Title: Organizational Buyer Behavior of Group Market
1Organizational Buyer Behavior of Group Market
- The ideal salesperson in the company meetings
segment isnt a salesperson in the traditional
sense, but rather the problem solver. - Robert C. Mackey
2Objectives
- After reading the chapter, you should be able to
- Understand the organizational buying process.
- Identify and discuss the importance of the
participants in the organizational buying
process. - Identify the major influences on organizational
buyers. - List the eight stages of the organizational
buying process. - Identify and describe the group markets in the
hospitality industry.
3Organizational Buyers
- In some ways business markets are similar to
consumer markets. - Both involve people who assume buying roles and
make purchase decisions to satisfy wants. - Nevertheless, business markets differ from
consumer markets in (a) market structure and
demand, (b) the nature of the buying unit, (c)
the types of decisions, and (d) the decision
process involved.
4Market Structure and Demand
- The American Marketing Association holds more
than twenty conferences annually. - the value of this account approaches 1 million
- a delegate also spends about 850 on
transportation and 425 on entertainment, plus
spending in local restaurants - Hyatt and Marriott share the majority of the
AMAs conference business, with Marriotts share
close to three thousand room-nights a year. - each organizational customer can deliver tens of
thousands of dollars worth of business to the
hotel, airlines, and the destinations economy
5Market Structure and Demand
- Organizational demand is derived demand, or a
function of the businesses that supply the
hospitality travel industry with meetings,
special events, and other functions. - AMA plans hosts conferences because members,
marketing managers, suppliers, and educators,
have attended past conferences on these topics. - if a particular conference receives poor
attendance, the AMA drops it from future
schedules - Ultimately, demand for association member
products determines the demand for association
meetings.
6Market Structure and Demand
- Through good environmental scanning, marketers
can identify emerging industries, companies, and
associations, screening for good business
partners. - Hotel managers need to understand the financial
health of the corporations associations they
serve. - if clients fall on hard times, managers need to
look for healthy industries to replace the lost
business, before it affects the revenue per
available room (REVPAR) - Compared with consumer purchases, a business
purchase usually involves more buyers and a more
professional purchasing effort.
7Market Structure and Demand
- Corporations that frequently use hotels for
meetings may hire their own meeting planners. - Professional meeting planners receive training in
negotiating skills and belong to associations
such as Meeting Planners International, which
educates its members in the latest negotiating
techniques. - A corporate travel agents job is to find the
best airfares, rental car rates, and hotel rates.
- hotels must have well-trained salespeople to deal
with well-trained buyers, creating thousands of
sales jobs
8Market Structure and Demand
- Once the meeting is sold, the account is turned
over to a convention service manager who works
with the meeting planner to make sure the event
is produced according to the meeting planners
expectations. - Outside the hotel, jobs relating to meetings
include corporate meeting planners, association
meeting planners, independent meeting planners,
and convention and visitor bureau salespersons.
9Types of Decisions and The Decision Process
- Organizational buyers face more complex buying
decisions than consumer buyers. - Their purchases often involve large sums of
money, complex technical features, economic
considerations, and interactions among many
people at all levels. - The organizational buying process tends to be
more formalized professional purchasing effort.
- the more complex the purchase, the more likely it
is that several people will participate in the
decision-making - In the organizational buying process, buyer and
seller are often very dependent on each other.
10Types of Decisions and The Decision Process
- The decision-making unit of a buying organization
is sometimes called the buying center - Users - those who use the product or service
- Influencers - directly influence the buying
decision butdo not themselves make the final
decision - Deciders - select product requirements and
suppliers - Approvers - authorize proposed actions of
deciders or buyers - Buyers - have formal authority for selecting
suppliers and arranging the terms of purchase - Gatekeepers - have the power to prevent sellers
or information from reaching members of the
buying center
11The Buying Center
- Buying centers vary by number type of
participant, so salespersons calling on
organizational customers must determine - who are the major decision participants?
- what decisions do they influence?
- what is their level of influence?
