Purchase decision process

Norgas is a service provider, more specifically a transporter of petrochemicals. The need for their services appears when there is a deviation between the supply and demand for petrochemicals in countries. The need for either import or export occurs and therefore transportation services like Norgas’ are in demand. Transportation is used to transfer the petrochemicals from the place with high supplies to the place of demand, in this case by sea.

Production units are large customers of petrochemical shipping, as petrochemicals are used in their production of a variety of products, such as plastics. Customers will go through a two stage information search; internal and external, to find services which can satisfy their need for transport. A customer will use experience and knowledge in addition to information gathered through colleges, public sources, brokers and reports in the search. The customer will find several companies able to fulfil their transportation need. As mentioned, the petrochemical shipping does not have any direct substitutes, so different methods of transport will not normally be evaluated. Therefore, it is the other shipping companies that constitute the main competition.

In the next stage, the customers will evaluate the objective attributes of the different services, such as price, speed, safety, size, delivery terms, relationship, service and reputation. These criteria form a consumer’s evoked set. Evoked set is “the group of brands that a consumer would consider acceptable from among all the brands in the product class of which he or she is aware of” (San Diego State University,2011). It is vital that Norgas understand which attributes costumers evaluate and value to be among the customer’s evoked set. Further, the consumers take on the purchase decision, which include whom to buy from, when to buy or in some cases the customers decide not to buy. The decision depends on considerations such as terms of sale and past experience. If attributes such as price and technology are the most important to a customer, and Norgas scores the highest on these attributes among all the competitors, they are most likely to be chosen.

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When the transportation of the petrochemicals is completed, the customers will compare the service delivered with their expectations and future experiences. Satisfaction or dissatisfaction affects the consumer’s value perception, the communication and if they are likely to repeat the purchase behaviour. The petrochemical shipping industry tends to be very relationship focused, so it is significant that Norgas contribute with positive post-purchase communications among consumers to build strong relationships. Steps in the consumer purchase decision can be skipped or minimized if Norgas succeed in creating strong relationships. Highly satisfied customers may only perceive one company as part of their evoked set and consequently no other companies will be evaluated. Norgas needs to be aware of these steps, to obtain customers, satisfy their needs and stay competitive through establishing and maintaining a set of loyal customers.

Contracts

Norgas operate with long contractual agreements and spot contracts. Costumers will go through the purchase decision process in both cases. Regarding the long contracts, consumers will go through this process before the agreement. In the spot market, customers will find the available services at a specific time and place, value their attributes and furthermore choose the service best matching their needs and preferences. The contracts govern the transportation of goods by ships. These contracts are made by bills of lading or by a charter party. A bill of landing is an acknowledgement issued by a carrier. The bill of landing specifies the goods on board, from where it will be transported and the final destination. The bill of landing serves several purposes: It is an evidence of a valid contract, it is used as a receipt and as a legal document of transfer. A charter party is a lease contract between the ship-owner and their charterer (Investopedia,2011) and (BusinessDictonary,2011).

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A spot contract is used when someone wants to lease cargo space for a single voyage or to transport a specified cargo from A to B. The freight price for a spot-operation is often higher than a contractual agreement, due to the short-term nature of the contract and the relative smaller lot sizes. The length of the initial agreement decides how many and who, that has to be involved in the actual agreement process. If the proposal is longer than 6 months, the board of directors will get involved and make the decision to pursue or not. This will then be a Long Contractual Agreements and there are two main types of these contracts, which Norgas uses: a time charter and a Contract of Affreightment (COA).

A time-charter is a licensing contract between Norgas and a charterer, where the charterer leases the vessel for a specific time period and for one or more voyages. Norgas maintains rights of possession and control, while the charterer decides upon cargos and directions. The charterer pays for all the operational costs involved like fuel and port costs together with a daily rent to Norgas. A Contract of Affreightment is a contract to rent all or part of the cargo space on series of voyages. When a charterer contracts for only a part of the cargo space, the governing contract is called a space charter. Under a voyage charter, it is customary for the master or the agent to issue a bill of lading to the shipper, who is usually the charterer.

However, the voyage charter remains the governing contract. For Norgas, these types of contracts are being created with large customers, usually on a yearly basis.

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