Organisation buying behavior
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Organisation buying behavior

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Organisation buying behavior Organisation buying behavior Document Transcript

  • Assignment on Organizational Buying BehaviourPrepared by:Jagannath Padhy – Roll No. 26Pravin Dsouza – Roll No. 11Class: MMM, Sem-IVSummary of the Assignment: • Introduction to Organizational Buying Behaviour • Compare the characteristics of Organizational with consumer buyer behaviour. • Evaluate the different types of buying situations that organizations face. • Explain organisational decision making processes.
  • • Consider the influences that impact on organisational buyer behaviour.Introduction to Organizational Buying BehaviourOrganization buying is the decision-making process by which formal organizations establish the need forpurchased products and services and identify, evaluate, and choose among alternative brands andsuppliers.Organisational buying is very similar to individual buyer behaviour with some contextual differences.Organisations buy in furtherance of organisational objectives, such as to manufacture and deliver goodsand services to members, customers or the community.Organisational buying is heavily influenced by derived demand, that is, demand for an end product or fora product or service sold by the buyer’s customers. The demand for components by a manufacturer willbe dependent on demand coming from their customers, the retailers and wholesalers, who in turn arereacting to demand from their customers, the consumers. Overall consumer demand may in turn beimpacted by economic, social, political and technological factors in the environment.Different groups or individuals may play one or more of the following roles:• Users: these are the people who will directly use or consume or require the product or service in order to undertake their operational duties.• Influencers: these are individuals or groups who help specify the requirements or provide information to help evaluate the alternatives. People who provide technical input are usually in this group.• Buyers: these individuals and groups have the formal authority to select vendors and undertake the actual purchase transaction. They may take a major role in the negotiations on price and conditions of supply.
  • • Deciders: These individuals have formal or informal authority to select the final supplier. May be the same as Buyers in routine purchases.• Gatekeepers: These individuals informally or formally control the flow of information or access to other groups involved in the buying process.The differences between organizational and individual buying processes are shown in the following table: Buying Step Business to Business Consumer Problem Anticipates and plans for purchase on Reacts to needs when they arise recognition a routine basis General need Extensive, objective cost-benefit Limited analysis of benefits; concern description analysis with total cost Product Precise technical description using Description more in terms of benefits specification techniques such as value analysis Information/ Extensive search that extends to the Limited search – geographically and in Supplier search search for supplier terms of sources Proposal Formal, such as in a tender process if May be verbal solicitation large volumes or values involved Buying Step Business to Business Consumer Limited analysis with subjective and Supplier Made after extensive evaluation of anecdotal information influencing the selection objective information decision Order-routine Routine calculation of re-order points Not routine specification as well as time and place of delivery Post-purchase Extensive comparison made and performance feedback given, concern with quality Little basis for compari review management at sourceThree Buying Situations: 1. New task 2. Modified rebuy 3. Straight rebuyNew taskIn this situation, the buyer is buying the product for the first time. As the cost of the product orconsumption value becomes higher, more number of executives are involved in the process. The stagesof awareness, interest, evaluation, trial, and adoption will be there for the products of each potentialsupplier. Only the products which pass all the stages will be on the approved list and price competitionwill follow subsequently. • When 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.Modified rebuy
  • In this buying situation, there is a modification to the specifications of the product or specifications relatedto delivery. Executives apart from the purchasing department are involved in the buying decisions. Thecompany is looking for additional suppliers or is ready to modify the approved vendors list based on thetechnical capabilities and delivery capabilities. • 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.Straight rebuyIn this buying situation, only purchasing department is involved. Thet get an information from inventorycontrol department or section to reorder the material or item and they seek quotations from vendors in anapproved list. The "in-suppliers" make efforts to maintain product and service quality. The "out-suppliers"have to make efforts to get their name list in the approved vendors list and for this purpose they have tooffer something new or find out any issues of dissatisfaction with current suppliers and promise to providebetter service. • 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.The Buygrid Framework for Organizational Buying Situations
  • Major Influences on Business Buyers• 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.• 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.Explain organizational decision making processesMost of the information an industrial buyer receives is delivered through direct contactssuch as sales representatives or information packets. It is unlikely that an industrialbuyer would use information provided through a trade ad as the sole basis for making adecision.1. Problem recognition. The process begins when someone in the organization recognizesa problem or need that can be met by acquiring a good or service. Problemrecognition can occur as a result of internal or external stimuli. External stimulican be a presentation by a salesperson, an ad, or information picked up at a tradeshow.2. General need description. Having recognized that a need exists, the buyers mustadd further refinement to its description . Working with engineers, users, purchasing agents, and others,the buyer identifies and prioritizes important product characteristics. Armed with exten~ive productknowledge, this individual is capable ofaddressing virtually all the product-relatGd concerns of a typical customer. To alesser extent, trade advertising provides valuable iaformation to smaller or isolatedcustomers. Noteworthy is the extensive use of direct marketing techniques(for example, toll-free numbers and information cards) in cor.junction with manytrade ads. Finally, public relations plays a significant role through lle placementof stories in various trade journals.3. Product specification. Technical specifications come next. !his is usually theresponsibility of the engineering department. Engineers design several alternatives,depending on the priority list established earher.4. Supplier search. The buyer now tries [0 identify the most appropriate vendor. Thebuyer can examine trade directories, perfonn a computer search, or phone othercompanies for recommendations. Marketers can par:.icipate in this stage by contactingpossible opinion leaders and soliciting support or by contacting the buyer
  • directly. Personal selling plays a major role at this s~age .5. Proposal solicitation. Qualified suppliers are next invited to submit proposals.Some suppliers send only a catalog or a sales representative. Proposal developmen~is a complex task that requires extensive research and skilled wtiting andpresentation. In extreme cases, such proposals are comparable to complete marketingstrategies found in the consumer sector.6. Supplier selection. At this stage, the various proposals are screened and a choiceis made. A significant part of this selection is evaluating the vendor. One studyindicated that purchasing managers felt that the vendor was often more importantthan the proposal. Purchasing managers listed the three most important characteristicsof the vendor as delivery capability, consistent quality, and fair price.Another study found that the relative importance of different attributes varies withthe type of buying situations.For example, for routine-order products, delivery, reliability, price, and supplierreputation are highly importan~. These factors can serve as appeals in salespresentations and in trade ads.7. Order-routine specification. The buyer now writes the final order with the chosensupplier, listing the technical specifications, the quantity needed, the warranty,and so on.8. Performance .review. In this final stage, the buyer reviews the suppliers performance.This may be a very simple or a very complex process.
  • directly. Personal selling plays a major role at this s~age .5. Proposal solicitation. Qualified suppliers are next invited to submit proposals.Some suppliers send only a catalog or a sales representative. Proposal developmen~is a complex task that requires extensive research and skilled wtiting andpresentation. In extreme cases, such proposals are comparable to complete marketingstrategies found in the consumer sector.6. Supplier selection. At this stage, the various proposals are screened and a choiceis made. A significant part of this selection is evaluating the vendor. One studyindicated that purchasing managers felt that the vendor was often more importantthan the proposal. Purchasing managers listed the three most important characteristicsof the vendor as delivery capability, consistent quality, and fair price.Another study found that the relative importance of different attributes varies withthe type of buying situations.For example, for routine-order products, delivery, reliability, price, and supplierreputation are highly importan~. These factors can serve as appeals in salespresentations and in trade ads.7. Order-routine specification. The buyer now writes the final order with the chosensupplier, listing the technical specifications, the quantity needed, the warranty,and so on.8. Performance .review. In this final stage, the buyer reviews the suppliers performance.This may be a very simple or a very complex process.