Organization Buying

Behavior
Organizational Buying Process
2. General
1. Problem 3. Product
Description
Recognition Specifications
of Need

Organizational 5. Acquisition
4. Supplier
Buying Process and Analysis
Search
of Proposals

6. Supplier 7. Selection
8. Performance
Selection of
Review
Order Routine
Buying Process

Stages in the buying process are not as

sequential as suggested by the model.

Sometimes steps are skipped. For example, on

straight rebuys, buyers choose to purchase
almost immediately.

However, the model represents important

aspects of how companies buy and evaluate
business purchases.
Many Different People May Influence a Decision
Overlapping Needs of Individual Influencers
and the Customer Organization
Problem Recognition

Need can arise internally (machine breakdown)

More often than not, it is the salesperson

who precipitates the need for a new product

Advertising also can influence purchasing

Product Specifications

Many times the question boils down to:

1. Is it a new task buy?

2. Is it a straight re-buy?
3. Is it a modified re-buy?

Professional sellers try to influence this decision as

early as possible in the buying process—if they can!
Organizational Buying
New Task: Marketer’s Edge

If a marketer is already established with an account,

often he or she can leverage that situation into
further business.

This is why present suppliers continue to develop

further business with their customers—they
understand their prospects’ buying philosophy,
developing situations and contacts.

They can also create need since the prospect trusts

them.
Straight Re-buy: Marketing Challenges to

Purchasing departments handle this situation; in most
cases the determinant is who is “IN” and who is “OUT”?

“IN” seller needs to constantly reinforce their services,

meet buying expectations, continue developing
relationships and be responsive to changing needs.

“OUT” sellers have a much more difficult task.

The buying company is usually reluctant to change

because “OUT” sellers are unknown, they are a big risk,
and change is expensive.
Modified Re-buy: Buying Decision Approaches

Simple Modified Rebuy: Involves narrow

choices and minimal research.

The major area of consideration is supplier
relationship.

Complex Modified Rebuy: Involves larger
items, more research, extensive specification
development, a competitive bidding process
and long-term relationship development with
new supplier(s).
Out Sellers
To get in, OUT sellers need to convince the
buying organization that:

Their current supplier is not doing their job.

They are experiencing problems that they were

not aware of earlier.

Their purchasing requirements have changed.

There exists better alternatives (not merely in cost terms).


Supplier Search
 Often the specs are written so that only specific
organizations are able to fulfill the contract.

 In established businesses, often only preferred vendors

are considered

Acquisition and Analysis of Proposals
 Many times, this step is perfunctory. The buyer may
have already determined the preferred vendor, but
legally it may be necessary to seek other proposals

Supplier Selection
At this point, negotiation includes not only monies, but also:
1.Delivery times
2.Level of service

3.Warranties

4.Payment schedules etc.

TCO: Total Cost of Ownership
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.
14
Buyer-Seller Relationships in Business Markets
Close Relationships
Relationships May
May Produce
Not Make Sense
Mutual Benefits

- Reliable source of - Reduced flexibility

supply - Some purchases are too
- Cost reductions BUT small or infrequent
- Price stability or - Higher risk from
concessions greater purchase
- Reduced uncertainty concentration
- Joint problem solving
- Improved quality
RECIPROCITY
Relationships Have Many Dimensions
Thank You