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ORGANIZATIONAL BUYING BEHAVIOUR

CHAPTER SUMMARY
This chapter introduces the basic theory of organizational buying an
understanding of !hich is funda"ental to business#to#business "ar$eting%
&t begins by loo$ing at the organizational buying process and a nu"ber of
"odels of the process% &t then in'estigates the theory of ris$ and
uncertainty and identifies the $ey factors that influence beha'iour% &t
concludes !ith a discussion of the role of purchasing !hich is seen as a
$ey area in the co"petiti'eness of the "odern industrial fir"%
() *escribe different factor influencing oranisational buying+
*efinition,
Ans, According to Philip $otler, Mar$eting is hu"an acti'ity directed at
satisfying needs and !ants through e-chance processes
&ntroduction
The need for an understanding of the organizational buying process has
gro!n in recent years due to the "any co"petiti'e challenges presented
in business#to#business "ar$ets% Since (./0 there ha'e been a nu"ber of
$ey changes in this area including the gro!th of outsourcing the
increasing po!er en1oyed by purchasing depart"ents and the i"portance
gi'en to de'eloping partnerships !ith suppliers%
The factors influencing buyer2s purchase decisions can be con'eniently
di'ided into follo!ing categories,
() Econo"ics En'iron"ent, En'iron"ental factors constitute an
i"portant deter"inant of organizational purchasing% This includes
econo"ic situation go'ern"ent policy co"petiti'e de'elop"ent in
the industry technological de'elop"ent and their introduction% 3or
e-a"ple if the organisationl buyer feels that the go'ern"ent is going
to increase ta- on industrial buying is li$ely to increase in the near
future his buying of "aterial !ill increase as buying !ill beco"e
costly in future due to ta- burden% An organization buyer "ay update
his technology if "achinery is a'ailable at fair rates and interest
charges are lo!% Purchases !ill be "ade at lo!er le'el if the
recession trends are clearly 'isible in the econo"y% An industrial
purchaser !ill be cautions and careful in his buying decisions so that
decision !ill pro'e appropriate and !ill not bring loss to the
organisation% An industrial purchaser !ill collect infor"ation about
econo"ic situation in the country and !ill ta$e appropriate decisions
after analyzing such econo"ic infor"ation% He has to gi'e special
attention to econo"ic en'iron"ent !hile ta$ing purchase decision%
45) 6rganisational 3actors, organisational factors are internal factor
affecting buying decision% E'ery purchasing organization has certain
ob1ecti'es and goals !ell accepted producer and syste" for purchasing
and an appropriate organizational structure% These factors directly and
indirectly influence its purchase decision% These characteristic pro'ide
clues for deter"ining buying decision% The ob1ecti'es of an oranisation
influence the types of products it needs and the criteria by !hich it
e'aluates supplies%
Co"panies fra"es their procedures7policies for "a$ing purchase
decision% 8o'ern"ent organization nor"ally use bidding !hile "a$ing a
purchase% Products specifications are !ell established and suppliers ha'e to
sub"it bids as per the general notice% &n the case of other industrial
purchasers "ay ha'e different procedures for purchasing% Suppliers ha'e to
note the procedural differences a"ong the oranisations as regards purchases
procedures and ad1ust their 9uotations etc accordingly%
6rganizational structure assigns authority and responsibilities
for decision "a$ing to 1ob positions across a co"pany% So"e co"panies
assign authority for purchase decisions to purchase "anagers !hile others
do not% &nfor"al relations a"ong people 4!ith the organization) in different
positions in a purchase organization can affect buying decisions%
&n "any s"all fa"ily o!ned fri"s centralized structures
are used% Purchase decisions re9uire the fa"ily2s consent% This delays the
purchase decisions% &n decentralized structure 9uic$ decision are possible at
the depart"ental le'el% Policies li$e in'entory holding and procedures such
as pay"ents or bidding also influence purchase decisions of organizational
buyers%
4:)&nter#personal factors, industrial buying decisions are nor"ally
collecti'e and also as per the procedures decided% The buying centre
in'ol'es se'eral indi'iduals !ith different for"al authority status and
persuasi'eness% ;uying centre consists of indi'iduals of the organization
concerned !ith purchase decision process% They share the ris$ arising out
