Fall 2017 MARK 3510 CH 2

Chapter
2:
Organizational Buying
Behavior
Fall 2017 MARK 3510 Professor Eugene R. Raitt 1

Chapter Topics
Inside and outside forces influence organizational buying.
In this chapter you will learn:
1. The organizational buying process.
2. The four main factors that impact organizational buying
decisions.
3. A model of organizational buying behavior.
4. How knowledge of organizational buying enables
marketers to make more informed decisions on product
design, pricing and promotion.

Understanding the Dynamics
of Organizational Buying
Market-driven firms sense market trends and
work closely with their customers and vendors.
This is crucial to:
lIdentify profitable market segments
lLocate buying influences within segments
lReach organizational buyers efficiently and

effectively with an offer
Each decision goes through various steps.
Skipping a step can be essential to the decision-
making process.
Buying as a Process
l Buying is a process, not an event
l There are various points in the process that are

referred to as “Critical Decision Points” and
“Evolving Information Requirements”
l It starts with “Problem Recognition”
Fall 2017 MARK 3510 Professor Eugene R. Raitt

Organizational Buying Process
2. General
1. Problem 3. Product
Description
Recognition Specifications
of Need
Organizational 5. Acquisition
4. Supplier
Buying and Analysis
Search
Process of Proposals
6. Supplier 7. Selection
8. Performance
Selection of
Review
Order Routine
1. Problem Recognition
l Before anything is bought, most buyers need

to be made aware of a problem.

Internally:
l A machine breaks down

l Someone needs to order an MRO product
l Someone recognizes an opportunity that can be
captured by acquiring the product

Externally:
l More often than not, it is the salesperson who
precipitates the need for a new product
l Advertising also can influence purchasing
l Many organizations use the Push/Pull Strategy

2. General Description of Need
Once a need is recognized, the purchasing department works
with the buying group to define what is needed by asking:
l What is the extent of the problem?
l What alternatives can solve the problem?
l Where can the solution be purchased?
Each small decision ultimately helps define the product
specifications.
Sometimes the supplier is involved if the supplier influences the
sale (i.e., the supplier makes the buyer aware of the need).

3. Product Specifications
Many times the question boils down to:
1. Is it a new task buy?

2. Is it a straight rebuy?
3. Is it a modified rebuy?
Buyers try to be objective and consider many ideas.

Professional sellers try to influence this decision as early
as possible in the buying process—if they can!

3. Product Specifications
This is an important because it often determines

how the contract is structured and the specific
wording that it uses.

4. Supplier Search
l Who will be the supplier?
l The creating influencer has a lot of say
about the choice of supplier. If a
salesperson creates the need, often the
specs are written so that only the
salesperson’s organization is able to fulfill
the contract.
l In established businesses, often only
preferred vendors are considered.

5. Acquisition and Analysis of
Proposals
l This step occurs only when the buying organization lacks
adequate information to make a decision.
l Proposals are presented in detail often by a team engineers,
users and purchasing agents. Successful proposals determine
the supplier.
l Many times, this step is perfunctory. The buyer may have
already determined the preferred vendor, but legally it may
be necessary to seek other vendor proposals to attain
government contracts.

6. Supplier Selection
At this point, negotiation includes not only monies, but
also:
1.Quantities
2.Delivery times
3.Level of service
4.Warranties
5.Payment schedules
6.And a host of final details that determine selection

7. Selection of Order Routine
l Once the supplier is selected, the order routines
are established

8. Performance Review
After receipt of the product or service, a
performance review asks:
1. Did the supplier meet delivery time?

2. Did the product meet the specs?
3. Does the contract have to be modified?
4. Did the vendor live up to expectations?

Buying Process
l Stages in the buying process are not as sequential as
suggested by the model.
l Sometimes steps are skipped. For example, on

straight rebuys, buyers choose to purchase almost
immediately.
l However, the model represents important aspects of

how companies buy and evaluate business
purchases.

