Chapter 1: Introduction to Business Marketing

Management

Chapter 2: Understanding Business Customers:

Organizational Buying Behavior

Case Study: ETAMAG – The Lost Order

Robert Hallermann is one of the top sales engineers of Elektrotechnik
Münster AG (ETAMAG), one of the oldest and most reputable companies
of this branch of industry. Working up a turnover of € 200 mio., ETAMAG
fabricates a widespread assortment of electric motors, generators and Fachbereich Elektrische
controlling devices and is widely valued for the quality and reliability of its Energietechnik
products as well as its customer service.
Prof. Dr. Valerie Wulfhorst
On February 2nd of the present year Hallermann received a writing of Carl
Betriebswirtschaftslehre,
Nolte Technik (CNT) telling him that he has lost the order for the drive
insb. Controlling
system of a new cutting-to-length line.
Telefon
The place of residence of the client, CNT, is in Greven, a city not far from 02921 378-451
the ETAMAG´s head office in Münster. CNT processes and finishes strip Telefax
steel sourced from large steel producers and offers it for sale in various 02921 378-409
E-Mail
shapes. Last year CNT´s turnover exceeded € 80 mio. [email protected]

In view of its significance as a customer Hallermann seeked to pay CNT a

visit at least once a month. In those eight years in which he was in charge Standort Soest
of CNT Hallermann had managed to establish close business relationships Lübecker Ring 2
with Wolfgang Molter, CNT´s buying agent, as well as with several 59494 Soest

engineers and operating managers, and he even was on friendly terms

with them.

On the basis of the cutting-to-length line that CNT had ordered from Magna
in Düsseldorf two years ago the company was planning on introducing new
production processes in its steel-mill. Excluding the drive system, the
contract value of the mechanic components totalled up to about two million Fachhochschule
Südwestfalen
euros, those of the drive system accounted for an additional 900.000 €.
Sitz: Iserlohn

Hallermann failed to see why he had lost the order for the benefit of the Hagen
competition. Admittedly, the cutting-to-length line was a technical challenge Iserlohn
different from the drives for slitting lines sold up to now, but the respective Meschede
components were the best available on the market. Therefore he decided Soest
to edit the sales reports for Freddy Weber, his area manager in charge, in www.fh-swf.de
order to examine together whether and, if so, what kind of mistakes had www.fh-swf.de
been made.

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January 13th of last year
Visited Molter. Got to know that CNT is inviting offers for a drive system for
a new cutting-to-length line. The flow line had already been ordered from
Magna in Düsseldorf. So, now it´s just about the drive. Molter told me the
engineering board director didn´t want CNT´s design engineers to be
bothered too much, seeing that they were preoccupied with other problems
concerning the new cutting-to-length line. Instead, all suppliers are
expected to cooperate with Molter. Contacting the operating personnel is
permitted. Molter told me the name of the Magna-engineer, whom I may
get in touch with concerning the details of the new flow line.

The purchase decision will be made concertedly by Molter, chief engineer

Lorenz, factory manager Dapra and engineering board director Vogel,
whom I was supposed to contact. Molter implied that pricing would be a
crucial factor.
Drove back to my office and drew up a letter to the Magna-engineer in
Düsseldorf concerning the specifications for the cutting-to-length line.
Wrote to TKN about a letter of recommendation regarding the drive system
I sold to this company for their slitting lines the previous year. I informed
the manager of my situation and he agreed on rendering every assistance.

January 23rd
Received a double-sided description of the cutting-to-length line, obviously
designed for promotion purposes, from Magna. Gave it to Pollack, our
system developing engineer, and asked him to compose a provisory
system for the Magna-facility.

February 2nd
Spent the whole morning at Molter´s. Noticed that operating and
engineering personnel are on bad terms because of the specifications for
the drive system. Left behind a huge pile of literature for him, including the
letter of recommendation written by TKN.

