ORGANIZATIONAL BUYING BEHAVIOUR

CHAPTER SUMMARY
This chapter introduces the basic theory of organizational buying, an
understanding of which is fundamental to business-to-business marketing.
It begins by looking at the organizational buying process and a number of
models of the process. It then investigates the theory of risk and
uncertainty and identifies the key factors that influence behaviour. It
concludes with a discussion of the role of purchasing which is seen as a
key area in the competitiveness of the modern industrial firm.

1) Describe different factor influencing oranisational buying?

Definition:
Ans: According to Philip kotler: Marketing is human activity directed at
satisfying needs and wants through exchance processes
Introduction
The need for an understanding of the organizational buying process has
grown in recent years due to the many competitive challenges presented
in business-to-business markets. Since 1980 there have been a number of
key changes in this area, including the growth of outsourcing, the
increasing power enjoyed by purchasing departments and the importance
given to developing partnerships with suppliers.

The factors influencing buyer’s purchase decisions can be conveniently

divided into following categories:
1) Economics Environment: Environmental factors constitute an
important determinant of organizational purchasing. This includes
 economic situation, government policy, competitive development in
the industry, technological development and their introduction. For
example, if the organisationl buyer feels that the government is going
to increase tax on industrial buying is likely to increase in the near
future, his buying of material will increase as buying will become
costly in future due to tax burden. An organization buyer may update
his technology if machinery is available at fair rates and interest
charges are low. Purchases will be made at lower level, if the
recession trends are clearly visible in the economy. An industrial
purchaser will be cautions and careful in his buying decisions so that
decision will prove appropriate and will not bring loss to the
organisation. An industrial purchaser will collect information about
economic situation in the country and will take appropriate decisions
after analyzing such economic information. He has to give special
attention to economic environment while taking purchase decision.

(2) Organisational Factors: organisational factors are internal factor

affecting buying decision. Every purchasing organization has certain
objectives and goals, well accepted producer and system for purchasing,
and an appropriate organizational structure. These factors directly and
indirectly influence its purchase decision. These characteristic provide
clues for determining buying decision. The objectives of an oranisation
influence the types of products it needs and the criteria by which it
evaluates supplies.
Companies frames their procedures/policies for making purchase
decision. Government organization normally use bidding while making a
purchase. Products specifications are well established and suppliers have to
submit bids as per the general notice. In the case of other industrial
purchasers may have different procedures for purchasing. Suppliers have to
note the procedural differences among the oranisations as regards purchases
procedures and adjust their quotations, etc accordingly.
Organizational structure assigns authority and responsibilities
for decision making to job positions across a company. Some companies
assign authority for purchase decisions to purchase managers while others
do not. Informal relations among people (with the organization) in different
positions in a purchase organization can affect buying decisions.
In many small family owned frims, centralized structures
are used. Purchase decisions require the family’s consent. This delays the
purchase decisions. In decentralized structure, quick decision are possible at
the departmental level. Policies like inventory holding and procedures such
as payments or bidding also influence purchase decisions of organizational
buyers.

(3)Inter-personal factors: industrial buying decisions are normally

collective and also as per the procedures decided. The buying centre
involves several individuals with different formal authority, status and
persuasiveness. Buying centre consists of individuals of the organization
concerned with purchase decision process. They share the risk arising out
of it. They also have a common goal. There is interaction among the
members of a buying centre as regards purchases to be made. There is
also a possibility of conflict among the members (of a buying centre) in
marketing buying decision. The suppliers need to know about such
conflicts in order to resolve them so that the marketing/purchasing
programme can be adjusted accordingly. Conflicts among buying centre
 participants need to be solved promptly so that buying will be done
promptly i.e. as per the production schedule prepared. A knowledge of
group dynamics helps the marketer to settle conflicts and early release of
purchase order.

(4) Individual buyers characteristics/individual factors: In the final

analysis, individual factors play an important role in buying decision. The
other factors (environmental, organizational, etc.) are important but
individuals concerned with purchase decision are equally important. A
supplier needs to have complete details of all individuals involved in the
purchase decision process. Personal factors/ characteristics include age,
education, job position, maturity, etc. as these factors affect individual
perception, preference and motivation. Final decision are based on such
factors even when their importance is limited in the decision-making. In
the final analysis, individual/officer are responsible for taking buying
decision far the organization. The make-up of these individual is a major
factor influencing buying decision. The supplier has to consider this
factor and adjust his sales personnels accordingly. The industrial buyer
may be assertive or may have co-operative attitude. The supplier’s
representative has to adjust with all types/ categories of industrial buyers
in order to finalise purchase deal.

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2) Stat the difference between consumer buying and organizational
buying?
Ans: According to Philip kotler: Marketing is human activity directed at
satisfying needs and wants through exchange process.
Organizational Buying Behavior
Organizations often make decisions in a very similar fashion to consumers.
In fact, there has been substantial disagreement about whether the
differences in consumer decision-making and organizational decision-
making are adequate to justify separate models of decision-making for the
two.
1. Meaning: It refers to the actions of persons employed by an
organization to purchase products /services for the business. Buying
behavior is more objectives and rational.

2. Buying decision-making: Organizational buying is done by people

who work for organizations with a formal chain of command and
assigned responsibilities for their employers.

3. Steps in the decision process: Recognizing a need, identifying

suppliers, deciding product specification, evaluating suppliers,
negotiating a purchase order and evaluating performance of suppliers.

4. Product knowledge: Organizational buyers have more product

knowledge due to their traning and job relates experience.

5. Purchasing goals: Industrial buyers buy for the organizations. Since

people are doing the buying in organizations both personal and
organizational goals play equally important role in organizational
buying.
 6. Buyer-suppliers: Organizational buyers are less in number and
industrial seller keeps close contact with them. Direct selling to
organizational buyers is possible.

Consumer Buying Behavior

Researchers in marketing have studied most areas of consumer behavior
including the impact of everything from music to lighting on how people
behave and how they consume products. This is not surprising considering
the fact that we live in a consumption-driven culture. We will focus on the
basic constructs accepted today in the study of buying behavior.
1. Meaning: refers to the actions of individual consumers while
purchasing goods and services or their satisfaction. Buying
behavior is based on emotions and may not be rational.

2. Buying decision-making: Majority of households include more

than one member and each member has a voice in many
consumer buying decisions.

3. Steps in the decision process: Need recognition, deciding

involvement level, identifying alternatives, taking buying
decision and post purchase behavior.

4. Product knowledge: Limited product knowledge is available to

individual consumer.

5. Purchasing goals: Consumers buy for their own use or for use
by people close to them. Personal goals are important to
consumers when deciding what to buy.
6. Buyers-suppliers contact: Individual buyer do not keep close
and direct contact with the supplier. Direct selling is also
possible.