- what evaluation criteria does each participant
use? - When a buying center has multiple participants,
the seller may not have time/resources to reach
them all. - smaller sellers concentrate on reaching key
buying influencers and deciders
12The Buying Center
- Most deciders like to feel in control of the
purchasing decision, so going over a deciders
head working with the boss will be resented. - In most cases the boss will leave the decision up
to the decider, and the ill will created by not
dealing with the decider directly will result in
him or her choosing another company. - Larger sellers use multilevel, in-depth selling
to reach as many buying participants as possible.
- their salespeople virtually live with their
high-volume customers
13Major Influences on Organizational Buyers
- Organizational buyers are subject to many
influences as they make buying decisions, and
some vendors assume the most important influences
are economic. - A study of buyers in ten large companies
concluded that emotions feelings play a part in
the decision. - In reality, organizational buyers commonly
respond to both economic and personal factors. - where there is substantial similarity in supplier
offers, price becomes an important determinant - when competing products differ substantially,
buyers are faced with many decision variables
other than price
14Major Influences on Organizational Buyers
- The various influences on organizational buyers
may be classified into four main groups - environmental, organizational, interpersonal,
individual
15Environmental Factors
- Organizational buyers are heavily influenced
bythe current and expected economic environment.
- Factors such as the level of primary demand, the
economic outlook, and the cost are important. - In a recession, companies cut their travel
budgets, whereas in good times, travel budgets
are usually increased.
16Organizational Factors
- Each organization has specific objectives,
policies, procedures, organizational structures,
and systems related to buying. - The hospitality marketer has to be as familiar
with them and wants to know - how many people are involved in the buying
decision? - who are they?
- what are the evaluation criteria?
- what are the companys policies constraints on
the buyers?
17Interpersonal Factors
- The buying center usually includes several
participants, with differing levels of interest,
authority, and persuasiveness. - hospitality marketers are unlikely to know the
group dynamics taking place during the buying
decision process - Salespeople commonly learn the personalities and
interpersonal factors that shape the
organizational environment and provide useful
insight into group dynamics.
18Individual Factors
- Each participant in the buying decision process
has personal motivations, perceptions, and
preferences. - Age, income, education, professional
identification, personality, and attitudes toward
risk all influencethe participant in the buying
process. - buyers definitely exhibit different buying styles
- Hospitality marketers must know their
customersand adapt their tactics to known
environmental, organizational, interpersonal, and
individual influences.
19Organizational Buying Decisions
- Organizational buyers do not buy goods and
services for personal consumption. - they buy hospitality products to provide
training, reward employees and distributors, and
to provide lodging for their employees - Eight stages of the organizational buying process
have been identified and are called buyphases. - this model is called the buygrid framework
20The Buygrid Framework
- Stage 1 Problem Recognition
- The buying process begins when someone in the
company recognizes a problem or need that can be
met by acquiring a good or a service. - problem recognition can occur because of
internalor external stimuli - Internally, a new product may create the need for
a series of meetings to explain the product to
the sales force. - Externally, the buyer sees an ad or receives a
call from a hotel sales representative who offers
a favorable corporate program.
21The Buygrid Framework
- Stage 2 General Need Description
- Having recognized a need, the buyer goes on to
determine the requirements of the product and to
formulate a general need description. - The corporate meeting planner works with others
to gain insight into the requirements of the
meeting. - they determine the importance of the price,
meeting space, sleeping rooms, food and beverage,
and other factors - Alert marketers can help buyers define their
companies needs and show how their hotelcan
satisfy them.
22The Buygrid Framework
- Stage 3 Product Specification
- Once the general requirements are determined, the
specific requirements for the meeting can be
developed. - Information often requested includes
availabilityof water, ceiling heights, door
widths, security, and procedures for receiving
and storing materials prior to the event. - A salesperson must be prepared to answer their
prospective clients questions about their
hotels capabilities to fulfill the product
specification.
