Exploring the factors Affecting Order Conversion Rate in B2B Market: A Case of Power Sector

Transcription

1 European Journal of Commerce and Management Research (EJCMR) Vol, Issue February Exploring the factors Affecting Order Conversion Rate in BB Market: A Case of Power Sector Amlan Bhattacharya Assistant Professor Marketing Xavier Institute of Management & Entrepreneurship Bangalore, India amlan@xime.org Vaishaka V. Paranjape Student Executive MBA Symbiosis Institute of Business Management Bangalore, India vaishak_vp@yahoo.co.in Abstract Marketers need to understand the influence of the environment in which firms are operating and need to understand the cause of the problem which creates the need for the purchase for any consumer. Further for a marketer to be successful in the present competitive environment it is very much important to understand the buying behavior of his consumers, than that of working towards having more efficiency than competitors. Thus in subject project an attempt is made to study varies factors which influences the decision making for a customer, and thus influences on order conversion for a marketer or supplier. A study has been done to understand if is there any gap between what a sales executive presumes regarding customer and what actually influences the decision making of a consumer. At the end of the project, a relation between probability of order conversion ratio and various factors influencing the purchase decision of the customers of Bangalore based Private Power Companies has been arrived at. Index Terms BB, Conversion Rate, Power. I. INTRODUCTION BB marketing is the management process responsible for the facilitation of exchange between producers of goods and services and their organizational customers. All the demands in BB markets are derived demands derived from some kind of consumer demand. Thus the decision making in BB purchase also depends on the requirements and preferences of its end user. Involvement of more number of individuals, organizational policies and preference of the end user, who is far away from the reach of supplier, makes it more complicated to understand the purchase behavior or decision making process of a BB buyer. Thus considering the complexity of decision making procedure, it becomes important for an organization to understand the factors influencing the buyer in various stages of purchase from specification formation to negotiation, purchase and post purchase analysis and influence of the same in future purchases. The study focuses on understanding the influence of different factors such as price, cost of acquisition, brand value and previous experience, in decision making process and intern on the order conversion ratio for any product/service provider. The research focuses on collecting about responses from instructional and EPC customers from southern part of India. The research questions to be answered are as below: What is the influence of price of product over total cost of purchase to buyer in buying decision? Will customer vendor relationship plays a major role in buying decision? Will the brand value of supplier influences the buying decision of purchaser? What is the influence of previous purchase experience in organizational buying? II. LITERATURE REVIEW For this particular piece of research work, the literature was studied to be reviewed prior to going ahead with the methodology and data collection process, as mentioned below. The main characteristic of organizational buying is that it is a group activity. Usually people from various areas of business and of different status contribute to the final purchase decision. Group of individuals with a stake in the buying decision is called buying center. The concept of buying center just refers to the representatives of different independently operating parts of organization such as: finance, production, purchasing, engineering, human resource and etc. It does not matter if they are located at single place or operating from various parts of the world. Different people involved in buying centre can be segregated as initiators, gatekeepers, influencer, deciders, purchasers and users based on their role played in buying centre (Webster & Wind, 97): i. Initiators: they recognize that company problem can be solved or avoided by acquiring a product or service ii. Gatekeepers: Control information and vendor access to corporate decision makers; determine which vendors get chance to sell iii. Influencers: Have a say in whether a purchase is made and what is bought.

2 European Journal of Commerce and Management Research (EJCMR) Vol, Issue February iv. Deciders: Say yes or no to contemplated product or service v. Buyer: is a person who procures on behalf of organization. This is usually a representative of purchasing department or buying manager. vi. Users: Consume the purchased product or service. done through personal interview as the response rate for the survey sent through the mail was minimal. The data was collected from the respondents by making three groups of customers based on the buying requirement of the customers. The groups were EPC, Utility and Industries and institutional buyers. Organizations purchase under different circumstances pursuing various objectives. Most business purchases can be categorized under one of the three headings (Hutt & Speh, ): Straight RePurchase Situation: It is a buying situation that is routine and has established solutions. Straight repurchases are «more of the same» and often involve simply the reorder of a previous product. In that kind of situation only purchasing department is involved. Modified RePurchase Situation: It occurs when there is a change in selection criteria or buyer intends to review some product specifications, terms of delivery, price, contract details or even supplier. It involves fewer people and time than the new task situation and more people and time than straight repurchase. New Task Situation: This describes a need that hasn t been faced by the organization previously. Task of that level may require deep analysis of suppliers so that organization will seek many sources of information and assistance, utilizing the complete buying process to investigate alternatives. The higher risks, the larger number of decision makers, the bigger importance of purchase, than the longer time is spent on evaluating options and decision making. Marketers should strive to derive straight or modified RePurchase situations from new task situations. Thus it becomes important for a sales person to understand what the purchase situation is and analyze the possible competition. EPCs & Contractors: These are service providers who execute the project on turnkey basis for utilities, Industries and institutional buyers. The scope for the firm will be to design/engineer the project, procure the necessary equipment and construct/execute the project and handover the site to end user. Utilities: The group covers utilities such as power generation transmission and distribution companies generally operated by government body. The scope of this group in the industry is to use the electrical products and equipments in order to generate and transmit the electrical power to end users. Industries and institutional buyers: The group covers the end users who purchase the product/equipment for their usage for controlling the process in the industry or supply of power for their day today activity to achieve their business goals. Questionnaire: The questionnaire was divided into two sections, one to understand the business profile of the respondent and the other for collecting the data suitable for resource. After completion of literature review, the questionnaire was formed to explore the objective of study. The study being an exploratory research, questionnaire was designed with both decretive and objective type of questions; this helped to explore the different procedures/ methodologies used by customer for making purchase decision. IV. ANALYSIS OF DATA Figure.: Influencing factors in purchase decision of a firm in general III. METHODOLOGY Research Approach: The research is an exploratory research to study the factors influencing the order conversion rate. The process of data collection is done with both secondary and primary research technique. Primary Data Collection: The study is being accomplished by prescribing the survey to purchase managers of institutional buyers, EPC (Engineering, procurement and Construction firms) and sales executives selling products and services. The geographical areas covered in the research are cities from the southern states of India, viz. Bangalore, Mangalore, Vishakhapatnam, Kochi and Thiruvananthapuram. (The above mentioned cities were chosen considering the fact that both the author and coauthor are based in southern India). Price has highest influence Brand value has least influence Data Source: The data is collected through personal interview and circulating the survey through . The target audiences for collection of data are purchase managers and sales engineers as described above. Then data collection was