Organizational Buying Process
2. General
1. Problem 3. Product
Description
Recognition Specifications
of Need
Organizational 5. Acquisition
4. Supplier
Buying and Analysis
Search
Process of Proposals
6. Supplier 7. Selection
8. Performance
Selection of
Review
Order Routine

Buying Process
There other events that influence the buying
process, most notably:
1. Economic conditions
2. Competition
3. Basic shifts in the organizational objectives
4. The buying situation

Three Buying Situations
1. New task
2. Straight rebuy
3. Modified rebuy

1. New Task
l New task – a perceived problem or need that is totally

different from previous experiences.
l To solve it, buyers need a significant amount of

information.
l Buyers & Influentials operate in a stage of decision-

making known as “extensive problem solving” because
they lack:
l Well-defined criteria
l A strong predisposition toward a particular
solution
1. New Task
There are 2 approaches to New Task purchasing:
1. Judgmental Situations
2. Strategic Decisions

New Task - Judgmental Situations
l This is the greatest amount of uncertainty because there is
little information or experience to support a decision.
l To overcome this, decision-makers conduct outside research

to analyze key aspects of the buying decision.
l An example of key questions might include:

l What kind and model of production equipment should we purchase?
l Who are the available suppliers?
l Will they provide the services we need?

New Task - Strategic Decisions
l This level of New Task purchasing is the most
important because it concerns long-range planning,
larger investments and increased risk if they are
wrong.
l An example of strategic questioning might include:

l Should we develop a new product line which demands us
to buy new machinery, retool what we have, and maybe
even hire a different type of employee?
l What should we do?

Marketing Consideration for
New Task Buys
Marketers can gain an edge if they:
1. Initiate problem recognition
2. Get involved very early in the decision-making

process
3. Get involved early in the procurement process
4. Understand the buying organization's behavior

patterns

New Task Marketer’s Edge
l If a marketer is already established with an account,
often he or she can leverage that situation into
further business.
l This is why present suppliers continue to develop

further business with their customers—they
understand their prospects’ buying philosophy,
developing situations and contacts.
l They can also create need since the prospect trusts

them.

Three Buying Situations – A Review
1. New task
2. Straight rebuy
3. Modified rebuy

2. Straight Rebuy
l Straight rebuy – a problem or need that is

recurring or a continuing requirement.
l Buyers have experience in the area
l Require little or no new information
l Buyers operate in routine problem-solving stage

Buying Decision Approaches
Casual purchases: Involve no information search or analysis.
Routine low priority: Decisions are more important and

involve a moderate amount of analysis.

Straight Rebuy
l Routine problem solving situations
requiring routine solutions.
l This is the repeat business situation that

every major supplier desires.
l MOR: Maintenance, Operation and Repair

items fall into this category as do various
services such as travel.

Straight Rebuy
l Many companies review this area of business
every now and then, but the edge usually goes
to the supplying company.
l Relationships become very important.

Marketing Challenges to Straight Rebuy
l Purchasing departments handle this situation in most

cases; the determinant is who is “IN” and who is
“OUT”?
l “IN” seller needs to constantly reinforce their services,

meet buying expectations, continue developing
relationships and be responsive to changing needs.
l “OUT” sellers have a much more difficult task.

Buying Companies Risk to Change Vendors –
Straight Rebuys
l The buying company is usually reluctant to

change because “OUT” sellers are unknown,
they are a big risk, and change is expensive.
l The old adage is: “If it ain’t broke, don’t fix

it.”

Out Sellers in Straight Rebuy
To get in, OUT sellers need to convince the buying

organization that:
1. Their current supplier is not doing their job.

2. They are experiencing problems that they were
not aware of earlier.
3. Their purchasing requirements have changed.
4. They should consider other alternatives.

3. Modified Rebuy
} Modified rebuy—Decision makers feel there is a benefits to
reevaluating alternatives.
} Internal Forces:
} Search for quality improvement
} Cost reductions

Modified Rebuy
l Buyers feel they can make significant advances if they
review their buying situations on a regular basis.
l Often, changes in styles, materials or even alternative

solutions facilitate this review.
l Another reason for Modified Rebuy is dissatisfaction with

present supplier.
l New supplier was able to find the present supplier’s

weaknesses and offered buyers new alternatives to “fix”
their problem(s).

Modified Rebuy:
Limited Problem Solving
l When a company has to replace a broken part,
they may bypass the manufacturer and go to a
supplier of comparable upgrades.
l Example: Your IBM printer breaks so you

consider an HP printer instead.