23The Buygrid Framework
- Stage 4 Supplier Search
- The buyer now conducts a supplier search to
identify the most appropriate hotels. - the buyer can examine trade directories, do a
computer search, or phone familiar hotels - Hotels that qualify may receive a site visit from
the meeting planner, who eventually develops a
shortlist of qualified suppliers.
24The Buygrid Framework
- Stage 5 Proposal Solicitations
- Once the meeting planner has drawn up a short
list of suppliers, qualified hotels are invited
to submit proposals. - hotel marketers must be skilled in researching,
writing presenting proposals - Proposals should be marketing oriented, not
simply technical documents. - they should position their companys capabilities
and resources so that they stand out from the
competition - many hotels have developed videos for this
purpose
25The Buygrid Framework
- Stage 6 Suppliers Selection
- In this stage, members of the buying center
review the proposals and move toward supplier
selection. - they conduct an analysis of the hotel,
consideringphysical facilities, ability to
deliver service, andthe professionalism of its
employees - In general, meeting planners consider the
following attributes in making their selection of
a location - sleeping rooms meeting rooms
- food beverage
- check-in/checkout billing procedures
- staff
26The Buygrid Framework
- Stage 6 (cont.) Supplier Selection
- The buying center may attempt to negotiate with
preferred suppliers for better prices terms
before making the final selection. - There are several ways the hotel marketer can
counter the request for a lower price. - dates can be moved from a high demand period toa
need period for the hotel - menus can be changed.
- The marketer can cite the value of the services
the buyer now receives, especially where services
are superior to competitors
27The Buygrid Framework
- Stage 7 Order-Routine Specification
- The buyer writes the final order with the chosen
hotels, listing technical order-routine
specifications of the meeting. - the hotel responds by offering the buyer a formal
contract - The contract specifies cutoff dates for room
blocks, date when hotel will release the room
block for sale to other guests, and minimum
guarantees for food and beverage functions. - Many hotels restaurants have turned what should
have been a profitable banquet into a loss by not
having or enforcing minimum guarantees.
28The Buygrid Framework
- Stage 8 Performance Review
- The buyer does a postpurchase performance review
of the product to determine if the product meets
the buyers specifications and if the buyer will
purchase from the company again. - It is important for hotels to have at least daily
meetings with a meeting planner to make sure
everything is going well and correct things
thatdid not go well. - This manages the buyers perceived service
helps avoid a negative postpurchase evaluation by
the buyer.
29Group Business Markets
- One of the most important types of organizational
business is group business - it is important for marketing managers to
understand differences between a group and a
consumer market - group business is often more sophisticated and
requires more technical information than the
consumer market - Many group markets book more than a year in
advance, and during this time, cognitive
dissonance can develop. - marketers must keep in contact with the buyer to
assure them that they made the right decision in
choosing the sellers hotel
30Group Business Markets
- Categories
- The four main categories of group business are
conventions, association meetings, corporate
meetings, and SMERF. - Social, Military, Educational, Religious, and
Fraternal organizations - Conventions attract large numbers, but meetings
occur much more frequently than conventions. - there are about ninety-five meetings for each
convention - fifteen hundred people attend the average
convention - 165 people attend the average association meeting
- 78 people attend the average corporate meeting
31Group Business Markets
- Considerations
- When choosing a hotel, an important consideration
for a is whether the hotel can house the
participants. - most hotels have the potential of attracting
hundreds of small meetings, where larger hotels
can attract conventions - Successful hotels know which groups to attract,
how to use group business to fill need dates
how to sell groups on the hotels benefits rather
than just price.
32Group Business Markets
- Conventions
- Conventions are a specialty market requiring
extensive meeting facilities. - usually the annual meeting of an association,
include general sessions, committee
special-interest meetings - Hotels with convention facilities, such as the
Chicago Hyatt can house small and midsized
conventions. - Conventions that use a major facility, such as
the Jacob Javitts Convention Center in New York,
often have tens of thousands of delegates. - called citywide conventions because hotels
throughout the city house their delegates
33Group Business Markets
- Conventions (cont.)
