SUB-TOPIC: ORGANIZATION BUYING
BEHAVIOR
Organizations are social constructions, Therefore,
“organizations” do not buy things, Individual employees make purchase decisions
on the organization’s behalf. Understanding the personal motivations of these individuals,
and their influence on different stages of the purchasing process, is essential
for marketing success.
In the consumer
market a very large percentage of purchase decisions are made by a single
person. As we discussed in the Consumer Buying Behavior, there are situations in
which multiple people may be involved in a consumer purchase decision, such as
a child influencing a parent to choose a certain brand of cereal or a husband
and wife deciding together to buy a house, but most of the time purchases in
consumer markets are individual decisions. The business market is
significantly different. While single person purchasing is not unusual,
especially within a small company, a significant percentage of business buying,
especially within larger organizations, requires the input of many
people. In the marketing literature those associated with the purchase
decision are known to be part of a
Buying Center, which consists of individuals within
an organization that perform one or more of the following roles:
(i)
Buyer – responsible for
dealing with suppliers and placing orders, for example, purchasing agent
(ii)
Decider – has the power to make the final
purchase decision, for example Chief
Executive Officer (CEO)
(iii)
Influencer – has the ability to affect what is
ordered such as setting order specifications, foe example, engineers,
researchers, product managers, and other user departments in the organization
(iv)
User – those who will actually use the product
when it is received, for example office staff
(v)
Initiator – any Buying Center member who is
the first to determine that a need exists, for example user departments such as
office staff
(vi)
Gatekeeper – anyone who controls access to
other Buying Center members, for example administrative assistant
The meaning of organizational buying center
The organizational buying center are the individuals in the
organization that share knowledge and information relevant to the purchase of a
particular product or service.
Marketers should know:
- Which individuals to target.
- How and when each should be contacted.
- What kinds of information and appeals each is likely to find
most useful and persuasive.
It is very important
for the marketers to first identify who plays what role in the organization
buying center. Once identified the marketer must address the needs of
each member, which may differ significantly. For instance, the Decider,
who may be the company president wants to make sure the purchase will not negatively
affect the company’s bottom line while the Buyer wants to be assured the
product will be delivered on time. Thus, the way each Buying Center
member is approached and marketed to requires careful planning in order to
address the unique needs of each member.
When the Decision
Marking Unit (DMU) within the organization wants to purchase a certain product
or service the following steps are taken inside the buying center:
1.
Need or problem recognition
The
recognition can start for two reasons. The first reason can be to solve a
specific problem of the company. The other reason can be to improve a company’s
current operations/performance or to pursue new market opportunities.
2. Determining product specification
The
specification includes the peculiarities (characteristics or quality) that the
product/service that is going to be purchased has to contain.
3. Supplier and product search
This
process contains the search for suppliers that can meet a company’s product or
service needs. First a supplier that matches with the specifications of the
company has to be found. The second condition is that the supplier can satisfy
the organizations financial and supply requirements.
4. Evaluation of proposals and selection of suppliers
The
different possible suppliers will be evaluated to assess their capability to
perform the work.
5. Selection of order routine
This
starts after the selection of the supplier. It mainly consists of negotiating
and agreeing with the supplier about certain details.
6. Performance feedback and evaluation
Performance
and quality of the purchased goods will be evaluated. In this process of making
decisions different roles can be given to certain members of the center of the
unit depending on the importance of the part of the organization.
A COMPARISON OF ORGANIZATIONAL VS CONSUMER MARKETS
The following are the crucial differences from a marketing point
of view between organizational and consumer markets:
1. The motivations of the buyer: what the organization will do
with the product and the benefits it seeks to obtain.
2.The demographics of the market.
3.The nature of the purchasing process and the relationship
between buyer and seller.
Purchase motives:
Demand for industrial goods and services is:
- Derived from the demand for consumer goods and services.
- Relatively inelastic.
- More erratic because small increases or decreases in consumer
demand can, over time, strongly affect the demand for manufacturing plants and
equipment.
- More cyclical.
Market demographics:
Organizational buyers, when compared with buyers of consumer goods, are:
(i) Fewer in number.
(ii) Larger.
(iii) Geographically
concentrated.
Purchasing processes and relationships
Organizational markets are characterized by the following:
(i) Use of professional buying specialists following prescribed procedures.
(ii) Closer buyer–seller
relationships.
(iii) Presence of multiple buying influences.
(iv) More application to buy on specifications.
Organizational marketers tend to:
• Use direct selling.
• Be heavy users of “high-involvement” media.
Participants in the organizational purchasing process:
• Users
• Influencers
• Gatekeepers
• Buyers
• Deciders
TYPES OF BUYING SITUATIONS
• A straight rebuy
This involves purchasing a common product or service the
organization has bought many times before.
• A modified rebuy
This occurs when the organization’s needs remain unchanged, but
buying center members are not satisfied with the current product or the
supplier.
• New-task buying
This occurs when an organization faces a new and unique need or
problem
DIFFERENT
KINDS OF GOODS AND SERVICES SOLD AND BOUGHT UNDER B2B
(a) Raw materials
• Purchased primarily by processors and manufacturers, they are
inputs for making other products.
• The two types are natural products and farm products
Implications for marketing decision makers:
• The limited supply of most natural products gives producers the
power to limit supplies and administer prices.
(b) Natural materials
• Generally bulky and low in unit value –producers try to minimize
handling and transportation costs.
• Distribution channels for natural materials tend to have few
middlemen.
(c) Agricultural products
• Distribution is a key function.
• There is usually little promotional activity.
(d) Component materials and parts
• Purchased by manufacturers as inputs for making other products.
• Component materials have been processed to some degree before
they are sold.
• Component parts are manufactured items assembled as part of
another product without further changes in form.
Implications for marketing decision makers
• Most components are bought in large quantities – they are
usually sold direct.
• Sellers must ensure a steady, reliable supply, especially when a
just-in-time (JIT) management system is used by the buyer.
• Competitive bidding by suppliers can provide some of the cost
saving benefits of JIT systems without the time and effort necessary to build
close cooperation.
(e) Installations
Buildings and major capital equipment that manufacturers and
service producers use.
Implications for marketing decision makers
• Many installations are custom-made.
• Long period of negotiation.
• Firms usually provide many postsale services.
• Promotional emphasis on personal selling.
• High-caliber, well-trained salespeople.
(f) Accessory equipment
• Includes industrial machines and tools that manufacturers,
services producers, and governments use to carry out their operations.
• Accessory consists of tools and machines with relatively short
lives and small price tags.
Implications for marketing decision makers
• Emphasis on personal selling.
• Advertising, brand name promotions, and company Web sites are
also important.
(g) Operating supplies
• They do not become a part of the buyer’s product or service, nor
are they used directly in producing it.
• They facilitate the buying organization’s day-to-day operations.
Implications for marketing decision makers
• Wholesale middlemen are typically used to distribute these
supplies.
• Price is usually the critical decision variable.
Organizations buy things for one of three reasons:
• To facilitate the production of another product or service,
• For use by the organization’s employees in carrying out its
operations, or
• For resale to other customers.
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