Buying Decision Approaches
l Simple Modified Rebuy: Involves narrow choices
and minimal research.
l The major area of consideration is supplier
relationship.
l Complex Modified Rebuy: Involves larger items,
more research, extensive specification
development, a competitive bidding process and
long-term relationship development with new
supplier(s).

IN verses OUT Suppliers
l IN suppliers need to understand developments
within the buying organization so they can be a
part of the modified rebuy situation. They
generally have an edge unless they are “out of
touch” with the buyer.

IN verses OUT Suppliers
l OUT suppliers need to create the need and

influence the buying organization to consider
other alternatives. This demands superior
salespersonship.
l Selling company needs to offer performance
guarantees, warranties and often additional
services and training.

Vested Interest
Developing a vested interest on the part of
both the buyer and seller is important to
perpetuating the business.
l Questions:
1. Did the selling organization put in enough
effort to show serious involvement?
2. Is the buying organization trapped in a
buying decision, making it difficult to get
out?
Business Strategy Considerations
The business marketer must always try to

understand the sale from the buyer’s perspective
and do everything to make it easier for the buyer
to buy.

Business Strategy Considerations
Marketers needs to understand:
1. Who are the decision makers?
2. What are their problem(s)?
3. What are their purchasing patterns?
4. What is the importance of their purchase?
5. What is the timing of the purchase?

Forces Influencing Organizational Buying Behavior
• Economic outlook:
domestic & global
Environmental • Pace of technological
change
A projected change in Forces • Global trade relations
business conditions
can alter buying plans
drastically. • Goals, objectives and
Organizational strategies
Forces • Organizational position
Organizational of purchasing
Buying
Behavior • Roles, relative
Group influence and patterns
Forces of interaction of buying
decision participants
•Job function, past

Individual
experience, and buying
Forces motives of individual
decision participants 44
Environmental Forces - Economic
Influences
l Changes in the environment such as business
conditions, technological advances or new legislation
can affect buying plans.
l Since much of business is driven by derived demand,

business marketers must be sensitive to changes in
the consumer market.
l Also, the economy can determine a company’s

ability or willingness to buy. If the economy is bad,
companies often put off purchasing until they see a
change.
Economic Influences
l Not all companies are affected equally. For
example, high interest rates may affect housing
starts but may not affect food products, medical or
transportation services.
l Finally, there is an affect from foreign competitors

such as China and India. Both have strong labor
saving costs as a competitive advantage.

Technological Influences
l Technology is changing so quickly that yesterday’s
technological advancement is today’s electronic commodity.
Example: Computers
l However, all companies need to stay alert to these changes.

For example, Blockbuster is feeling the pinch of Netflix,
Internet and satellite movies-on-demand.
l Technological change—especially from the Internet—is
drastically changing the way companies do business.

Technological Change
l The Internet has leveled the playing field, allowing
competitors the opportunity to compete in the world’s
most technological advanced countries.
l It affects not only entire companies (the printing industry is

struggling due to digital printing and electronic
communication), but also individual careers (an “A”
programmer in India can be purchased for $2-4/hour).

Organizational Forces &
Growing Influence of Purchasing
l As manufacturing has become less important,

purchasing and procurement have become more
important.
l Companies are outsourcing many activities such as

manufacturing, marketing, accounting, etc., yet
procurement remains a strong influence resulting in a
shift to more professional procurement positions.

Strategic Priorities in Purchasing
l As the purchasing profession grows, so do its goals and

priorities.
l Purchasers are more ambitious, resulting in a more

competitive environment. An effective marketing
strategy develops stronger and deeper relationships
with purchasers.
l This is the impetus for Relationship Marketing.