Had lunch with Dapra and Faßbender, his assistant. The problem is that
nobody is fully aware of what is really needed, Dapra pointed out. He
added that “maybe the provisory specifications will give us some ideas”.
He seemed to be under the impression that the engineers would include in
the specifications anything his operating personnel wished for. I decided to
concentrate my selling efforts on Dapra.

After lunch I discussed with Dapra and Faßbender the same items I had
talked about with Molter before. However, we went into much more details.
Reliability seemed a chief concern of both of them: “Downtime kills you!”,
they said. I reminded them of ETAMAG being a quasi-neighbour of CNT´s
and therefore providing the best conditions for immediate and regular after-
sales service. While leaving I gave them the recommendatory letter, a pile
of literature and a copy of Pollack´s draft.

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February 17th
Paid Molter a short visit to see if things were making progress. He didn´t
have any news to share, so I arranged to have lunch with him, Lorenz and
Dapra next month. My boss, Freddy Weber, would attend, too.

Afterwards Faßbender and I discussed some developments of system

construction increasing reliability. Spent perhaps an hour at the cutting
stage (Schneidbühne) with the master. Asked the operating staff, they
praised the ETAMAG-drives for the two slitting lines by common consent,
albeit one guy liked the BAA-system of the third slitting line because of its
steel casting engine case. When I pointed out that this would make the
engine bulky and inaccessible for maintenance works, he answered that he
wouldn´t have to maintain it, that he, however, “was bound to like a large,
heavy engine”. Bought him a coke and we parted as friends.

March 14th
Weber treated us all – Lorenz, Dapra, Molter, Faßbender and me – to an
excellent luncheon at the golf club and sang from the treetops when talking
about quality and customer service of ETAMAG. It was the first time I met
Lorenz – he had entered CNT less than six months ago. He seemed a little
grumpy; it took him two Martini to get a little more cheerful. After lunch I
took Molter aside and asked him about new developments. He had now
taken the view that the main problem – just as Dapra had indicated
previously – was the uncertainty about what was required in the drive
system. Features of the products are not being discussed, he said, and
insinuated that the construction department wouldn´t continue working on
the specifications until CNT has had the chance to look at pre-offers .

April 10th
Spent the morning at Dapra´s and left him further data describing the
newest developments at ETAMAG in the area of regulator systems.
Came round to Molter´s office and collected an order amounting to € 2.500
for switching elements.

May 10th
Spent the day with Pollack and worked out some details on our provisory
offering. He was the brain behind the idea of designing the system in a way
that all component parts were ETAMAG-products – a servicing advantage
for CNT – and equipping them with a yearlong contract of guarantee and
customer service. This concept appeared to be a brilliant compromise on
steady delivery and accuracy in cutting.

Weber approved of the pricing at € 895.000, and I instantly sent the offer to
Molter by e-mail.

July 17th
Molter called and told me I would soon receive an e-mail requesting
ETAMAG to make an offer concerning the final specifications. BAA,
Kennedy-Electric and Hamilton had been called upon likewise. I got price
lists and specifications of our competitors´ systems and took them home in

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order to inspect them thoroughly later that same evening. In the course of
this I noticed that all solutions were identical except for details. Only BAA
was able to offer more capacity in its regulator systems than any other
company. This extra capacity, however, would cost CNT considerably
more. CNT would only need supplementary equipment in case it would
build an additional cutting-to-length line, which was highly unlikely.

July 19th
Paid Molter a short visit. Asked him on the committee´s view on regulator
capacity. He told me that I should look for Lorenz. Lorenz had time to
receive me, and I spent roughly an hour with him. We talked about
structural elements. He didn´t seem to attach so much importance to extra
capacity in regulator systems as to system stability. He mentioned that the
operating personnel were concerned about temperature-sensitivity. As this
feature was one of ETAMAG´s strengths, I talked to him lengthy about our
temperature stability. When leaving I gave him some additional, very
specific technical literature to complete the literature I had given to Molter
and Dapra and which obviously had found its way to Lorenz´ desk.

