The document discusses organizational buying behaviour and the buying process. It begins by outlining the important questions about types of customers, factors considered in evaluations, who is involved in decisions, and changes occurring in buying. It then covers the types of customers that organizations buy from, including producers, resellers, government agencies, and institutions. The rest of the document details the organizational buying process, factors that influence decisions, and trends in organizational buying like increased importance of purchasing agents and supply chain management.

1. Buying Behaviour and the Buying
Process
Chapter 4

2. Important Questions Answered
 What are the different types of customers?
 How do organisations make purchase decisions?
 Which factors do organisations consider when evaluating
products and services?
 Who is involved in the buying decision?
 What should sales people do in different types of buying
situations?
 Which changes are occurring in organisational buying,
and how will these changes affect salespeople?
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3. “A supplier who does a great job at our France
location can use the reputation if trying to
earn business in Iowa.”
~Marvin Wagner

4. Successful salespeople
 Successful salespeople always know their
customers, needs of the customers and all those
who are involved in making the purchase
decisions.
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5. Types of Customers
 Producers
 OEM Purchases
 End-user Purchases
 Resellers
 Government Agencies
 Institutions
 Consumers
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6. Producers
 Producers buy products and services to manufacture
and sell their products and services to customers
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7. OEM Purchases
 Original Equipment Manufacturers (OEM) purchase
goods to use in making their products.
 Salespeople selling OEM products need to
demonstrate that their products help their customers
produce products that will offer superior value.
 OEM usually purchase in bulk and usually long-term
relationships develop between customers and OEMs
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8. End-user Purchases
 Goods and services to support their own production
and operations
 Capital Equipment are major purchases like mainframe
computers and machine tools that are used by the manufacturers
for years.
 MRO (Maintenance, Repair and Operating) supplies include
consumables and replacement parts of machinery.
 Services include telephone, internet and employment agencies
etc. to support the manufacturing operation.
Maintenance, repair,
and operating (MRO) Capital equipment
supplies include paper items are major
towels and replacement purchases
parts for machinery.
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9. Resellers
 Resellers buy finished products/services to sell to
businesses and consumers.
 Dell Computer makes OEM buying decisions when it purchases
microprocessors for its computers, acts as an end user when it
buys a machine to bend sheet metal for the cases that house the
computers, and func­tions as a reseller when it buys software to
resell to its computer customers when they place orders.
Turnover is how
Profit margin is how quickly an item sells,
much a reseller makes and how much effort it
on each sale. takes to sell.
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10. Government Agencies
 Governments are usually the largest customers for goods
and services. Every Government (Federal, Local) has
rules and regulations that the suppliers need to follow to
be able to be eligible as a supplier to the Government
Agencies. Effective selling to government agencies
requires a thorough knowledge of their unique
procurement procedures and rules. Salespeople also need
to know about projected needs so they can influence the
development of the buying specifications
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11. Institutions
 Institutions can be Public as well Private such as
churches, hospitals, and colleges.
 Usually the purchasing rules and regulations of the
institutions are more rigid as compared to the rules
and regulations of the Governments.
 Some manufacturers deal with Institutions and
resellers at the same time. For this purpose they keep
two different sales forces for the different types of
clients.
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12. Consumers
 Consumers buy products and services for use by
themselves or by their families.
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13. Organisational Buying and Selling
 Selling to Organisations is more complex than selling to
Consumers.
 Complexity of the Organisational Buying Process
 Derived versus Direct Demand
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14. Complexity of the Organisational
Buying Process
 Organisations use highly trained and knowledgeable
purchasing agents to make these decisions and Often
extensive evaluations and negotiations are involved in
this process.
 Purchasing agents
 Evaluations and negotiations
 Complexity is increasing
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15. Derived Versus Direct Demand
 Direct demand
Selling to consumers is easier as the only
the needs of consumers/families are to be considered
 Derived demand
Organisational selling often requires
information about the customers of the customer
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16. How do Organisations Make Buying
Decisions?
 Steps in the Buying Process: There are eight steps
involved in organisational buying. Very often all the
eight steps are not followed during organisational buying
process.
 Recognition of a need
 Definition of the product-type needed
 Development of detailed specifications
 Search for qualified suppliers
 Acquisition and analysis of proposals
 Evaluating proposals and selecting a supplier
 Placing an order and receiving the product
 Evaluating product performance
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17. Recognition of a need
 The most important step in buying is to
recognise the need of having something. This
could be triggered by the employees of the