Aligning Purchasing Shift from administrative role
with Strategy, to value-creating function that
serves internal stakeholders
Not Just Buyers
and provides competitive edge
in market.
Exploring New Focus on suppliers’

Value Frontiers: capabilities, emphasizing
business outcomes, total
It’s Not Just About ownership costs, and potential
Price for long-term value creation.
Source: Adapted from Marc Bourde, Charlie Hawker, and Theo Theocharides, “Taking Center Stage: The 2005 Chief
Procurement Officer Survey,” (Somers NY: IBM Global Services, May 2005), pp. 1-14. Accessed at http://www.ibm.com/bcs
onFall
July2017 MARK 3510
1, 2005. Professor Eugene R. Raitt 51
Ò Putting Suppliers Inside: Ò Develop fewer and deeper
The Best Value Chain Wins relationships with strategic
suppliers and involve them in
decision- making processes,
ranging from new product
development to cost-reduction
initiatives.
ÒPursuing Low-Cost Sources: Overcome hurdles imposed by

A World Worth Exploring geographical differences and
seek out cost-effective
suppliers around globe.

Marketing Strategic Considerations
l As Purchasers develop their strategic roles, Marketers

respond by developing strategic alliances to become a part of
their business.
l Buyers and Sellers know that “the best value supply chain
wins” the customer…and the profits.
l The result is closer relationships with carefully chosen
suppliers who can align their activities with customer needs.
l Example: At this time in history, Walmart is one of the best at

accomplishing this activity!

Procurement Manager’s Toolkit
Total Cost of Ownership
TCO considers the full range of

costs associated with the purchase
and use of a product or service over its
complete life cycle.

TCO
1. Acquisition costs: selling price and transportation

costs & administrative costs of evaluating suppliers,
expediting orders, and correcting errors in shipments
or delivery.
2. Possession costs: include financing, storage,
inspection, taxes, insurance, and other internal handling
costs.
3. Usage costs: are those associated with ongoing use
of the purchased product such as installation, employee
training, user labor, and field repair, as well as
product replacement and disposal costs.
Value-based Selling Tools
l Astute business marketers can pursue value-
based strategies that provide customers with a
lower cost-in-use solution.
l Value-based strategies seek to move the selling
proposition from one that centers on current
prices and individual transactions to a longer-
term relationship built on value and lower total
cost-in-use.

SEGMENTING THE BUY
l Various categories of purchases are segmented
on the basis of procurement complexity and the
nature of the effect on corporate performance
l Use a segmentation approach to isolate those
purchase categories that have the greatest effect
on corporate revenues

E-Procurement
l Purchasing managers use the Internet to find

new suppliers, communicate with current
suppliers, or place an order.
l E-procurement cut purchasing cycle time in half,
reduced material costs by 14 percent and
purchasing administrative costs by 60 percent,
and enhanced the ability of procurement units to
identify new suppliers on a global scale.

Reverse Auctions
l Involves one buyer who invites bids from several
prequalified suppliers who face off in a dynamic,
real-time, competitive bidding process.
l Reverse auctions are best suited for commodity-
type items such as purchasing
materials, diesel fuel, metal parts, chemicals,
and many raw materials

A Strategic Approach to Reverse
Auctions
l “Preempt the auction: convince the buyer not to

go forward with the auction because you have a
unique value proposition and are not inclined to
participate.
l Manage the process: influence bid specifications
and vendor qualification criteria.
l Walk away: simply refuse to participate
Centralized vs. Decentralized Purchasing
l Purchasing is moving away from a transaction-
based support role to a more strategic,
executive level role
l One result of this is to centralize purchasing
l Centralized purchasing operates differently than

decentralized purchasing

Decentralized Purchasing
l Decentralized purchasing allows local branches to
purchase what they need. This results in local
control, and for many kinds of services this
makes sense.
l Example: Stop and Shop buys products from local

farmers.

Marketing Strategy Response
l The organization of the marketer’s selling

strategy should parallel the organization of
the purchasing function of key accounts.
l To avoid disjointed selling activities and
internal conflict in the sales organization,
and to serve the special needs of important
customers, many business marketers have
developed key account management
programs.
l Develop strategic relationships with a
limited number of customers in order to

Industrial Sales: How to Assess Group Forces
There are three questions that need to be addressed:
1. Who takes part in the buying process?

2. What is each member’s relative influence in decision?
3. What criteria is important to each member in
evaluating the supplier?
Answering these questions puts the salesperson in a better

position to become the chosen supplier.

