Chapter 3

Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
Organisational Buying and

Buying Behaviour
Chapter 3
Chapter Questions
1. What are the purchasing objectives of business buyers?
2. How is the buying process (buyphases) of organisations?

3. What are the types of buying situations (buyclasses) in business
organisations? Is vendor analysis/ multi-attribute model useful ?
4. What is the buygrid framework?

5. Who are buying centre members and key influentials?
6. What are the roles in organisational buying?
7. Which are the comprehensive models of organisational buying

behavior?
8. Which are the contemporary purchasing activities?
2
Purchasing Objectives of Business Buyers
Buying right items in right quantity, at right time and right place to process/distribute.
– Perfect delivery / ready availability
– Superior quality of product / service
• Specifications
• Cost of inspection
• Consistent production
– Lowest price
– Services
• Prompt and accurate info. from suppliers
• Technical assistance
• Spare-parts availability
• Repair and maintenance
• Training Cont…
3
• Good long-term supplier relationship
• Firms spend 50%+ of sales on purchases
• Personal objectives
– Higher status
– Job security
– Salary increments
– Promotions
– Social considerations
4
5
Organisational Buying Process
• Different from consumer market
• Industrial services:
– Difficult to write specifications
– Difficult forecast demand
– Difficult to plan
cont6
Eight phases/buyphases
developed by Robinson, Faris, & Wind:
1. Problem / Need recognition
• Faster production
• Breakdown
2. Decide characteristics and quantity of needed product
• R&D dept.
• Purchase dept.
3. Develop specifications / description of needed
product
• inter-functional
• Suppliers are involved
4. Search for potential suppliers
7
cont
5. Obtain & analyse supplier proposals
•
Product specifications
• Price
• Delivery
• Payment
• Transportation
• Terms and conditions
6. Evaluate and select suppliers
• Vendor Analysis System (next slide)
• Balanced Scorecards
• Internal business process
7. Select an order routine
• Order quantity
• Order frequency
8. Performance feedback & post-purchase evaluation
8
Table 3.1
Supplier/Vendor Analysis
using Multi attribute model
Attributes Weight Supplier Total
(or Criteria) (or Importance) Performance Rating Score
Product Quality 3 8 24
Service Quality 3 7 21
Price 2 6 12
Reputation 1 8 08
Flexibility 1 6 06
Total 10 71
Performance rating scale : 1-10, ( 10 = excellent, 1 = poor )

9
10
Buying Process of Organisational Buyers
• Types of Buying Situations (Buyclasses)

1. New Task / New purchase
– More information, risk, decision time, people involved
2. Modified Rebuy / Change in Supplier

– Due to existing suppliers’ poor performance, or change in
specifications
– Hence, search for alternate supplier
3. Straight Rebuy / Repeat Purchase

– Due to existing suppliers’ good performance
– Routine, low risk decision. Less information needed
11
Buygrid Framework
Buyclasses
(situations)
Buyphases
(processes) New Modified Straight
Task Rebuy Rebuy
1. Problem / need recognition Yes May be No

2. Characteristics, Quantity of needed product Yes May be No
3. Specification of needed product Yes May be No
4. Potential suppliers’ search Yes Yes No
5. Obtain and analyze supplier proposals Yes Yes May be
6. Evaluate proposals and select suppliers Yes Yes No
7. Select an order routine Yes Yes May be
8. Performance feedback and evaluation Yes Yes Yes
12
Buying Centre Members and
Key Influentials
• Buying centre, or purchase committee, consists of members
who make buying decisions, share common objectives and
risks
• Key influentials are the few most influential members
• Buying centre members are:

– Top management persons
– Technical persons: Key influentials for new task and modified
rebuy situations and technical products
– Buyers / purchasers: Key influentials for straight rebuy
– Commercial persons: Finance & Marketing persons
13
14
Influentials
Buyers
Organisationa
Roles in
l Buying
Deciders
Users
Gatekeepers
Models
of Organisational Buying Behaviour
• Most important factors influencing organisational
buyers:
– Organisational / Task – oriented
– Personal / non-task oriented
– Enviromental
– Buying Centre
• Most comprehensive models:

1. Webster and Wind
2. Sheth
3. Choffray and Lilien 15
The Webster and Wind Model
Environmental Variables: Technological, Economic, etc.
Organisational Variables: Technology (for purchasing), Buying

Centre structure, buying goals and tasks, buying centre members.
Buying centre variables: Interpersonal interactions, Group

functioning: Buying and non-buying tasks, external influences.
Individual variables
Buying Decision Process:

Individual and Group. Buying
Decision
16
The Sheth Model
Componet-1 Componet-2 Componet-3
Differences in Variables that • Methods Situational

individual determine if used for Factors
buyers’ buying decision conflict
expectations is autonomous or resolution in
caused by joint : joint Supplier
factors: • Product decision or
• Background specific making Brand choice
• Information • Company process
sources specific • Problem
• Past solving
purchases • Persuasion
• Perceptual • Bargaining
distortion • Politicking
17
The Choffray and Lilien Model
Obtain alternative offers from

suppliers
Organisational Constraints Environmental Constraints
Source of information Likely alternative offers
Evaluation criteria Individual preferences formed
Negotiation
Organisational preferences
Group problem solving Organisational choice 18

Contemporary Purchasing Activities
1. Just-in-time (JIT) Delivery

2. Outsourcing
a) Multi sourcing
b) Sole/Single sourcing
3. Worldsourcing
4. Value analysis / Value engineering
5. Supplier evaluation system/Multi attribute model

6. Buying committee/Buying centre 19

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Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.

Organisational Buying and

2. How is the buying process (buyphases) of organisations?

4. What is the buygrid framework?

6. What are the roles in organisational buying?

7. Which are the comprehensive models of organisational buying

Performance rating scale : 1-10, ( 10 = excellent, 1 = poor )

• Types of Buying Situations (Buyclasses)

2. Modified Rebuy / Change in Supplier

3. Straight Rebuy / Repeat Purchase

1. Problem / need recognition Yes May be No

• Key influentials are the few most influential members

• Buying centre members are:

• Most comprehensive models:

Organisational Variables: Technology (for purchasing), Buying

Buying centre variables: Interpersonal interactions, Group

Buying Decision Process:

Componet-1 Componet-2 Componet-3

Differences in Variables that • Methods Situational

Obtain alternative offers from

Organisational Constraints Environmental Constraints

Source of information Likely alternative offers

Evaluation criteria Individual preferences formed

Group problem solving Organisational choice 18

1. Just-in-time (JIT) Delivery

5. Supplier evaluation system/Multi attribute model

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