DIGOS CENTRAL ADVENTIST ACADEMY, INC.

Lapu-lapu Ext., Digos City, Davao del Sur 8002 Philippines

Tel. No.: 082-553-3172 email: dcaaonline@gmail.com

PRINCIPLES OF MARKETING
GRADE XI

NAME: _____________________________________________________ DATE: August 19, 2020

Module Number: 3
TOPIC: THE BUYING BEHAVIOR OF ORGANIZATIONAL MARKETS

Organizational Markets – are those that buy goods for production purposes or for reselling.
Classification of Organizational Markets:
1. Industrial Markets – organizations that require goods and services for the purposes of producing goods and services. The production
output of industrial firms is sold for profit.
2. Reseller Markets –organizations that buy goods and services which they later sell at a profit.
3. Government Markets – government agencies that buy products and services for use in the production of public goods and services.
These include the national, regional, provincial, and municipal governments.
4. Nonprofit Organizations – are nongovernmental organizations that serve their customers but do not have profits as organizational
goal.

ORGANIZATIONAL BUYING AND ITS CHARACTERISTICS

1. Demand
2. Potential Buyers – business firms that sell to individual consumers and families are confronted by thousands of potential buyers
while firms that sell to organizations have to deal with only few customers.
3. Buying Objectives – individuals and families buy products and services to satisfy their respective needs, physical or otherwise.
Organizations, however, buy for the purpose of making profits and this is done through increasing sales or reducing costs.
4. Buying Criteria – organizations are concerned not only with short-term profits but also with the attainment of long-term objectives.
As such, they use the following criteria when buying products and services:
a. Price
b. Ability of the seller to meet the quality specifications required for the item
c. Ability of the seller to meet required delivery schedules
d. Technical capability of the seller
e. Warranties and claim policies in the event of poor performance
f. Past performance of the seller on previous contracts
g. Production facilities and capacity of the seller
5. Size of Order or Purchase – the size of goods purchased by an organization is typically larger than those purchased by an individual
consumer. Usually, the organization sets certain requirements concerning the size of the order.
6. Buyer-Seller Interactions – Interaction between buyer and seller in consumer buying is different from those in organizational
buying. In consumer buying, the buyer only interacts with the seller for a short period usually during the time of the purchase while
the complexity of the organizational buying makes it necessary for the buyer and seller interaction to be more time consuming.
7. The Buying Center – is a group consisting of several people from different departments who participate in the decision process of
buying. The members share knowledge of information relevant to the purchase of a product or service. Depending on the size and
nature of the organizations, the purchasing decision is undertaken by either a single person or by a group of persons.

Kinds of Buying Process

1. New-task buying – this happens when the organization has a new need and the buyer wants a great deal of information. The process
takes more time and it involves the following:
a. Setting product specifications
b. Identifying sources of supply
c. Establishing an order routine for possible future purchases
2. Straight Rebuy – this is a routine repeat purchase. This happens when previous purchase is satisfactory. As such, the buyer will need
little information on new products and new sources of supply.
3. Modified Rebuy – this process is undertaken when the items purchased remain the same, but the members of the buying center are
not satisfied with the products quality, the price, or the service provided by the supplier. The buyer in this situation will search for
information about alternative products and suppliers. This will provide an opportunity for other suppliers to do business with the
firm if their products and services are better.
Participants in Organizational Buying Process
The members of buying centers participate in the buying process of organizations. Each of them performs individual roles indicated as
follows:
1. Users – they are the ones who will use the product or service that is subject of purchase.
2. Influencers – they are the persons who influence the buying decision.
3. Deciders – they are the persons who make decisions on product requirements and suppliers.
4. Approvers – they are the persons who authorize the proposed actions of deciders or buyers.
5. Buyers – they are persons who authorized to select the supplier and arrange the terms of purchase.
6. Gatekeepers – they are persons who have the power to prevent sellers or information from reaching members of the buying center.

Purchase Decision-making Process in Organizations

1. Recognition of a problem or need – in this stage of the buying process, there are some factors that must be considered. They are as
follows:

a. Organizational purchasing is a result of product and operational needs . The primary objective of the firm is to make profits, and
this is possible of the firm can provide the product or service that the customers want. In consumer purchasing, the consumer
makes purchases to satisfy his physical or psychological needs.
Gov’t Recognition No. 001 s. 2014 (Kindergarten) I Gov’t Recognition No. 018 s. 1989 (Elementary)
Gov’t Recognition No. 001 s. 2015 (Junior High School) I Gov’t Permit No. 062 s. 2019 (Senior High School)
 DIGOS CENTRAL ADVENTIST ACADEMY, INC.
Lapu-lapu Ext., Digos City, Davao del Sur 8002 Philippines
Tel. No.: 082-553-3172 email: dcaaonline@gmail.com

