Organizational Buying Behavior

GROUP NO. 4

INDEX

Meaning of Organizational Buying BehaviorDefinitionCharacteristics Of Organizational Buying

BehaviorOrganizational Buying SituationsMajor Influences on Business BuyersOrganizational buying processParticipants in organizational Buying Behavior

MEANING

Organization buying is the decision-making process by which formal organizations establish the need for purchased products and services and identify, evaluate, and choose among alternative brands and suppliers.

CHARACTERISTICS

1. Consumer market is a huge market in millions of consumers where organizational buyers are limited in number for most of the products.

2. The purchases are in large quantities. 3. Close relationships and service are required. 4. Demand is derived from the production and sales of buyers. 5. Demand fluctuations are high as purchases from business

buyers magnify fluctuation in demand for their products. 6. The organizational buyers are trained professionals in

purchasing. 7. Several persons in organization influence purchase. 8. Lot of buying occurs in direct dealing with manufacturers.

ORGANIZATIONAL BUYING SITUATIONS

Straight rebuy

Modified

rebuy

New task buy

Systems buy

Straight rebuy:- In this buying situation, only

purchasing department is involved. That get an information from inventory control department or section to reorder the material or item and they seek quotations from vendors in an approved list.

 Modified rebuy:- In this buying situation, there is a

modification to the specifications of the product or specifications related to delivery. Executives apart from the purchasing department are involved in the buying decisions. The company is looking for additional suppliers or is ready to modify the approved vendors list based on the technical capabilities and delivery capabilities.

 

BUYING SITUATIONS (continue…)

New task buy:- In this situation, the buyer is buying the product for the

first time. As the cost of the product or consumption value becomes higher, more number of executives are involved in the process. The stages of awareness, interest, evaluation, trial, and adoption will be there for the products of each potential supplier. Only the products which pass all the stages will be on the approved list and price competition will follow subsequently.

 Systems buy:- Systems buying is a process in which the organization

gives a single order to a single organization for supplying a full system. The buying organization knows that no single party is producing all the units in the system. But it wants the system seller to engineer the system, procure the units from various vendors and assemble, fabricate or construct the system.

ORGANIZATIONAL BUYING SITUATIONS (continue…)

MAJOR INFLUENCES ON BUSINESS BUYERS

Environmental factors

Organizational factors

Interpersonal

factors

Individual factors

Environmental factors:- Expected demand for the product

that the buying organization is selling, expected shortages for the item, expected changes in technology related to the item etc. are the environmental factors that will have an effect.

 Organizational factors:- Changes in purchasing department

organization like centralized purchasing, decentralized purchasing and changes in purchasing practices like  long-term contracts, relationship purchasing, zero-based pricing, vendor-performance evaluation are the organization factors of importance to marketers.

 

MAJOR INFLUENCES ON BUSINESS BUYERS

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Interpersonal factors:- These factors are the

relationship between buyers and sales representatives of various competitor companies.

 Individual factors:- These factors related to the

buyer. What sort of ways of interacting and service are appreciated by the buyers and what ways are considered as irritants? Marketers have to understand the reactions of buyers.

MAJOR INFLUENCES ON BUSINESS BUYERS

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Problem recognition:  The first stage of the business buying process in

which someone in the company recognizes a problem or need that can be met by acquiring a good or a service.

General need description:  At this stage of business buying process company

describes the general characteristics and quantity of a needed item.

Product specification:   At this stage of the business buying process buying

organization decide on the product and specifies the best technical product characteristics for a needed item.

ORGANIZATIONAL BUYING PROCESS (continue..)

Value analysis:  An approach to cost reduction, in which

components are studied carefully to determine if they can be redesigned, standardized or made by less costly methods of production.

Supplier search:  At this stage of the business buying process buyer

tries to find the best vendors.

Proposal solicitation: The stage of the business buying process in which

the buyer invites qualified suppliers to submit proposals.

ORGANIZATIONAL BUYING PROCESS

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Supplier Selection:  The stage of the business buying process in

which the buyer reviews proposal & selects a supplier or suppliers

Order-routine specification:  The stage of the business buying process in

which the buyer writes the final order with the chosen supplier(s), listing the technical specifications, quantity needed, expected time of delivery, return policies, & warranties.

Performance review:  The stage of the business buying process in

which the buyer rates its satisfaction with suppliers, deciding whether to continue, modifies, or drops them.

ORGANIZATIONAL BUYING PROCESS (continue…)

PARTICIPANTS IN ORGANIZATIONAL BUYING BEHAVIOR

Buying center is all of the individuals and units thatparticipate in the business decision-making processUsersInfluencersDecidersApproversBuyers

Users:- The persons who use the item. Say for safety gloves the

operators. Initiators:- The persons who request the purchase. The safety

officer may initiate the request for the purchase. Influencers:- Persons who held define specifications. In this case

of safety gloves, the safety officer may himself define specifications. If an industrial engineer is in the organization, he may also be consulted. There can a different gloves for different working situations and industrial engineer may be more aware of specific requirements due to his special nature of work - human effort engineering.

 

PARTICIPANTS IN ORGANIZATIONAL BUYING BEHAVIOR ( continue….)

Buyers:- They are the person who actually do the buying

transaction. Gatekeepers:- They control access to personnel in a company.

The receptionist, the secretaries etc. Deciders:- People who decide on product requireements and

suppliers. It is the final approval for product specfications and suppliers' list.

 Approvers:- Persons who approve the purchase. In the case of

safety gloves, the personal manager may have the power to approve.

 

PARTICIPANTS IN ORGANIZATIONAL BUYING BEHAVIOUR (continue….)

ConclusionAs we all know that buying process in an organizational play an very vital role.Therefore the organization goes through many process and research so that it would not effect the pricing policy of the organization. Therefore organization buying behavior is important for every organizational