Components of Marketing

Unit 2
 2. Institutional Customers:
-Institutionalcustomers consist of individuals or groups who purchase a specific kind of
product for three purposes:-resale, direct use in producing other product, or use in
general daily operations.

-In other words, customers who purchase goods for sales to final consumers for
orgnizational utilization, or for processing purposes are known as institutional customers.

-The institutional customers are also known as organizational customers or buyers. So they
do organizational buying.

-Organizational buying refers to the buying behavior of organizations that they purchase
the products for re-production, re-sale and institutional usage, such as educational
organization, government, producers, wholesalers, retailers and private organizations.
-Prodcucers buy primary goods and capital goods for producing various kinds of
commodities. Wholesale firm buy from manufacturers or producers for sale to retail
outlets. Government deparment and agencies make purchases for official use. Non-
government organizations also make purchases for their own use. They are all
institutional customers.
Features/ Characteristics of Institutional
Customers:
There are various characteristics of institutional buyers. Principal
characteristics are the following:
 Numbers of buyers:
Few buyers purchase high volume of quantity in geographically
concerntrated area.
 Demand:
The demand is derived from the demand of consumer products. In
this way, it has derived demand. The total demand is inelastic. It is
not affected by the changes in price. But there is change in price of
organizational product, it directly affect the consumer product
price and national economy.
 Relationship:
The relationship between supplier and organizational customer is
close. Due to few numbers of customers they can develop good
relationship for future.
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 Rationality:
Buyers are well informed about competitors, price, quality,
quantity, buying criteria and services.
 Professionalism:
Purchase policy and documentations process is necessary
to the organizational buying. Professional and trained
people are involved in purchase decision and purchase
process.
 Channel:
The channel structure of the organizational buying may
be direct from manufacturer to users and sometimes it
may be manufacturers to sales agent to users.
 Buying influences:
Organizational buying decision involved in different
parties at the buying process. Different participants and
decision maker influence to the buying decision.
Buying Process of Institutional/Organizational Customers:
There are seven steps in the institutional or
organizational buying process. Organizational
buying process varies on the nature of organization
volume and aomout of the purchase. The most
commonly used buying process are:
Step 1: Need/Problem Identification
Step2: Determining product specification
Step3: Identification of suppliers
Step 4: Inviting proposals
Step 5: Evaluation of proposals
Step 6: Purchase decision
Step 7: Performance Evaluation
1. Need/Problem Identification:
Institutional buying starts with the identification
of a need or a problem in the organization. The
need may result when the inventory level
decreases,new product are being introduced,
existing products are being modified, or the
organization is planning the introduction of a new
technology. The buying group decides on the
specific details of the nature of the need, product
requirements and quality levels and so on.
2. Determining product specifications:
The buyers determine the need item’s
characteristics such as the product quantity, quality,
price, method of payment, mode of payment,
delivery date, place, design of the product etc.
3. Identification of Suppliers:
One the need is identified and product
specifications are determined, the buying group
identifies the potential sources of the supply of
products and potential suppliers. In case of
regularly purchased supplies institutions buy from
the established suppliers. In this step, the buyer
tries to identify pre-qualification of suppliers.
4. Inviting proposals:
The fourth step in the institutional buying process is to
invite poposals from reliable suppliers. Business
organizations directly contact the possible suppliers and
ask for simple but detailed proposals, while governement
and social institutions invite formal bids. The proposals
and bids contain information on price, quantity,quality,
delivery schedule and other terms and conditions of sale.
 
5. Evaluation of proposal:
The buying group evaluates all the proposals received
from the suppliers on their true merits. The buying group
uses reputation of the supplier, past experience, size of
operation, finanical and technical capablilities to arrive
at a decision regarding the selection of the supplier.
6. Purchase decision:
After selecting supplies, they make purchase decision. While
making purchase decision, the buyers should be clear or they
take specific details about the terms of sales, credit
arrangement, technical and additional services.
The purchase decision is taken only after long and serious
negotiation over the terms and condition of sale. Institutions
may place an order for one time supply and enter into a
contract for regular supply.
7. Performance evaluation:
The performance evaluation process takes three types of
action. These actions are: to continue to the current supplier,
modify and end the relationship with the supplier. The buyer
may rate the supplier on several criteria to increase the firm
performance. The buying steps involved in a way task buying
situation, in modigy re-buy process and straight re-buy
condition, some steps can be compressed or by passed.
Factors afefcting of Institutional Buying decisions :

Organizational buying decisions are influence by several factors.