customer company and/or the salespersons of the
vendor company. Salespeople often trigger the
buying process by demonstrating how their
products can improve the efficiency of the
customer's operation.
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18. Definition of the product-type
needed
 The members of the organisation develop a
general approach to solve the problem and make a
decision to purchase a particular product/service.
The problem solution is defined in terms of
purchasing a product or service.
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19. Development of detailed
specifications
 The specifications of the product needed are
specified and put in writing.
The specifications for the product needed to solve
the problem are pre­pared. Potential suppliers will
use these specifications to develop proposals. The
buyers will use them to objectively evaluate the
proposals.
 Steps 2 & 3 offer a big opportunity to the
salespersons.
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20. Search for qualified suppliers
 The customer may simply contact previous
suppliers or go through an extensive search
procedure
 Salespersons are contacted, customers of the
suppliers are contacted. Word of mouth, business
magazines, Internet all are used nowadays
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21. Acquisition and analysis of proposals
 Various companies submit proposals that are
often prepared with the help of the representatives
of the customer company.
 Qualified suppliers are asked to submit
proposals. Salespeople work with people in their
company to develop their proposal.
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22. Evaluating proposals and selecting a
supplier
 The written proposals are evaluated; the best
possible supplier is selected. The customer
evaluates the proposals. After selecting a
preferred supplier, further negotiations may take
place concerning price, delivery, or specific
perfor­mance features.
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23. Placing an order and receiving the
product
 Once the order is placed, the supplier supply the
goods according to the agreement. The order goes to
the supplier, who acknowledges receipt and commits
to a delivery date. Eventually the product is shipped
to the buying firm, which inspects the received
goods and then pays the supplier for the product.
During this step salespeople need to make sure the
paperwork is correct and their firm knows what has
to be done to satisfy the customer's requirements.
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24. Evaluating product performance
 Formally/Informally the items/services received
are evaluated by the persons concerned.
Salespeople play an important role in this step.
They need to work with the users to make sure the
product performs well. In addition, salespeople
need to work with purchasing agents to ensure that
they are satisfied with the communi­cations and
delivery.
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25. Creeping Commitment
 When the consumers become used to a particular
course of action, it becomes kind of a routine to
purchase . As decisions are made at each step, the
range of alternatives narrows; the customer becomes
more and more committed to a specific vendor. Thus it
is critical that salespeople be very involved in the ini­
tial steps so they will have an opportunity to participate
in the final steps.
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26. Types of Organisational Buying
Decisions
 New tasks: When a particular product/service is needed
for the first time.
 Straight re-buys: When the same product is bought from
the same customer when the need arouse previously.
 Modified re-buys: When the customer has purchased a
product/similar one but wishes to have new information
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27. Who Makes the Buying Decision?
 The group of people involved in making a decision
about buying a new product or a modified one is
called Buying Centre. These people are usually the
 Users
 Influencers
 Gatekeepers
 Deciders
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28. Users
 People who will ultimately be involved in using the
product. They often have considerable influence in the
early and late steps of the buying process-need
recognition, product definition, and post purchase
evaluation. Thus users are particularly important in new
task and modified re buy situations. Salespeople often
attempt to convert a straight re buy to a modified re buy
by demonstrating superior product performance or a new
benefit to users.
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29. Influencers
 People from inside/outside the organisation who provide
information during the buying process. These members
of the buying center may provide details on product
specifications, criteria for evaluating pro­posals, or
information about potential suppliers.
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30. Gatekeepers
 They control the flow of information and may limit the
alternatives considered. Purchasing agents often playa
gate keeping role by determining which poten­tial
suppliers are to be notified about the purchase situation
and are to have access to relevant information.
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31. Deciders
 These are the persons who make the final decision about
the purchase. Determining who actually makes the
purchase decision for an organiza­tion is often difficult.
For straight re buys the purchasing agent usually selects
the vendor and places the order. However, for new tasks
many people influence the decision, and several people
must approve the decision and sign the purchase order.
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32. Importance of Hospital Buying Center
Hosp.Admin
Engineers
Physicians
P. Agents
Nurses
Steps in Buying Process
Need recognition (step 1) H M L L L
Definition of product type (step 2) H H M M L
Analysis of proposal (step 5) H M M H L
Proposal evaluation and supplier
H L H L M
selection (step 6)
Legend:
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P. Agents = Purchase Agents; H = High; M = Moderate; and L = Low

