Organizational Buying Behaviour

Those who supply goods and services to consumer markets

are themselves in need of goods and services to in their
business. These organizations, producers, resellers, and
government make up vast marketing organizations that buy a
large variety of products, including equipment, raw material,
and labour and other services. Some organizations sell
exclusively to other organizations and never come into
contact with consumer buyers.

The Classification of Organizational Markets

 Producer Markets
 Reseller Markets
 Government Markets
 Institutional Markets

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Five characteristics mark the organizational buying
process:

1. In organizations, many individuals are involved in

making buying decisions,

2. The organizational buyer is motivated by both rational

and quantitative criteria dominant in organizational
decisions; the decision makers are people, subject to many of
the same emotional criteria used in personal purchases.

3. Organizational buying decisions frequently involve a

range of complex technical dimensions. A purchasing agent
for Volvo Automobiles, for example, must consider a number
of technical factors before ordering a radio to go into the new
model. The electronic system, the acoustics of the interior,
and the shape of the dashboard are a few of these
considerations.

4. The organizational decision process frequently spans a

considerable time, creating a significant lag between the
marketer's initial contact with the customer and the
purchasing decision. Since many new factors can enter the
picture during this lag time, the marketer's ability to monitor
and adjust to these changes is critical.

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5. Organizations cannot be grouped into precise categories.
Each organization has a characteristic way of functioning
and a personality

The first item in this list of characteristics has important

implications. Unlike the consumer buying process,
organizational buying involves decision making by groups
and enforces rules for making decisions. These two
characteristics greatly complicate the task of understanding
the buying process. For example, to predict the buying
behavior of an organization with certainty, it is important to
know who will take part in the buying process, what criteria
each member uses in evaluating prospective suppliers, and
what influence each member has. It is also necessary to
understand something not only about the psychology of the
individuals involved but also how they work as a group. Who
makes the decision to buy depends in part on the situation.
People Involved In Organisational Buying:
Organizational buying usually involves group decision
making, which is known as the ‘decision-making
unit’ (DMU) or the buying centre. In such a group,
individuals have different roles in the purchasing process,
categorized as:

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1. Initiators – these people requisition or suggest
purchasing a product or service;
2. Users – these are people in the organization who use
the product. Sometimes they will also be involved in
devising product specifications;
3. Influencers – influencers affect the buying decision in
different ways e.g. they may be technical personnel who
have developed product specifications;
4. Deciders – deciders make the buying decision (in most
cases this is the buyer);
5. Buyers – buyers have formal authority to purchase the
product;
6. Approvers – these people authorize actions of deciders
or buyers;
7. Gatekeepers – gatekeepers control the flow of
information to and from DMU or buying centre members
e.g. a buyer’s assistant.
One person might play all these roles, or each may be
performed by different persons or groups of people.

Three types of buying situations have been distinguished:

 the straight re-buy,

 the modified re-buy, and
 The new task.
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The straight re-buy is the simplest situation: The company
reorders a good or service without any modifications. The
transaction tends to be routine and may be handled totally

by the purchasing department.

With the modified re-buy, the buyer is seeking to modify

product specifications, prices, and so on. The purchaser is
interested in negotiation, and several participants may take
part itn the buying decision.

A company faces a new task when it considers buying a

product for the first time. The number of participants and the
amount of information sought tend to increase with the cost
and risks associated with the transaction.

This situation represents the best opportunity for the Stages

in Organizational Buying:

The organizational buying process contains eight stages,

or key phrases, which are listed hereunder. Although these
stages parallel those of the consumer buying process, there
are important differences that have a direct bearing on the
marketing strategy. The complete process occurs in the case
of a new task. Even in this situation, however, the process is
far more formal for the industrial buying process than for the
consumer buying process.
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Most of the information an industrial buyer receives is
delivered through direct contacts such as sales
representatives or information packets. It is unlikely that an
industrial buyer would use information provided through a
trade ad as the sole basis for making a decision.