September 12th
Had lunch with Molter and Lorenz. Both now agreed that it was the
specifications that had caused the committee´s differences in opinion. CNT
had gained a considerable amount of experience concerning drive systems
for smaller facilities, for instance slitting lines. This led the committee to
believe that those experiences were transferable, and that therefore a
decision on a drive system for a cutting-to-length line, in spite of enhanced
size and complexity of the facility, would be relatively easy.

Obviously the lack of criteria upon which the specifications could be

developed had posed the problem. After the temporary offers had been
opened, Dapra eventually made this fact clear to all parties involved in the
decision-making process and asked Magna-engineers for technical
assistance concerning the development of criteria. Lorenz expected the
final specifications to be completed early November.

This news inspired me in my work. I was under the impression that I was
capable of convincing Lorenz. I wanted to make sure that the specifications
contained certain features that were available as standard configuration of
our energy supply with constant potential and our control panels. The
inclusion of these features in the final specifications would grant
ETAMAG´s offer a considerable price advantage.

September 20th
Met Lorenz for lunch and spent two hours with him in the afternoon.
Thoroughly discussed all aspects of our system with him, emphasizing the
standard configuration of our energy supply facilities and control panels
which reduces the emergence of generator breakdowns and malfunction of
controls. He paid attention all the time and asked very few additional
questions. He seemed rather convinced of the benefits of ETAMAG-
devices.

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October 4th
At dinner with Faßbender I was told that Dapra had left CNT and taken
another post, and that he, Faßbender, had been promoted new factory
manager. Neither Faßbender nor Molter, with whom I spoke later that
afternoon, were willing to talk about the particulars of this matter.

November 6th
Received the final specifications for the drive system from Molter by mail
and attached thereto an invitation to amplify our offer to Vogel, Lorenz,
Faßbender and Molter at an official presentation on December 27th. I
instructed Pollack to design the ultimate offer and arranged for him and
Weber to be present at the official presentation.

The specifications caused surprise. CNT had included ETAMAG´s features

with regard to energy supply and control, but also specified some special
wiring – which wasn´t an issue – and a considerable extra capacity for the
main regulator – which might become an issue.

November 13th
Spent two hours before midday arguing the specifications out with Lorenz,
who turned out to attach exorbitant importance to the minutest details.

December 27th
Our presentation went pretty well. Weber was great at declaiming on
ETAMAG´s reliability and customer service. Pollack thoroughly discussed
the technical aspects of the drive system offered by us. I concluded with a
summary and handed over the sealed up offer to Vogel. Designing this
offer was sheer torture for Pollack, Weber and me, taking ages to be
completed. In the end, it came to the rock bottom price of € 871.000.

February 2nd
Received a letter from Molter informing me that the order had been
assigned to BAA. Called Molter. He told ma that all offers had been in the
bandwidth of plus/minus € 10.000, and that BAA narrowly defeated
ETAMAG. He congratulated me for ETAMAG´s performance and uttered
his hope that I would not consider having come second too tragical.

Questions:
1. Ch1: Describe the characteristics of business marketing on both, the
customer and the supplier side with respect to this case.
2. Describe in general the classification of Business Types in business
marketing by Backhaus/Voeth based on specific investments. Analyze
the specific investments that both, CNT and ETAMAG have to make
and classify the business type for the relationship between the two.
3. Which persons at CNT, Magna and ETAMAG are involved in the
buying decision?

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Ch2: The one and only question is „Why did ETAMAG lose the sale?“ To
answer this question it may be useful to check the following:

4. Describe the major stages of the organizational buying process

regarding the buying decision of the cutting-to-length line or the drive
respectively at CNT. Identify at which stage(s) problems might occur
and describe CNT’s problems.
5. Which type of buying situation is the buying process of the cutting-to-
length line for CNT (please argue) and in which way should the
suppliers ETAMAG or Magna address this task?
6. Identify the members of the buying center with respect to
Webster/Wind’s Five Role Model.
7. And finally: What were the main reasons why ETAMAG lost the sale?

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