Roles in the Buying Center
Initiator Influencers Gatekeepers
Decider Purchaser Users

8
Buying Center Roles
Initiator Initially perceives a problem and initiates the buying process to

solve it.
Affects the purchasing decision by providing technical
Influencer information or other relevant (internal or external)
information.
Controls the information to be reviewed by members of the
Gatekeeper buying group. (For example, buyer may screen advertising
material and even salespeople.)
Actually makes the buying decision, whether or not they have
Decider formal authority to do so. Could be the owner, an engineer or
even the buyer.
Has formal authority to select and purchase products or
Buyer services and the responsibility to implement and follow all
procurement procedures.
User Actually use the product in question. Can be inconsequential or

Fall 2017 MARK 3510 major players in the process.
Professor Eugene R. Raitt 66
Buying Center Members
Members of the buying center assume different
roles throughout the procurement process.
1. Isolate the personal stakeholders

Clues to help
identify powerful 2. Follow the information flow
buying center 3. Identify the experts
members:
4. Trace the connections to the top
5. Understand purchasing’s role
SOURCE: Adapted from John R. Ronchetto, Michael D. Hutt, and Peter H. Reingen, “Embedded Influence
Patterns in Organizational Buying Systems,’ Journal of Marketing 53 (October 1989), pp. 51-62.
Isolating the Buying Situation
l Since buying is a process and not an event, one
needs to understand who affects the potential sale
and how they affect it.
l One method is to isolate the sale. That means to

define the buying situation and to understand what
stage it is in. Effective salespeople create a need,
whereas less effective salespeople become involved
later in the buying process.

Strategy to Isolate the Sale
l Depending upon the product, selling companies that
have new-buy products must:
l Create a need
l Get involved in the early stages of the buying process

Strategy to Isolate the Sale
l For more established type products (MRO), the
strategy should be to:
l Get a foothold
l Start small
l Learn the company
l Offer better deals
l Be ready to offer more as buying/selling opportunities
occur

Clues for Identifying
Powerful Buying Center Members
1. Isolate personal stakeholders. Who has the
most to gain and/or lose?
2. Follow the information flow. Influencers are
usually the ones who actually facilitate the
exchange.
3. Identify the experts. Experts ask the most
questions, exhibit the most knowledge, and are
often the most influential.

Clues for Identifying
Powerful Buying Center Members
4. Trace the communication to the top. Who are
the decision makers?
5. Make sure you understand purchasing’s role.

Often purchasers are not decision makers, but
they may be the bargainers. In repeat buying
situations, they are usually dominant players
because of their specialization.

Who Makes the Decision?
l Individuals make the decision, not organizations!
l Each member has a unique personality,

experience and motive, and are subject to risk
and rewards.
l Professional marketers understand this and make

sure that they learn to recognize and match to it.

Evaluative Criteria
Industrial product users value:
1. Prompt delivery
2. Efficient and effective service
Engineering values:
1. Product quality
2. Standardization
3. Testing
Purchasing values:
1. Price advantage and economy
2. Shipping and forwarding

Evaluative Differences
l Education: Engineers have a different educational
background than purchasing agents.
l Also, various occupations have different
dispositions. For example:
1. Engineers are usually cold, analytical and
suspecting.
2. Salespeople are usually warm, open and
optimistic.

Marketing Response
By understanding the buying process and the

various roles that link the buying group
together, the marketer is in a better position to
match with them by working with the right
people and the appropriate sales process.

Selective Processes in
Information Processing
ý Selective exposure.
ý Selective attention.
ý Selective perception.
ý Selective retention.

Selective Exposure
l Individuals accept communication

messages consistent with their attitudes
and beliefs.
l This is why buyers will choose to talk to

some salespeople and not to others.

Selective Attention
People filter out stimuli only to allow certain

ones to cognition. For example, buyers will
notice certain ads that can solve a perceived
need.

Selective Perception
l People interpret stimuli in terms of their attitudes

and beliefs.
l This explains why buyers may modify or change
their disposition to a salesperson in order to make
it more consistent with their predisposition
towards the company.
l They like the company so they may like the
salesperson.

Selective Retention
l People recall information that pertains to their

own needs and dispositions.
l For example, a buyer may remember information

about a certain brand because it elicits a reaction
that is consistent with his/her criteria.