3 European Journal of Commerce and Management Research (EJCMR) Vol, Issue February Figure..: Thurstone s Case v Scalling model Figure.: Utilities P Q E B A R Centre Figure.: EPC 9 7 Figure..: Thurstone s Case v Scalling model 9.. Figure:..: Thurstone s Case v Scalling model R.7. Centre R Centre

4 European Journal of Commerce and Management Research (EJCMR) Vol, Issue February Figure:.: Industries and Institutional Buyers Buying Behaviour Centre Figure:.: EPC 9 7 Figure:..: Thurstone s Case v Scalling model Figure:..: Thurstone s Case v Scalling model R Centre Figure:.: Utility 7

5 European Journal of Commerce and Management Research (EJCMR) Vol, Issue February Figure:..: Thurstone s Case v Scalling model Figure:.7.: Thurstone s Case v Scalling model Figure.7: Industry/Institutions V. FINDINGS & CONCLUSION From the data analysis we can observe that with the assumption of availability of the product being constant the price has highest influence over the purchase decision and the second highest influencer is the quality of the product, From Thurstone s Case v Scalling model we can understand that if we rank the different influencers the ranking would look like as below. Price. product Quality. After sale services. previous experience with the vender. Brand value of vender. We can infer from this is brand value in BB market and unspecific to power sector has least influence on buying decision of a supplier ware as price has the highest influence. Further when we look into different groups and observe their buying decisions, we can arrive at interesting inferences for different segment of the market: EPCs give highest score to price and then to quality of the product. Utilities give highest socre to price then to after sales service provided by the vender For Industries and institutional buyers, product Quality gets the highest score and then after sales services and the previous experience with the vender REFERENCES [] Bakos, J. (99), A Strategic Analysis of Electronic Marketplaces, Management Information Systems Quarterly, (), 9 [] Benjamin, R. et al. (99), Electronic Markets and Virtual Chains on the Information Superhighway, Sloan Management Review, vol., no., pp. 7 [] Berryman, K. L. et al. (99), Electronic Commerce: Three Emerging Strategies, The McKinsey Quarterly,, 9

6 European Journal of Commerce and Management Research (EJCMR) Vol, Issue February [] Bichler, M. (), The Future of Emarkets: Multidimensional Market Mechanisms, Cambridge University Press, UK [] Carson, D., et al. (99c), Marketing and Entrepreneurship in SMEs: an Innovative Approach, Prentice Hall, London [] Clayton, K. (99), Initiatives from Government for SMEs: Franchising, Business Entry, Ecommerce, Australian Accountant, vol., no., pp. [7] D. Young, H.H. et al. (999), Strategic Implications of Electronic Linkages, Information Systems Management, vol., no., pp. 9 [] Daniel, E. et al. (), Adoption of Ecommerce by SMEs in the UK: Towards a Stage Model, International Small Business Journal, vol. (), pp. 7 [9] Egan et al. (), The Integration of Ecommerce Tools into the Business Processes of SMEs, Irish Journal of Management: Dublin, Vol., Iss. ; p. 9 [] Eduard, T. et al. (), Adding Clicks to Bricks, Consulting to Management, Burlingame, December, vol., iss., pg. [] Fiore, F. (), Emarketing Strategies: The Hows and Whys of Driving Sales Through Ecommerce Sell Anything, Anywhere, Anyway, Anytime & Any price, Macmillan, Que, Australia [] Ghosh. (99), Making Business Sense of the Internet, Harvard Business Review, vol. 7, iss., pp. [] Greenstein et al. (), Electronic Commerce: Security, Risk Management & Control, nd ed., McGrawHill, New York [] Gamble, R.H. (999), Electronic commerce: The Way of the Future is Still in Flux, Business Credit, October, 7 [] Greaves, C., P. et al. (999), Business Use of the World Wide Web, with Particular Reference to UK Companies, International Journal of Information Management, 9, 9 7 [] Guthrie, R.A. et al. (99), Competitive Implications of the Internet, Informations Systems Management, vol., no., pp. 9 9 [7] Hagel et al. (999), Net Worth: Shaping Markets When Customers Make the Rules, Harvard Business School Press, Mckinsey & Comp., US [] Kalakota, R. et al. (997), Electronic Commerce: A Manager s Guide, Reading, MA: AddisonWesley [9] Kaplan, S. N. et al. (), Ehubs: The New BB Marketplaces, Harvard Business Review, (May June), pp. 97