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
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