- There are almost 14,000 conventions held each
year in the US, with delegates staying an average
of 3.6 days spending an average 1,500 per
event. - of this amount about 350 is spent on lodging
- Associations usually select convention sites two
to five years in advance, with some large
conventions planned ten to fifteen years before
the event. - Some associations prefer to have their
conventions in the same city year after year. - others move to a different area of the country
each year
34Group Business Markets
- Conventions (cont.)
- A convention can be a major source of income for
the sponsoring organization. - registration fees from attendees and sales of
exhibition space in the trade show are major
sources of revenue - The price that can be charged for exhibition
space is related to the number of attendees. - an association looks for locations that will be
both accessible and attractive to members
35Group Business Markets
- Conventions (cont.)
- Convention planners listed the following as the
most important factors in choosing a destination - availability of hotels facilities
- distance from attendees ease costs of
transportation - climate recreation, sights cultural activities
- The most important attributes of the hotel
- meeting rooms sleeping rooms
- food beverage quality
- exhibit space support services
- negotiable rates billing procedures
- check-in/checkout staff assignment previous
experience
36Group Business Markets
- Conventions (cont.)
- Food quality is very important to convention
planners. - attendees will talk about exceptional banquets,
out-of-the-ordinary receptions unique coffee
breaks - poor food and service can generate negative
feelings about the convention among the
participants - Support services must be available when needed.
- a nonfunctioning DVD player must be
repaired/replaced quickly to ensure the
presenters flow is not interrupted - Billing procedures are important to planners.
- meeting planners want a bill that is
understandable, accurate, and delivered in a
timely manner
37Group Business Markets
- Convention Bureaus
- Convention bureaus are nonprofit marketing
organizations that help hotels sign conventions
meetings. - often supported by a hotel or sales tax run by
chambers of commerce, visitor bureaus, or
city/county governments - A hotel relying on meeting business for a
significant portion of its occupancy should have
a good working relationship with the convention
bureau. - which includes active membership in the
organization
38Group Business Markets
- Association Meetings
- Associations sponsor many types of meetings.
- regional, special-interest, educational, and
board meetings - 71,000 associations, 92 of which hold meetings,
creating 227,000 association meetings annually. - generating meeting business valued at 70 billion
- Important destination attributes for an
association meeting planner are availability of
hotel facilities, ease of transportation,
distance from attendees, and transportation
costs. - unlike conventions, climate, recreation
cultural activities are not as important as the
meeting itself is the major draw
39Group Business Markets
- Associations (cont.)
- In selecting a hotel, the association meeting
planner looks attributes similar to the
convention planner. - except for exhibition space
- For the association meeting planner, food and
beverage are the most important attributes. - Membership in the American Society of Association
Executives (ASAE) is beneficial for hotels
actively pursuing association business. - Members attend association meetings
voluntarily,so the hotel should work with
meeting planners to make the destination seem as
attractive as possible.
40Group Business Markets
- Corporate Meetings
- A corporate meeting is a command performance.
- employees are directed to attend without choice
- Because corporations do not have to develop and
implement a marketing plan to gain attendees,
they often plan meetings with a few weeks lead
time. - About 800,000 corporate meetings are held with an
average expenditure exceeding 36,000 per
meeting. - corporate meetings are smaller than association
meetings - When seeking business from corporations, a hotel
manager must understand who has the
responsibility for booking meetings.
41Group Business Markets
- Corporate Meetings (cont.)
- The corporations major concern is for a
productive meeting that accomplishes the
companys objectives. - types of corporate meetings include training,
management, planning and the incentive meeting - To a corporate meeting planner, the most
important attributes in the choice of a
destination are the availability of hotels, ease
of transportation, transportation costs, and
distance from the attendees. - Hotels interested in capturing and retaining
corporate meeting business must make sure that
meeting rooms are adequate and set up properly.
42Group Business Markets
- Corporate Meetings (cont.)