1. Problem recognition: The process begins when someone

in the organization recognizes a problem or need that can be
met by acquiring a good or service. Problem

recognition can occur as a result of internal or external

stimuli. External stimuli can be a presentation by a
salesperson, an ad, or information picked up at a trade show.

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2. General need description: Having recognized that a need
exists, the buyers must add further refinement to its
description . Working with engineers, users, purchasing

agents, and others, the buyer identifies and prioritizes

important product characteristics.

Armed with extensive product knowledge, this individual is

capable of addressing virtually all the product-related
concerns of a typical customer. To a lesser extent, trade
advertising provides valuable information to smaller or
isolated customers. Noteworthy is the extensive use of direct
marketing techniques (for example, toll-free numbers and
information cards) with many trade ads. Finally, public
relations play a significant role through placement of stories
in various trade journals.

3. Product specification. Technical specifications come next.

This is usually the responsibility of the engineering
department. Engineers design several alternatives, depending
on the priority list established earlier.

4. Supplier search: The buyer now tries to identify the most

appropriate vendor. The buyer can examine trade directories,
perform a computer search, or phone other companies for
recommendations. Marketers can participate in this stage by
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contacting possible opinion leaders and soliciting support or
by contacting the buyer directly. Personal selling plays a
major role at this stage

5. Proposal solicitation: Qualified suppliers are next invited

to submit proposals. Some suppliers send only a catalogue or
a sales representative. Proposal development is a complex
task that requires extensive research and skilled writing and
presentation. In extreme cases, such proposals are
comparable to complete marketing strategies found in the
consumer sector.

6. Supplier selection: At this stage, the various proposals are

screened and a choice is made. A significant part of this
selection is evaluating the vendor. One study indicated that
purchasing managers felt that the vendor was often more
important than the proposal. Purchasing managers listed the
three most important characteristics of the vendor as delivery
capability, consistent quality, and fair price. Another study
found that the relative importance of different attributes
varies with the type of buying situations. For example, for
routine-order products, delivery, reliability, price, and
supplier reputation are highly important. These factors can
serve as appeals in sales presentations and in trade ads.

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7. Order-routine specification: The buyer now writes the
final order with the chosen supplier, listing the technical
specifications, the quantity needed, the warranty, and so on.

8. Performance review: In this final stage, the buyer reviews

the supplier's performance. This may be a very simple or a
very complex process.

Organisational Buying V/s Consumer Buying

Factors Influencing Organizational Buying

 External Environmental Factors

 Internal Organizational Factors
 Interpersonal and Individual Factors
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  Situational Factors

External Environmental Factors

As a major constraint under which a business operates, the
external environment impacts nearly every aspect of a
business, including its buying decisions. Here’s a list of the
external elements that affect organizational buying.

A. Economic Conditions: The fluctuations in the money

markets and the interest rates have a major impact on the
buying strategies. The interest rates and organizational
buying have an inverse relation; in most cases, an increase
in the interest rates may bring about a drop in the buying.
B. Regulatory Changes: Any changes in the corporate laws,
rules and regulations will also influence how, when and
what the organizations buy. There are also regulatory
changes that may affect only a particular industry and
accordingly the related organizations will change their
buying patterns to stay in-line with the new regulations.
C. Political Environment: A change of the government or
policy has a direct impact on the economic scenario, and
this ultimately translates into a shift in the organizational
buying patterns as well.

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D. Social Environment: Societies and cultures are ever
evolving, and every business has to change its practices and
procedures to meet up with the societal changes. For
instance with the rise in the number of animal lovers, pure
leather suppliers have seen a slump in their business. The
clothing and footwear manufacturers have shifted to
artificial leather suppliers. This points out how the social
environment can affect the buying patterns of
organizations.
E. Competition: Today’s business is all about beating
competition and staying ahead. So when an organization's
competitors move on to a newer product or service, or if
they get to enjoy a competitive edge because of their
suppliers, it's very likely for the organization to change its
trends too and thus its buying pattern will change
accordingly.
Internal Organizational Factors: More than the
external factors, it’s the internal organizational factors that
influence organizational buying. These internal factors are
the:

