Organizational Buying

 Organizational buying is:

“the decision-making process by which formal
organizations establish the need for
purchasing products and services and identify,
evaluate, and choose among alternative brands
and suppliers.”
Difference between Consumer Markets &
Organizational Markets:
 Compared to Consumer Markets, in
Business Markets:
 There are Fewer buyers
 There are Larger buyers
 Time spent in decision is high
 More number of people are involved
 Close relationships with their supplier-
customers
 Direct Purchase
 Reciprocity
Types of Organizational demand:
 Derived demand – Based on demand of
organization’s product.
 Inelastic demand – No reaction to price change.
 Joint demand – Demand of your product
related to demand of related product.
 Organizational Markets:
 Corporate Market:
 Producers: Buy raw materials, convert them into finished goods.
 Original Equipment Manufacturers (OEMs)
 Industrial dealers: Sell material as it is to its customers.
 Buy products to facilitate production.
 The Institutional Market: Schools, hospitals, etc.
 Cost and quality standards drive purchases
 The Government Market
 Bidding process awards contracts
 Cost is of prime importance.
Types of Organizational Buying:
 New Task:
 Situation where product purchased for 1st time.
 High involvement and time consuming.
 Modified Rebuy:
 Goods have been purchased earlier.
 Changes in specifications etc.
 Straight Rebuy:
 Product purchased frequently & regularly.
 Low involvement, minimal time commitment.
Types of Organizational Buying
 Systems Buying
 An organization selects only one supplier for
all its raw material requirements.
 Systems Selling
 Selling all the raw materials required by an
organization.
Participants in Business Buying
Buying center members fill one or more
roles in the purchase decision process:
 Initiators  Deciders
 Influencers  Approvers
 Users  Buyers

Gatekeepers
 Influences on Business Buyers
 Environmental factors:
 Demand level
 Economic outlook
 Interest rates
 Technological change
 Politics
 Regulations
 Competition
 Organizational factors:
 Objectives
 Policies
 Procedures
 Organizational Structures
•Social Factors:
•Relationship with the decision maker.
•Informal Tie-ups.
•Personal factors:
•Decisonmakers’ attitudes, demographics, etc.
 Purchasing/Procurement Process
 Problem recognition
 General need description
 Product specification
 Supplier search
 Proposal solicitation
 Supplier selection
 Order-routine specification
 Performance review
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