A Presentation on-

Organizational Buying Behavior and

Howard Sheth Model
Organizational Buying Behavior
y . The organizational buying behavior process is well
documented with many models depicting the various
phases, the members involved, and the decisions made
in each phase. The basic five phase model can be
extended to eight; purchase initiation; evaluations
criteria formation; information search; supplier
definition for RFQ; evaluation of quotations;
negotiations; suppliers choice; and choice
implementation.
DIFFERENCE BETWEEN ORGANIZATIONAL
BUYING AND CONSUMER BUYING
y ORGANIZATIONAL CONSUMER PURCHASE FOR-
1. Further production
2. Usage in operating the organization
3. Resale to other consumers
FINAL CONSUMER PURCHASE FOR-
1) Personal
2) Family
3) Household use
TYPES OF ORGANIZATIONAL PURCHASES
y STRAIGHT REBUY
Routine purchase
Associated with frequently purchased items
MODIFIED REBUY
Routine Purchase
Frequent Purchase, but buyer does review product
specifications or suppliers
y NEW TASK
Not Routine
Product needs and specifications researched
BUYING CENTER
y There are often multiple decision makers in
organizational purchases. For example
y Users
y Influencers
y Deciders
y Buyers
y Gatekeepers
Risk and uncertainty
y - This is concerned with the role of risk or uncertainty
on buying behavior. The level of risk depends upon
the characteristics of the buying situation faced. The
supplier can influence the degree of perceived
uncertainty by the buyer and cause certain desired
behavioral reactions by the use of information and the
implementation of certain actions. The risks
perceived by the customer can result from a
combination of the characteristics of various factors:
the transaction involved, the relationship with the
supplier, and his position vis-a-vis the supply market.
Factors influencing organizational buying
behavior.
y Three key factors are shown to influence
organizational buying behavior these are,
y Types of buying situations
y Situational factors, geographical and
y Cultural factors and time factors.
EXPLANATION OF THE MODEL
EXPECTATION
y Expectation refer to perceived potential of alternative
suppliers and brands to satisfy a number of explicit
and implicit objectives in any particular buying
decision.
EXPECTATIONS-
y Purchasing Agents
y Engineers
y Users
y Others
y Background of individuals: The first and probably
most significant factor is the backgrounds and task
orientation of each individuals involved in the buying
process.
They can be classified under following head:
Specialized education
Role Orientation
Life Style
y Information Sources and active search- Type of
information each of the decision maker is exposed to
and his participation in active search
Various sources of Information search
Salesman
Exhibitions and tradeshows
Direct mails
Press releases
Journal advertising
y Perceptual distortion: Each individual strikes to make
the objective information consistent with his own prior
knowledge and expectations by systematically distorting it,
for example; since there is substantial difference in the
goals and values of purchasing agents, engineers and
production personnel, one should expect different
interpretations of the same information among them.
y Satisfaction with past purchase: The factor which
creates differential expectation among the various
individuals involved in purchasing process is the
satisfaction with buying experiences with the supplier or
brand. Often it is not possible for a supplier or a brand to
provide equal satisfaction to the three parties.
Industrial buying process
Product Specific Factors: The first product specific
variable is what Bauer calls perceived risk in buying
decision.
Company Specific Factors: There are three
organization specific factors they are as follows
Company Orientation
Company Size
Degree of Centralization
y Product Specific Factors
Time Pressure
Perceive Risk
Type of purchase
Decision Making
Joint Decisions-The major thrust of the present model of
industrial buying decisions is to investigate the process
of joint decision making. This includes
Initiation of decision to buy
Gathering of information
Evaluating alternative of suppliers
Resolving conflict among parties
Autonomous Decisions: It is always not necessary that
there will be always joint decision making sometimes it
can be autonomous. Here it is important to know, which
party is delegated for decision
CONFLICT RESOLUTION
y Problem Solving: Here the particular supplier should
go for availability of more information, because buyers
tend to go for more active search. It gives your
company a upper hand than your competitors.
y Persuasion: If the conflict among the parties is
primarily due to disagreement on some specific criteria
with which to evaluate suppliers- although there is an
agreement on the buying goals or objectives at a more
fundamental level, it is likely to be resolved by
persuasion
y Bargaining: In some typical situation specially
purchasing related to capital expenditure items, the
conflict is resolved by method of bargaining. The
fundamental differences among the parties are
implicitly conceded by all members and concept of
distributive justice is followed. Generally single party
decision is dominant.
y Politicking: Disagreement may arise due to style of
decision making, the conflict tends to be grave and
borders on the mutual dislike of personalities among
individual decision makers. The conflict is solved by
politicking.
SITUATIONAL FACTORS
y Industrial buyer similar to consumer behavior decides
on factors other than rational or realistic criteria. They
can be
Price Controls
Recession
Foreign Trade
Internal Strikes
Walk Outs
Machine Break down