33. Supplier Evaluation and Choice
 At various steps of the buying process, members of the
buying centre evaluate the buying process and the
results of the product purchased.
 The needs of the organisation and the decision makers
affect the evaluation and selection of products and
suppliers
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34. Factors influencing
Organisational Buying Decisions
7.34

35. Organisational Needs and Criteria
 Economic Criteria: To increase profit organisations take
sophisticated approaches to evaluate cost of equipment.
 Life-cycle costing (total cost of ownership)
 Quality Criteria
To improve profitability quality is to be maintained;
 TQM approach is adopted.
 What are organizational buyers looking for?
 Service Criteria
Nowadays they Organisations want the suppliers to help
them solve the problems.
 Value analysis 35

36. Life Cycle Costing
7.36

37. Individual Needs of Buying Centre
Members
 Types of Needs: Buying centre members wish to satisfy
their own goals and aspirations. Salespersons can meet
these through their strategies.
 Financial security
 Self-esteem
 Recognition
 Risk Reduction: Buying centre members try to reduce
the risk of losing benefits
 Collect additional information
 Develop supplier loyalty
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 Spread the risk

38. Vendor Analysis
Organisational buyers often use formal methods to
analyse the vendors to be sure that their needs are
satisfied. When using this procedure, the buyer rates the
supplier and its products on a number of criteria such as
price, quality, performance, and on-time delivery.
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39. Personal, Psychological, and Social
Forces that Influence Consumers’
Buying Behavior
Consumer buying decision process
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40. Trends in Organisational Buying
 In today’s changing world the technology, competition
and customer demands are increasing so are the costs
of the raw material.
 These challenges force the Organisations to adopt
strategies to survive in the current situation.
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41. Trends in Organisational Buying
 Increasing Importance of Purchasing Agents
 Centralised Purchasing
 Global Sourcing
 Outsourcing
 Supply Chain Management
 The Internet and Business-to-Business Selling
 Long-term Customer-Supplier Relationships
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42. Increasing Importance of Purchasing
Agents
 Companies improve the status of their directors
to reflect the increasing importance of this
function.
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43. Centralised Purchasing
 Purchasing is becoming more centralized. Rather
than having each manufacturing facility contract for
supplies to meet its own production needs, more
purchasing is done at a central location, such as
corporate headquarters. Through centralization,
purchasing agents can become specialists,
concentrating on partic­ular items and developing
extensive knowledge about the uses, specifications,
and suppliers for those items.
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44. Global Sourcing
 To improve the quality and profitability the
material is purchased from any where in the world
– no restriction on country boundaries
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45. Outsourcing
 Organisations try to purchase goods and services
from efficient suppliers.
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46. Supply Chain Management
 This is a set of programmes undertaken to
increase the efficiency of the distribution channel
 Efficient Consumer Response (ECR) systems.
 Logistics
 Managing inventory while controlling costs
 Just-in-time ( JIT ) inventory control system
 Material requirements planning ( MRP )
 Automatic replenishment ( AR)
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47. The Internet and Business-to-
Business Selling
 Using up-to-date techniques in selling and
purchasing improve the quality of products and
services produced for the end-user
 Extranets
 Support for salespeople rather than replacement
 Electronic data interchange (EDI)
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48. Long-term Customer-Supplier
Relationships
 This helps both the customer and the supplier to
survive better in today’s difficult business
environment; keeping in mind that the satisfaction
of the customer is the only way of retaining the
orders as well as cheaper material does not mean
all for the Customer
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49. 49

50. End of Chapter 4

51. Thank you