager, or procurement manager. These are the people who are responsible for making buying products, services, and supplies for the company or for the company’s customers. In most cases, they are the decision makers for purchasing decisions.

Because most purchasing decisions in a company have a significant impact on the users and on the profitability of the company, some companies create cross-functional teams called a buying center. These people work together to make important buying decisions for the company or organization. For example, many colleges and universities have a buying center that makes decisions that impact all users in the school such as a new e-mail system, classroom, or dormitory supplies.Michael R. Solomon, Consumer Behavior: Buying, Having, and Being, 8th ed. (Upper Saddle River, NJ: Pearson Prentice Hall, 2009), 184.