ORGANISATIONAL BUYING BEHAVIOUR

MACMILLAN STUDIES IN MARKETING MANAGEMENT

General Editor: Professor Michael J. Baker, University of Strathclyde

This series is designed to fill the need for a compact treatment of major aspects of marketing management and practice based essentially upon European institutions and experience. This is not to suggest that experience and practice in other advanced economies will be ignored, but rather that the treatment will reflect European custom and attitudes as opposed to American, which have tended to dominate so much of the marketing literature.

Each volume is the work of an acknowledged authority on that subject and combines a distillation of the best and most up-to-date research find­ings with a clear statement of their relevance to improved managerial practice. A concise style is followed throughout, and extensive use is made of summaries, checklists and references to related work. Thus each work may be viewed as both an introduction to and a reference work on its particular subject. Further, while each book is self-contained, the series as a whole comprises a handbook of marketing management.

The series is designed for both students and practitioners of marketing. Lecturers will find the treatment adequate as the foundation for in-depth study of each topic by more advanced students who have already pur­sued an introductory and broadly based course in marketing. Similarly, managers will find each book to be both a useful aide-memoire and a reference source.

The other titles in the series are:

International Marketing Management

Pricing

Marketing: Theory and Practice

Product Policy and Management

J. M. Livingstone University ofStrathclyde

F.Livesey UMIST

Professor Michael J.Baker University ofStrathclyde

Professor Michael J.Bakerand Ronald McTavish University ofStrathclyde

ORGANISATIONAL BUYING BEHAVIOUR

The Key to More Effective Selling to Industrial Markets

RoyW. Hill and

Terry J. Hillier

M

©Roy W. Hill and Terry J. Hillier 1977

Softcover reprint of the hardcover 1st edition 1977

All rights reserved. No part of this publication may be reproduced or transmitted, in any form

or by any means, without permission.

First published 1977 by THE MACMILLAN PRESS LTD

London and Basingstoke Associated companies in New York Dublin

Melbourne Johannesburg and Madras

Text set in 12 pt Photon Times

This book is sold subject to the standard conditions of the Net Book Agreement.

The paperback edition of this book is sold subject to the condition that it shall not, by way of trade or otherwise, be lent, re-sold, hired out, or otherwise circulated without the publisher's prior consent in any form or binding or cover other than that in which it is published and without a similar condition including this condition being imposed on the

subsequent purchaser.

ISBN 978-0-333-21511-1 ISBN 978-1-349-15823-2 (eBook)DOI 10.1007/978-1-349-15823-2

978-0-333-21510-4

Contents

Preface viii

List of Tables x

List of Figures xi

Chapter 1 The Marketing Concept and its Implementation in an Industrial Environment 1

The Substance of Industrial Marketing 3 The Shortcomings of Industrial Marketing

at the Strategic and Tactical Levels 7 A Framework for Customer Analyses 13 Concluding Remarks 15

Chapter 2 An Anatomy of Industrial Purchases 16

Classifying Industrial Goods from the Suppliers' Viewpoint 17

Classifying Industrial Goods from the Customers' Viewpoint 20

The Anatomy of Purchase and Buying Behaviour 23

Concluding Remarks 2 7

Chapter 3 Focal Points of Buying Activity 29

Characteristics of the Industrial-buying Process 30 Constituent Elements of Buying Activity 36 Focal Points in the Corporate-buying Process 42 Decisions and Decision-making in an Industrial

Context 43 The Concept of Decision States 46

VI CONTENTS

The Individual Decision-making Process 49 Co-ordinates of Decision-making Activity 51 Concluding Remarks 60

Chapter 4 The Human Element in Industrial Buying 62

Concept of the Buying Centre 62 A Nuclear Approach to Studying the Buying

Centre 66 Components of Buyer Behaviour 69 Environmental and Organisational Constraints

on Human Interactions 71 Group Behaviour in an Industrial Context 76 Behavioural Characteristics of Individuals