- Hotel salespeople must develop an understanding
of the clients corporate culture to gain insight
into benefits the hotel can offer. - some companies feel meetings should be austere,
rather than lavish - others view meetings as a time for employees to
relax enjoy themselves, a well-deserved break - Companies that believe meetings should educate
rejuvenate employees, and build enthusiasm toward
the company are willing to spend more money on
food beverage, entertainment, and hotel
facilities.
43Group Business Markets
- Small Groups
- Although small in terms of number of
participants, thousands of small meetings are
held every month. - Hotels chains have developed special
packagesfor small meetings, often overlooked by
large hotels. - upscale hotels such as the LErmitage in Beverly
Hills go after executive meetings where expense
is not a problem - Sheraton has also developed executive conference
centers for board meetings, strategic planning
sessions training
44Group Business Markets
- Incentive Travel
- Incentive travel, a unique subset of corporate
group business, is a reward participants receive
for achieving or exceeding a goal. - for both individual and team performance
- A hotel salesperson selling incentives must be
ableto help their client justify the
expenditure. - percentage of sales of the attendees is an
excellent way - Because travel serves as the reward, participants
must perceive the destination hotel as special. - climate, recreational facilities, and sightseeing
opportunities are high on an incentive planners
list
45Group Business Markets
- SMERFs
- SMERF stands for Social, Military, Educational,
Religious, and Fraternal organizations. - median 485 nights at a budget of 180,000
- in the US, over 50,000 religious organizations
have group travel programs - The individual pays for the majority of the
functions sponsored by these organizations, and
sometimes the fees are not tax deductible. - Participants usually want a low room rate often
find food beverage within the hotel too
expensive. - SMERFs can be flexible to ensure a lower room
rate
46Group Business Markets
- SMERFs (cont.)
- Because attendees are price sensitive, a
challenge is to get them to book within the room
block. - due to Internet searching for lower rates at the
same hotel - Hotels often provide concessions like free rooms
ora free or reduced food beverage function
based on the number of room nights in the groups
block. - if the block does not materialize, the meeting
planner is responsible for extra charges - SMERFs provide good off-peak filler business.
- those new to hotel sales often start with SMERF
markets
47Group Business Markets
- Dealing With Meeting Planners Negotiating
- When negotiating with meeting planners, it is
important to try to develop a win-win
relationship. - meeting planners like to return to the same
property - Discussions over price can drive the planner and
hotel sales executive apart, or bring them
together - a negotiating technique is to determine group
requirements in detail and work out a package
based on needs budget - Some planners try to negotiate every item
separately, starting with the room rate, then
they choose a 65 banquet and try to negotiate
the price to 45. - every line item becomes a point of contention
48Group Business Markets
- Negotiating
- A consultative approach is much more effective.
- if the hotel knows the planner wants to spend 50
for dinner, the chef can develop alternatives in
this range, the hotel can produce the meal at a
profit and sell it for 50 - the hotel gains a profitable meeting, and the
meeting stays within the planners budget - If attendees are able to get work done at the
conference they will stay longer. - the hotel can offer a small meeting room with
business services, including Internet access,
computers printers - this can be a low-cost item to the hotel that has
a high value to the meeting planner
49Group Business Markets
- Negotiating
- Hotel salespersons must remember that most group
rates are noncommissionable - if the rates are to be commissionable, it should
be determined during the negotiation process - Meeting planners sometimes turn meetings over to
travel agents, who book about 5 percent of all
corporate meetings. - if the planner does so without understanding the
rate is noncommissionable, problems can arise
when the travel agent tries to collect a
commission
50Group Business Markets
- Negotiating
- It is also common to give one complimentary
room-night for every fifty room-nights that the
group producesanother point of negotiation. - A smaller meeting room the hotel will not be able
to sell during a proposed meeting can be used in
the negotiation process as a boardroom or a space
for the meeting manager to work. - The hotel salesperson must look for items that
will create value for the meeting planner without
creating costs or sacrificing revenue for the
hotel.