of it% They also ha'e a co""on goal% There is interaction a"ong the
"e"bers of a buying centre as regards purchases to be "ade% There is
also a possibility of conflict a"ong the "e"bers 4of a buying centre) in
"ar$eting buying decision% The suppliers need to $no! about such
conflicts in order to resol'e the" so that the "ar$eting7purchasing
progra""e can be ad1usted accordingly% Conflicts a"ong buying centre
participants need to be sol'ed pro"ptly so that buying !ill be done
pro"ptly i%e% as per the production schedule prepared% A $no!ledge of
group dyna"ics helps the "ar$eter to settle conflicts and early release of
purchase order%
4<) &ndi'idual buyers characteristics7indi'idual factors, &n the final
analysis indi'idual factors play an i"portant role in buying decision% The
other factors 4en'iron"ental organizational etc%) are i"portant but
indi'iduals concerned !ith purchase decision are e9ually i"portant% A
supplier needs to ha'e co"plete details of all indi'iduals in'ol'ed in the
purchase decision process% Personal factors7 characteristics include age
education 1ob position "aturity etc% as these factors affect indi'idual
perception preference and "oti'ation% 3inal decision are based on such
factors e'en !hen their i"portance is li"ited in the decision#"a$ing% &n
the final analysis indi'idual7officer are responsible for ta$ing buying
decision far the organization% The "a$e#up of these indi'idual is a "a1or
factor influencing buying decision% The supplier has to consider this
factor and ad1ust his sales personnels accordingly% The industrial buyer
"ay be asserti'e or "ay ha'e co#operati'e attitude% The supplier2s
representati'e has to ad1ust !ith all types7 categories of industrial buyers
in order to finalise purchase deal%
`
5) Stat the difference bet!een consu"er buying and organizational
buying+
Ans, According to Philip $otler, Mar$eting is hu"an acti'ity directed at
satisfying needs and !ants through e-change process%
Organizational Buying Behavior
6rganizations often "a$e decisions in a 'ery si"ilar fashion to consu"ers%
&n fact there has been substantial disagree"ent about !hether the
differences in consu"er decision#"a$ing and organizational decision#
"a$ing are ade9uate to 1ustify separate "odels of decision#"a$ing for the
t!o%
1. Meaning, &t refers to the actions of persons e"ployed by an
organization to purchase products 7ser'ices for the business% ;uying
beha'ior is "ore ob1ecti'es and rational%
2. Buying e!i"ion#$a%ing& 6rganizational buying is done by people
!ho !or$ for organizations !ith a for"al chain of co""and and
assigned responsibilities for their e"ployers%
3. 'te(" in the e!i"ion (ro!e""& Recognizing a need identifying
suppliers deciding product specification e'aluating suppliers
negotiating a purchase order and e'aluating perfor"ance of suppliers%
4. )rou!t %no*lege& 6rganizational buyers ha'e "ore product
$no!ledge due to their traning and 1ob relates e-perience%
5. )ur!ha"ing goal"& &ndustrial buyers buy for the organizations% Since
people are doing the buying in organizations both personal and
organizational goals play e9ually i"portant role in organizational
buying%
6. Buyer#"u((lier"& 6rganizational buyers are less in nu"ber and
industrial seller $eeps close contact !ith the"% *irect selling to
organizational buyers is possible%

+on"u$er Buying Behavior
Researchers in "ar$eting ha'e studied "ost areas of consu"er beha'ior
including the i"pact of e'erything fro" "usic to lighting on ho! people
beha'e and ho! they consu"e products% This is not surprising considering
the fact that !e li'e in a consu"ption#dri'en culture% =e !ill focus on the
basic constructs accepted today in the study of buying beha'ior%
1. Meaning& refers to the actions of indi'idual consu"ers !hile
purchasing goods and ser'ices or their satisfaction% ;uying
beha'ior is based on e"otions and "ay not be rational%
2. Buying e!i"ion#$a%ing& Ma1ority of households include "ore
than one "e"ber and each "e"ber has a 'oice in "any
consu"er buying decisions%
3. 'te(" in the e!i"ion (ro!e""& >eed recognition deciding
in'ol'e"ent le'el identifying alternati'es ta$ing buying
decision and post purchase beha'ior%
4. )rou!t %no*lege& ?i"ited product $no!ledge is a'ailable to
indi'idual consu"er%
5. )ur!ha"ing goal"& Consu"ers buy for their o!n use or for use
by people close to the"% Personal goals are i"portant to
consu"ers !hen deciding !hat to buy%
6. Buyer"#"u((lier" !onta!t& &ndi'idual buyer do not $eep close
and direct contact !ith the supplier% *irect selling is also
possible%