The Interpersonal Dynamics of

Industrial Buying Behavior

CHAPTER 5
 Objectives

 Understanding the influence of purchasing activities

on organizational buying behavior

 Understanding how groups and individuals differ in

their approach to buying decisions
 Buying behavior influenced by internal and external forces.
 Knowledge regarding how organizational buying behavior
is affected by these forces holds utmost significance.
 Purchases are also affected by complex set of decisions
made by buying centers.

 Industrial marketer requires clear understanding of:

 How organizational groups interact,

 The amount of influence of various group members,

 How this influence varies throughout the purchasing decision

process
 Purchasing’s Influence on Buyer Behavior

 Efficient and effective purchasing done through the

use of inventory control systems.

 Purchasing is now considered as asset management

through asset utilization and inventory control.
 Inventory Control Systems

 Material Requirements Planning

 Estimate future sales
 Application not very easy
 Combining various function under one functional are – “material
management”
 Use of computers linked to suppliers
 Ensuing the effectiveness of MRP systems – Buyer-seller work
closely
 Benefits of MRP
 Controlled inventory levels
 Better cost management
 Timely deliveries
 Better operations
 Just-in-Time Purchasing
 Avoiding multiple sourcing

 Maintaining minimum inventory levels – one supplier

 Facilitating long-term relationship

 Reducing the risk of interrupted material flows

 Quality considerations
 Delivery performance

 Time and quality and functional integration of buyer-sellers

firms
 Centralized Purchasing
 Concentrated efforts by purchasing specialists
 Volume buying
 Long term focus vs. short term focus of local purchasing
 Facilitates buyer-seller relationship as long term focus

 Buyer Technology
 Economic order quantities
 Determining optimal lead times
 Tracking deliveries
 Monitoring supplier performance
 Increased use in repetitive buying

Marketing implications
Challenges for out-suppliers
 Joint Decision Making

No. of org. members involved in buying decision depends:

 Characteristics of firm – orientation , size
 Type of purchasing situation
 Perceived importance of product – risk
 Resources available

 Buying center interaction patterns

 Vertical involvement
 Lateral involvement
 Extensivity
 Connectedness

Relationship between Purchase situation, organizational

structure variables and interaction variables.
 Marketing implications
 Vertical

 Lateral

 Extensivity and Connectedness

 Centralization
Models
 Many models have been developed to explain
organizational buying behavior. One of the comprehensive
models is the Sheth model, described below.
 The Sheth model of industrial buyer behavior
focuses on (i) Psychological aspects of individual buyers
(Component 1), (ii) Conditions causing joint decision
making (Component 2), (iii) Conflict among those involved
in decision process & resolution of conflict
(Component 3).
 Situational factors include economic conditions, labour
disputes, mergers & acquisitions. The model does not
explain their influence on buying process.
Component (1) Component (2) Component (3) Situational Factors

Differences among Variables that Determine Methods used for

individual buyers if buying decision is conflict resolution
caused by factors : autonomous or joint : in joint-decision
 Background of A) Product Specific making process :
individuals (Education, Factors :
role & life style).  Time Pressure  Problem Solving
 Their information  Perceived Risk  Persuasion Supplier or
sources.  Type of Purchase  Bargaining Brand Choice
 Active Search B) Company Specific  Politicking
 Perceptual Distortion Factors :
 Satisfaction with  Company Size
past purchases  Company Orientation
 Degree of
Centralisation

Fig. : THE SHETH MODEL OF INDUSTRIAL BUYER BEHAVIOUR

 The Buying Committee

 Supplier Choice and Evaluation

 Evaluating supplier performance – the weighted point method.
 (refer to chap 4 slides)
 Assignment

 Explain the inventory control systems, the advantages, and

marketing implications for the supplier.

 Explain the factors affecting the size of buying center and the
amount of interaction between those involved in the buying
center.

 The buying committee is made up of a chief engineer who

wants technical innovation regardless of price, a purchasing
agent committed to driving component cost down, and a
manufacturing manager who insists on the status quo so
manufacturing costs can be stabilized. How can a seller
develop a strategy to handle these contradictory objectives?