b. An organization’s need can be identified by different employees of the firm. Change in internal and external
environment of the firm requires corresponding adjustments in the firm’s operations. These may involve changes in the
company’s products, processes, and policies.
c. Progressive firms are engaged in requirements planning . Environmental demand for efficiency makes it necessary for firms to
reduce costs and uncertainties in the continuous provision of the supply. Firms make attempts to forecast future requirements to
plan their purchase in advance.
Requirements planning – paves the way for signing of long-term contracts designed to minimize the risk of supply shortage and price
increases.
- There is a strong possibility that the firm can carry lesser inventory without sacrificing operational efficiency.
d. The firm needs to determine product specifications . This is a very important requirement because any discrepancy between
what is really required and what has been delivered by suppliers will mean additional expenses if the problem is to be
corrected. Delay can be also a consequence of discrepancy and it may mean lost opportunities for the firm.

2. Search for information about products and suppliers

a. A listing of products or services that will solve the problem. This is followed by value analysis. Value analysis is a systematic
appraisal of the design quality and performance of the products or services listed. The aim of the value analysis is to determine
which products or services meet the firm’s requirements including the cost factor.
b. Make or buy analysis. Sometimes, firms consider manufacturing its own needs due to the following:
i. It is more economical
ii. The firm wants to minimize the risk of a single supplier’s vulnerability to strike, or to avoid the possibility
of future price increases, or poor service.
c. Information must be gathered about potential suppliers . The information required includes the firm’s financial health, credit
history, production capacity, and quality standards.
3. Evaluation and selection of supplier. Both the consumers and organizations evaluate alternative suppliers and their products or
services. However, organizations are more formal and they use a set of choice criteria which show the advantages offered by each
supplier.
The criteria used and the importance of each varies according to the following:
i. The quality of goods or services being considered for purchase
ii. The characteristics and needs of the buyer
iii. The supplier’s ability to meet quality standards
iv. The supplier’s ability to meet deliver schedules
v. The price
vi. The technical capability of the supplier
In the evaluation of suppliers, a rating sheet is prepared to facilitate comparison in terms of total ratings.
4. The purchase. If a new-task buying is satisfactory, the organization would shift to the straight rebuy situation for repeat purchases.
Blanket purchaser order – an agreement where the supplier promises to resupply the buyer as needed on agreed price terms over a
specified period of time.
- Effectively shuts out other suppliers until the buyer is no longer satisfied with its relationship with the current supplier.
5. Performance evaluation and feedback – the evaluation commences as soon as the products are delivered. The following steps are
undertaken:
i. The buyer inspects the delivered products to determine whether it meets the required specifications
ii. The user will determine if the purchased product performs according to expectations
iii. The buyer evaluates the supplier’s performance on:
o Promptness of delivery
o Product quality
o After sales service
The purpose of the foregoing exercise is to provide necessary information in evaluating proposals and
selecting suppliers about similar purchases in the future.
What Influences Organizational Buyers
1. Economic – such as price, product quality, and service
2. Personal – such as favors, attention, and risk avoidance
Specifically, influences on organizational buyers may be classified as follows:
a. Environmental factors – involves the economic situation, as well as developments in technology, politics, and
competition.
b. Organizational factors – organizations are different in terms of policies, organizational structure, procedures, systems
and past experiences. Even if the marketer is able to convince the organizational buyers, factors like policies and
procedures may still hinder progress in the buying process.
c. Interpersonal Factors. Members of the organization’s buying center will have different interests, authority, and
persuasiveness. If will be to the advantage of the marketer if he will have information about the different personalities
involved in the purchasing process.
d. Individual Factors – each buying center member has his own personal motivations, preferences, and perceptions. Some
of them will be meticulous, and some would want to do the job quickly. Some would even want to make the suppliers
play against each other.
Activity:
Answer the following questions and write your answers on a one whole sheet of paper. Answers must be handwritten.
1. In what ways do organizational markets differ from consumer markets?
2. In recognizing the organization’s problem, what factors must be considered?
3. In the search for information about products and services, what types of information must be gathered about potential suppliers?
4. Who are the typical participants in the organizational buying processes?
5. What steps are undertaken when evaluating the performance of the product and the supplier?

Research:
Prepare a short written report on how purchasing is done by any of the business or government institution here in the Philippines.
Gov’t Recognition No. 001 s. 2014 (Kindergarten) I Gov’t Recognition No. 018 s. 1989 (Elementary)
Gov’t Recognition No. 001 s. 2015 (Junior High School) I Gov’t Permit No. 062 s. 2019 (Senior High School)