It helps to identify and implement new strategy to the marketer.
1. Environmental Factors:
-Economic
-Technological
-Political and Legal
-Social Resposibility
2. Organizational Factors:
-Buying obectives
-Buying Policies
-Buying Procedures
-Organizational structure
3. Interpersonal Factors:
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-Authority
-Interest
-Status
-Persuasiveness

4. Personal factors:
-Age
-Income
-Education
-Job Position
-Personality
1. Environmental Factors
Environmental factors includes economic factors, technological fator,
political legal factors and social responsibility factors:
a. Economic factors:
The economic condition of the country determined several factors such
as level of demand, production facility, consumption pattern, investment,
economic health, competition and saving. The economic condition
determines the consumer purchasing power. The demand of
organizational products are directly related to the demand of the
consumer products. Therefore, change in the economic condition of a
country affect the total demand of buyers, production facility to the
manufacturers, consumption pattern to the people, investment capacity
to the investors and competition power to the manufacturers for
organizational product.
b. Technological factors:
The level of technology, pace of technological changes and innovation
capacity directly affect the organizational buying decision. Technological
changes affects the production process, packaging, communication and
transportation. Fast growing new technology creates a revolution in
1. Environmental Factors
c. Political factor:
The political stability and favorable climate affects the
organizational buying. The favorable political climate creates
investment and production opportunity, increase in business
transactions and increases demand of the products and services.
d. Legal factors:
The organizational buying is also influenced by the regulatory
provisions imposed by the governement. Governement rules and
regulations directly affects.
e. Social responsibility factors:
The investor’s benefit increases socially accepted goods and
services. The environmental pollution issues, consumer health
issues child labor issues, social responsibility issues influences the
product production. These are the serious rising issues in the
business field. These factors influence the organizational buying.
2. Organizational Factors:
Organizational factors such as the buying objectives, policies,
procedures and organization structure have major influences on
the organization buying.
a. Buying objective:
Different organization have different buying objectives. Every
organization sets its buying objectives. The buying objectives
should match the organizational objectives. If organization has
followed a quality leadership objective. The buying actions
should be directed by quality oriented as well as their purchase
decision of raw materials should be qualitative not cheaper.
b. Buying Policies:
The organizational policies provide guidelines for buying
decisions. If the raw materials purchasing policy is to buy from
national supplier, they must follow it. Similarly, if the producers
want to implement Nepalese technology, they should be aware
to implement about this policy.
2. Organizational Factors:
c. Buying procedures:
The buying procedure represents buying
documentation. The organizational buying varies in
different organizational market. In the orgnizational
buying various documentation process and procedures is
required for purchasing and they must follow it.
Government requires sealed bid and tender for every
large purchase.
d. Organizational structure:
Structure of the orgnization also affects to the
organizational buying decision. The organizational
buying should depend on the boudary of authority,
responsibility and relationship.
3. Interpersonal Factors
The organizational buying decision involves in the individual personnel
or staffs with different interest, status, authority and persuasiveness.
These interpersonal factors affect the organizational buying decision.
a. Authority:- Organizational buying is based on authority. The
organization has a different members and it has a long hierarchy of
authority. The organizational buying is influenced by the authorized
people, who have athority of final decision.
b. Interest:- Organizational buying process involves in different
participants they are, initiator, users, influencer, deciders, approvers,
buyers and gatekeepeers. All these participants have their own interesst
on buying process. They influence buying decision.
c. Status:- The status determine the job position and role performed in
the organization. The buyer’s status influences producer and supplier
selection process.
d. Persuasiveness:- Persuasiveness is the power and experience of the
buyers who can decide own capabiity. It includes experience, technical
capacity, and product and supplier selection capacity of individual or
group of buyers. It affects the buying decision.
4. Personal factors:
The buyers’ personal motivation, perception and preferences differ in different people,
which are influence by the buyer’s age, income education, job position and personality.
Age: At the buying process young people want new branded product and they want
building new relationship with the different suppliers. An old person wants to continue
exsisting product and they want to establish good relationship with suppliers. Age factor
affect the perception of buyers.
Income : An Income level of buyers affects the buying decision. Personal motivation
and interest becomes buying decisions on the base of income. Organizational buying
depends on people ‘s interest.
Education:
In organizatinal buying rational and educational buyers carefully search and evaluate
different products and suppliers. They use different important information and compare
brand, quality,competitors and delevery system while buying process. The buyer’s
eduational level represents on the buying decision process.
 Job Position: . A job position represents the hierarchy of the organization. Hierarchy
is based on the authority and decision power. The authority and power level of the
buyer’s influence on the process of buying decision.
 Personality: .
The personality factors differ from buyers to buyers. It is an internal structure, traits,
appearance and confidence which help to influence buying responses. Buyer’s
personality represents on selection of brand, quality, purchase behavior and traits with
the product and sellers.
 Thank you !
Hope to see you as an
Enthusiastic, Motivated and
Successful Professional
Manageer and Leader of the
organization!