Organizational Buying Behavior

Overview

• Organizational Buyers

• Buying Objectives

• Industrial Buying Process

• Decision Making Units

• Model For Organizational Behavior – Webester and Wind Model

Organizational Buyers• Buying and selling are important concepts in both consumer and industrial

marketing.

• In industrial marketing there’s a great emphasis placed on “buying behavior” because in industrial marketing most of the players involved are “organizational buyers”

They include:

• Manufacturers

• Wholesalers

• Retailers

• Government agencies, institutions

• They buy goods and services for their own use or for resale by selling it to the next buyer

Purchase/Buying Objectives• Delivery and availability of goods and services

- The prime objective of the purchasing department is to ensure that purchased goods and services are available or delivered when and where they needed.

- JIT (Just in time) Reduced Inventory Cost, Reliability, Strong understanding between suppliers

- Example??

• Product Quality - The quality of product should be consistent with the specifications and use of the product.

- It is significant to ensure consistency in quality of product to reduce the cost of inspection, interruptions in production process due to rejections, and arranging replacements of rejected material.

- The quality standard for Pakistan – ISO 9001

- Fauji fertilizers, one of the top 25 performing companies. International Standards like ISO 9001, ISO 14001 and OHSAS 18001. - helped achieve business excellence - sona urea

• Lowest Price - For some companies, price is the main factor for their buying

decision.

- Monopoly, where there is not much competition so companies compromise on quality.

- Example??

• Services- The industrial buyers need many types of services to accompany the purchase of goods.

- These services include prompt and accurate information from suppliers, application or technical assistance, spare-parts availability, repairs and maintenance capability, and training, if required.

- WorldCall - Offers technical assistance of one year to all corporations that install this.

Industrial Buying Process

• Need - Samsung initial supplier for Apple for Micro Chips, price increase 20%

• Determination of the Characteristics of Needed Product

- Samsung using a 32 nanometer process. Apple needed less.

• Development of Specification of Needed Product

- Formal Contract which lists out all the

specifications and prices. 24 nanometer

• Search the Qualified Potential Suppliers

• Obtaining and Analysing Supplier Proposals

- It must include the product specification, price, delivery period, payment terms, taxes and duties applicable, transportation cost.

- Tiwan SemiConductor was chosen, used 24 nanometer process

• Routine Order Selection

- The activities include placement of orders (i.e. purchase orders) with the selected suppliers

- The quantity to be purchased from the supplier

- Frequency of order placement by buyers and delivery schedules to be adhered to by the supplier

- Payment terms to be adhered to by the buyer

• Performance Feedback and post-purchase Evaluation

Buying Decision Types• New Purchase

- new purchases are mostly done when you’re not satisfied with a current product or a service. End result to decrease cost.

- Gul Ahmad, new purchase in IT, reduced efficiency cost by upto 21% every quarter. (Bashir Sajid- upheaves of the textile industry in Pakistan. 2012)

• Change in Supplier - This situation occurs when the organisation is not satisfied with the performance of the existing suppliers, or the need arises for cost reduction or quality improvement

• Repeat Purchase

Decision making Units

• Initiators

• Buyers

• Users

• Influencers

• Deciders

• Gatekeepers

Model for Organizational Behavior- Webester and Wind Model