Nature of Industrial Buying

Organizational Buying Process

1. Problem Recognition

2. General Description

of Need

3. ProductSpecifications

4. Supplier Search

5. Acquisitionand Analysisof Proposals

6. Supplier Selection

7. Selectionof

Order Routine

8. PerformanceReview

Three Buying Situations (slide 1 of 4)

1. New task

2. Modified rebuy

3. Straight rebuy

Three Buying Situations1. New Task (slide 2 of 4)

• New task—the problem or need is totally different from previous experiences.– Significant amount of information is required.– Buyers operate in the extensive problem

solving stage.• Buyers lack well defined criteria.• Lack strong predispositions toward a solution.

Three Buying Situations2. Modified Rebuy (slide 3 of 4)

• Modified rebuy—decision makers feel there are benefits to be derived by reevaluating alternatives.– Most likely to occur when displeased with

the performance of current supplier.– Buyers operate in the limited problem

solving stage.• Buyers have well defined criteria.

Three Buying Situations3. Straight rebuy (slide 4 of 4)

• Straight rebuy—the problem or need is a recurring or continuing situation.– Buyers have experience in the area in

question.– Require little or no new information.– Buyers operate in the routine problem

solving stage.

Buying Decision Approaches

Causal purchases…involve no information search or analysis.

Routine low priority…decisions are more important and involve a moderate amount of analysis.

• Enables individual employees to buy online while the company retains control of the purchasing process.

The Buy-Side Requisitioning Process

Forces Influencing Organizational Buying Behavior

EnvironmentalForces

OrganizationalForces

GroupForces

IndividualForces

OrganizationalBuying

Behavior

•Economic Outlook: Domestic & Global•Pace of Technological Change•Global Trade Relations

•Goals, Objectives, and Strategies•Organizational Position of Purchasing

•Roles, relative influence, and patterns of interaction of buyingdecision participants

•Job function, pastexperience, and buyingmotives of individualdecision participants

A projected change in business conditions can drastically alter buying plan.

With rising competitive pressures managers are using rigorous cost modeling approaches to identify factors that drive the cost of purchased goods and services.

The Buygrid Framework for Organizational Buying Situations

Overview of the Buyer Grid

• Creeping commitment

• Center of gravity

• Marketing implications

Questions for the Industrial Salesperson

1. Which member takes part in the buying process?

2. What is each members relative influence in the decision?

3. What criteria is important to members in the evaluation process?

Members of the buying center assume different roles throughout the procurement process.

Clues for Identifying Powerful Buying Center Members

Buying Center Influence Matrix

Phase New Buy Modified Rebuy Straight Rebuy

Need identifcation Engineering

Purchasing

R & D

Production

Purchasing

Production

Engineering

Production

Purchasing

Establishment of specification

Engineering

Purchasing

Production

R & D

Engineering

Purchasing

Production

R & D

Quality control

Purchasing

Engineering

Production

Modification & evaluation of buying alternatives

Engineering

Purchasing

R & D

Purchasing

Engineering

Production

Purchasing

Engineering

Production

Supplier selection Purchasing

Engineering

R & D

Quality control

Purchasing

Engineering

Production

Purchasing

Engineering

Production

Buying Center Roles

1) Primary roles– Deciders– Influencers

2) Secondary roles

-Users

-Buyers

-Gate keepers

A model for determining composition of organizational buying center

Environment: Economic, technical, social & cultural, legal & political

FIRMBuyer mission

Purchase needs

Buy class Buy phaseDollar valuecomplexity

Time commitment& life cycle

Procurement Buying center membership

Other members

Transaction

BUYGRIDComponents

INTERFIRM

BOUNDARY

SPAN

Selective Process & Cognition

Selective exposure. Selective attention. Selective perception. Selective retention.

Perceived Risk Components

1.Uncertainty about the outcomes of a decision.

2.The magnitude of consequences associated with making the wrong selection.

The behavior of organizational buyers is influenced by environmental, organizational, group, and individual factors.

Major Elements of Organizational Buying Behavior

Objectives of organizational buying

Task oriented objectives:1) Price

2) Service

3) Quality

4) Assurance of supply

5) Reciprocity

Non-task objectives