Involved in the Industrial-buying Process 80 Individual Characteristic Profiles 86 Concluding Remarks 88

Chapter 5 The Art and Science of Source Management 90

Purchasing's Involvement in the Buying Centre 91 The Evolution of Materials Management 96 Task Activities in Professional Buying 98 Concluding Remarks 122

Chapter 6 Aggregate Buying Behaviour 123

Criteria for Aggregating Customers at the Macro Level 124

Innovation in Industrial Marketing 126 Factors Distorting Diffusion Patterns 134 Concluding Remarks 136

Chapter 7 Methods for Analysing and Measuring Buying Behaviour 138

Models of Organisational Buying Behaviour 139 Measuring the Components of Organisational

Buying Behaviour 148 Multivariate Techniques for Investigating

Industrial-buying Behaviour 152 Concluding Remarks 158

CONTENTS vii

Chapter 8 Communicating with Industrial Buyers 159

The Basis for Marketing Communications Concluding Remarks

Notes and References

Bibliography

Index

161 172

174

186

209

Preface

If suppliers of industrial goods are to develop successful and cost-effective marketing strategies, it is essential that they develop a detailed understanding of the ways in which their customers think, behave and operate in today's highly com­petitive business environment. All too frequently, however, this task has either been neglected completely or has been tackled at such a superficial level that this has resulted in the needless exclusion of suppliers from otherwise potentially lucrative markets.

This book is intended to provide guidance for both industrial marketing and purchasing executives in developing a detailed understanding of the behaviour of organisations purchasing in­dustrial goods. In particular it highlights the need for qualitative in-depth research at the company level before proceeding on to quantitative research involving large samples across industry. A number of general texts on industrial marketing have been published in the last few years. But this is a specialised text which discusses the way in which an understanding of organisational buying behaviour can assist in marketing planning (particu­larly regarding segmentation practices), in communication pro­grammes, and in the effectiveness of the sales force.

The book presents a wide-ranging review of the current body of knowledge on organisational buying behaviour in the public and private sectors and makes frequent reference to commercial and academic research which has been undertaken in various parts of the world. The bringing together and interrelating of this fragmented and diverse research material provides one of the first attempts to present a unified and coherent view of existing knowledge. There is also a separate and valuable bibliography. In addition a number of new ideas and concepts are proposed and dis-

PREFACE IX

cussed in some detail, and there are numerous original explanatory diagrams. Considerable emphasis is placed on the interdependence of the marketing and purchasing functions, including, for example, the marketing implications of the growing sophistication of purchasing techniques.

The underlying aim of the book is to discuss the key dimen­sions of organisational buying behaviour and to show how they can be described, measured and used to improve segmentation and communication procedures. It provides industrial marketing and purchasing executives and academics with a foundation upon which they can construct their own research studies in their own specialised fields, and will assist students at un­dergraduate, postgraduate and post-experience levels who have a special interest in the marketing/purchasing interface. Readers will find an outline of the structure of the text towards the end of Chapter 1.

Organisational buying behaviour is an umbrella term which covers purchasing activities in all types of organisations. These organisations are buying basically to satisfy organisational goals rather than individual and personal goals, which are associated with consumer and family buying. Such organisations may exist to manufacture goods, to resell or to provide a service. They may have a commercial or a social goal, and they may be privately, publicly or state owned. Most interest, until quite recently, has been focused on commercially oriented manufacturing organisations when the term industrial buying has been used. The book is largely con­cerned with this area, but since an increasing n urn ber of studies are being undertaken into institutional buying of state organisations, some of which are referred to in the book, Organisational Buying Behaviour is an appropriate title. No studies of the buying behaviour ofindustrial channels have been located and this subject has, therefore, been excluded.

The authors wish to acknowledge the help and advice over a number of years given by S. Swallow and D. A. Hammett; the contribution which S. Horsfield made to part of Chapter 7; and the patience shown by Miss Wendy Taylor in typing the manuscript.