Selective Process
l Each of those selective exposures elicits a reaction that
influences the buyers’ actions.
l Since procurement activities often span a great deal of
time, it is imperative for marketers to carefully design
and target their marketing communications.
l Salespeople who understand and adjust to buyer
psychological needs are usually more successful than
those who are not cognizant or considerate of those
needs.

Risk-Reduction
l Most people are adverse to risk, especially

buyers. Great risk can mean great loss and
buyers can get fired for that.
l There are two components to perceived
risk. They are…

Perceived Risk Components
1. Uncertainty about decision

outcomes.
2. Magnitude of consequences
associated with making a
wrong selection.

Confronting Risk
l The larger the purchase, the more influential the
buying center becomes and can often include
higher ranking members.
l There is an extensive outside search to see what

others are doing in similar situations.
l Sellers who have a proven track record are favored.

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Chapter

Fall 2017 MARK 3510 Professor Eugene R. Raitt 1

Fall 2017 MARK 3510 Professor Eugene R. Raitt 2

lLocate buying influences within segments

lReach organizational buyers efficiently and

l There are various points in the process that are

l It starts with “Problem Recognition”

Fall 2017 MARK 3510 Professor Eugene R. Raitt

l Before anything is bought, most buyers need

Fall 2017 MARK 3510 Professor Eugene R. Raitt 6

l A machine breaks down

Fall 2017 MARK 3510 Professor Eugene R. Raitt 7

Fall 2017 MARK 3510 Professor Eugene R. Raitt 8

Fall 2017 MARK 3510 Professor Eugene R. Raitt 9

Many times the question boils down to:

1. Is it a new task buy?

Buyers try to be objective and consider many ideas.

Fall 2017 MARK 3510 Professor Eugene R. Raitt 10

This is an important because it often determines

Fall 2017 MARK 3510 Professor Eugene R. Raitt 11

Fall 2017 MARK 3510 Professor Eugene R. Raitt 12

Fall 2017 MARK 3510 Professor Eugene R. Raitt 13

Fall 2017 MARK 3510 Professor Eugene R. Raitt 14

Fall 2017 MARK 3510 Professor Eugene R. Raitt

1. Did the supplier meet delivery time?

Fall 2017 MARK 3510 Professor Eugene R. Raitt 16

l Sometimes steps are skipped. For example, on

l However, the model represents important aspects of

Fall 2017 MARK 3510 Professor Eugene R. Raitt 17

Fall 2017 MARK 3510 Professor Eugene R. Raitt 18

Fall 2017 MARK 3510 Professor Eugene R. Raitt 19

Fall 2017 MARK 3510 Professor Eugene R. Raitt 20

l New task – a perceived problem or need that is totally

l To solve it, buyers need a significant amount of

l Buyers & Influentials operate in a stage of decision-

Fall 2017 MARK 3510 Professor Eugene R. Raitt 22

l To overcome this, decision-makers conduct outside research

l An example of key questions might include:

Fall 2017 MARK 3510 Professor Eugene R. Raitt 23

l An example of strategic questioning might include:

Fall 2017 MARK 3510 Professor Eugene R. Raitt 24

2. Get involved very early in the decision-making

4. Understand the buying organization's behavior

Fall 2017 MARK 3510 Professor Eugene R. Raitt 25

l This is why present suppliers continue to develop

l They can also create need since the prospect trusts

Fall 2017 MARK 3510 Professor Eugene R. Raitt 26

Fall 2017 MARK 3510 Professor Eugene R. Raitt 27

l Straight rebuy – a problem or need that is

Fall 2017 MARK 3510 Professor Eugene R. Raitt 28

Routine low priority: Decisions are more important and

Fall 2017 MARK 3510 Professor Eugene R. Raitt 29

l This is the repeat business situation that

l MOR: Maintenance, Operation and Repair

Fall 2017 MARK 3510 Professor Eugene R. Raitt 30

l Relationships become very important.

Fall 2017 MARK 3510 Professor Eugene R. Raitt 31

l Purchasing departments handle this situation in most

l “IN” seller needs to constantly reinforce their services,

l “OUT” sellers have a much more difficult task.

Fall 2017 MARK 3510 Professor Eugene R. Raitt 32

l The buying company is usually reluctant to

l The old adage is: “If it ain’t broke, don’t fix