51Group Business Markets
- Negotiating
- Many associations have a president, elected from
the membership, and a professional executive,
often called the executive vice president. - the executive vice president usually sets up the
meeting or supervises a meeting planner - It is important for the salesperson to find out
who is involved in the decision-making process,
officially and unofficially. - gatekeepers can give useful insights into the
decision-making process within the organization
52Group Business Markets
- Negotiating
- When the vice president of sales asks a junior
salesperson to organize a sales meeting, the
salesperson is usually unsure of how to proceed. - Meeting administrators often know the business as
well as the hotel salesperson. - salespeople should listen to the administrator
tounderstand his/her requirements - Sometimes they know exactly what they want and
just need a quote according to their
specifications. - if this is the case, trying to alter their
specifications arbitrarily can appear
unprofessional and lose business
53Group Business Markets
- Negotiating
- Most meeting planners maintain a history of the
group for the purpose of planning future
meetings. - a salesperson can gain valuable information by
asking questions about past conferences - In addition to information volunteered by the
meeting planner, the salesperson should interview
hotels that hosted the conference in past years. - this can provide insight into room pickups,
banquet attendance, past problems what members
enjoyed
54Group Business Markets
- Negotiating
- Meeting planners want their calls returned the
same day they are received. - When they ask about availability of meeting
space, they expect a response the same day and a
complete proposal in five days. - Most meeting planners want their bill within one
week of the event 25 want it within two days. - Planners feel hotel management should empower the
convention service manager to solve their
problems. - they do not want to wait while the convention
service manager checks with a superior
55Group Business Markets
- Prefunction Meetings
- A most important aspects of creating a successful
function is a prefunction meeting between the
hotel staff and the meeting planner before the
function. - Accounting should be at the meeting to get
acquainted with the function to make sure billing
meets expectations - the Bell Captain should know if a gratuity is
included - the concierge needs to know the meeting has open
nights with no banquets to allow the concierge to
set aside tables at local restaurants - hotel staff that will be receiving questions
about the event and the schedule should be
briefed - reservations agents should know the names of the
groups VIPs and who should get early check-in
privileges
56Group Business Markets
- Corporate Rates
- A nongroup form of organizational business is the
individual business traveler. - most hotels offer a corporate rate, intended to
providean incentive for corporations to use the
hotel - most hotels offer it now to any businessperson
who requests the corporate rate - To provide an incentive system for heavy users,
hotels developed a second set of corporate rates.
- the contract rate is a negotiated rate, usually
10 to 40 percent below the hotels rack rate
and often includes benefits besides a discounted
rate
57Group Business Markets
- Corporate Rates
- The corporate business traveler is a sought-after
segment, as while the corporate contract rate is
a discounted rate, it is higher than the group
rate. - the business traveler is also on an expense
account and makes use of the hotels restaurants
business facilities - Companies that would have not considered putting
their people in an economy brand a few years
agoare now using budget and economy-brand
hotels. - budget/economy hotels now have a 34.5 market
share - attributed to upgraded amenities found in economy
hotels and businesses needing to cut costs to
remain competitive
58Group Business Markets
- Corporate Rates
- Larger companies have travel management programs
run by the company or in-house branches of a
travel agency that negotiate corporate hotel
contracts. - In addition to developing hotel contracts, the
travel managers set per diem rates, specifying
the amount a company traveler can spend on food
beverage. - often at different levels, with the per diem
amount increasing as one moves up in the
corporation - It is important to find out a companys per diem
rates to determine if the hotel is in the right
price range. - and what level of manager the hotel can expect to
attract
59Group Business Markets
- Corporate Rates
- Some corporations use in-house travel agencies,
or in-plants, that also represent other
corporations, providing the advantage of
negotiating leverage. - A business represented through an in-plant may
have only 100 room-nights a year in New York. - the travel agency represented by the in-plant may
service ten companies with 1,500 room-nights in
New York - The agency can negotiate a rate based on the
1,500 room-nights pass it along to individual
companies. - the hotel compensates in-plants by straight
commissions, monthly fees, or a combination of a
fee and commission