Skipton, North Yorkshire May 1976

Roy W. Hill Terry J. Hillier

List of Tables

Table 2.1 Categories of industrial purchases: from the customer's viewpoint 22

Table 3.1 Functional involvement by type of purchase 54 Table 4.1 Examples of task and non-task buyer behaviour 70 Table 4.2 Sample profiles of members of the buying

centre 87 Table 5.1 The role of purchasing in the buying of

industrial glass 94 Table 5.2 Some examples of the criteria used for

initial supplier selection and supplier evaluation for purchases of certain production facilities 108

Table 5.3 Criteria used in the selection of suppliers of earthmoving equipment 110

Table 5.4 Criteria used in vendor rating systems in the United States Ill

Table 5.5 Customer 'spend' pattern (%) for sintered products 112

Table 5.6 Critical factors overriding a low bid 113 Table 5.7 A hypothetical example of a vendor-rating

scheme 116 Table 6.1 Directly observable or measureable criteria

for the segmentation of industrial markets at the macro level 125

Table 6.2 Secondary criteria for the segmentation of industrial markets at the micro level 126

Table 6.3 Relationship of major decision areas with stages in adoption process 133

Table 7.1 An example of objects and variables 154 Table 8.1 Businessmen readership of selected media -

production and works managers 165

LIST OF TABLES xi

Table 8.2 Classification groups for businessmen 166 Table 8.3 Coverage (in%) according to 'participation

in procurement and placing of orders' 167 Table 8.4 Coverage (in%) according to function

(frequent and regular readers) 168 Table 8.5 Ranked importance of supplier-profile

variables for hydraulic components in United States 170

Table 8.6 Ranking of criteria used in deciding supplier for a particular grade of oil in Sweden 1 71

Table 8. 7 The information needs of buyers when evaluating alternative quotes in the selection of processed raw materials in the U.K. 172

List of Figures

Figure 2.1 A classification of the activities in the chemical industry 19

Figure 2.2 A hypothetical example of the range of buying situations for a finished good such as a small electric motor 24

Figure 2.3 The constituent elements of the anatomy of the purchase 25

Figure 3.1 The stages in the corporate industrial-buying process for selected items of capital equipment 32

Figure 3.2 Constituent functions of the corporate industrial-buying process 34

Figure 3.3 Differences between the buying process for buyer- and supplier-specified items 35

Figure 3.4 Constituent elements of the corporate industrial-buying process 37

xii LIST OF FIGURES

Figure 3.5 The cycle of industrial-buying decisions 45 Figure 3.6 The concept of decision states 47 Figure 3.7 The incremental nature of decisions 48 Figure 3.8 Responsibility for decision-making in the

industrial-buying process for electronic production facilities 56

Figure 3.9 Managerial involvement as a function of selected criteria 58

Figure 4.1 Units in the buying centre 63 Figure 4.2 Major decision areas in the buying

process and buying centres 64 Figure 4.3 The decision atom: a nuclear approach

to studying the buying centre 67 Figure 4.4 Overlap and concurrence of product and

supplier decision 68 Figure 4.5 Factors affecting the buying behaviour

of the buying centre 71 Figure 4.6 A suggested relationship between

organisational environment, structure, climate and group structure 74

Figure 5.1 Task activities in professional buying 100 Figure 6.1 The diffusion pattern in industrial

markets 129 Figure 7.1 The Wind-proposed framework for the

analysis of the various determinants of the buyer's behaviour 141

Figure 7.2 The Webster and Wind model for under-standing organisational buying behaviour 143

Figure 7.3 The Sheth integrative model of industrial buying behaviour 145

Figure 7.4 The Nielsen box model of industrial buying behaviour 147

Figure 7.5 Questionnaire used to generate data on the purchase of materials 150

Figure 7.6 An example of the data generated by the Scientific American survey 151

Figure 8.1 The communication link between suppliers and customers 161