I. Organization's Goals and Objectives: The goals and

objectives of an organization are major determinants as
to how and what the organization will purchase. An
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 organization that wants to capture a bigger chunk of the
market by selling cheaper stuff is more likely to look for
suppliers who can supply larger quantities at a low price.
However, a company whose goal is to deliver quality
products may have a very contrasting buying pattern,
and they will focus more on the quality issues than on
the price advantage.
II. Organizational Structure:  Hierarchical and
management structures vary from one organization to
another. While some organizations have a well
established purchase department, others may assign this
job to the HR or Administration department. There are
also organizations where the purchase decisions must be
taken collectively by all concerned departments. The
organizations also have well-defined guidelines as to
which purchase decisions can be made by which
management level. The internal setup and how authority
and responsibility flow through it, play an important role
in the organizational purchasing.
III. Policies and Procedures: How the purchase order is
routed, depends on the organization's policies. How does
the buying procedure begin, who will participate and
who has the ultimate authority to decide on the purchase

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 are all dependent on the policies and procedures of the
organization. Some organizations prefer to invite public
bids, while others may contact only the few suppliers on
their list. There are also budgetary policies that have a
say in the purchase decisions, for instance while some
organizations may have a flexible policy to make
purchases as and when the need arises, others may have
to wait till the allocation of the annual or biannual
budget.
IV. Technological Levels: Whenever making new
purchases, organizations take into consideration their
current technology. Some purchases are meant to
replace the current technology with a newer version, so
their buying decision will be influenced by what level of
technology they currently own. Also, organizations try to
ensure that all new purchases being made are
technologically compatible with their existing
technology. So, one way or the other – an organization's
existing technology has a major influence on its future
purchases.
V. Manpower Skills: Whether the organization has the
skilled manpower to make proper and optimum use of
the new purchases being made, especially equipment

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 and machinery, is another issue that influences
organizational buying.
Interpersonal and Individual Factors

Since organizational buying decisions are never a one person

affair, interpersonal relationships among the decision makers
plays a vital role in this type of buying.

a. Participation and Authority: In organizational buying

situations, there are always re-defined rules as to who can
participate in the purchase decision and who the ultimate
deciding authority is.
b. Interpersonal Conflict: Interpersonal conflicts and
conflicts of interest amongst the decision makers often
results in delays and changes. Thus, the kind of thinking
and the kind of relationship the decision makers share have
a major role to play in corporate buying.
c. Education and Awareness: The educational background
of the decision makers and their level of awareness have a
major bearing on what type of purchases they will make.
d. Risk Taking Ability: If the buying committee constitutes
high risk takers, they will not be averse to the idea of
choosing the latest technology or new suppliers. While on
the other hand, decision makers with a low risk taking
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 tolerance are more likely to stick to proven and tested
technology or to well known and well established suppliers.
e. Individual Factors: Individual factors such as age, cultural
background and social status, of the members on the
buying team, also influence the buying decisions.
Situational Factors
1. Time Factor: Sometimes, organizations don’t have all the
time to follow the detailed buying procedure. If the
organization needs a replacement for equipment that
broke down suddenly, it may decide to place its order with
some existing supplier or a supplier that is at close
proximity.
2. Current Financial Situation: If the organization is
crunched for cash, it may decide to place its order with one
of its existing supplier who offers extended credit. Also, if
the organization cannot spare out enough money for a
certain purchase, it may opt for a readily available cheaper
version that fits into its budget.
3. Availability: Some buying decisions can wait while others
cannot, thus if the supplier cannot make available the exact
product by the desired date, the organizational buyers may
shift to a new supplier or to a more readily available
alternative.

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4. Special Offers: Special offers being given by a supplier
may also be one of the situational factors affecting the
buying decision.
As a supplier, now that you know what factors influence
organizational buyers, you can work up your business to
business sales strategies to manipulate organizational
buying activities and thus procure more orders for your
supply business.

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