Organizational Buying Behaviour
These are marketing intermediaries such as wholesalers and retailers who buy finished goods for resale at a profit. ? Government markets This comprises of national and local governments, seeking to provide the public with education, water, energy, national defense, road systems and health care. ? Institutional markets o Organizations that seek to achieve charitable, educational, community or other non-business goals make up institutional markets. o They include churches, hospitals, museums, libraries, universities and charitable organizations. 2. DIFFERENCES BETWEEN ORGANIZATIONAL AND PERSONAL BUYING.
These can be compared on the unique characteristics of organizational buying. a) Business markets have fewer buyers than consumer markets. b) In business markets, there are a few large buyers c) There is close supplier-customer relationship in business market due to o Smaller customer base o Contracts go to suppliers who co-operate with the buyers on technical specifications and delivery requirements o Suppliers are expected to attend special seminars organized by buyers so as to be familiar with the buyers’ quality specifications. d) Geographically concentrated buyers ) Derived demand The demand for business goods is ultimately delivered from the demand for consumer goods f) Inelastic demand The total demands for industrial goods are not much affected by the changes in the environment. g) Fluctuating demand Demand for organizational goods tend to be more volatile than the demand for consumer products. o This is especially true for the demand of new plant and equipment o A given percentage increase in consumer demand can lead to a larger percentage increase in the demand for plant and equipment necessary for additional output. h) Professional purchasing
Business goods are purchased by trained purchasing agents, who must follow the organizations, o Purchasing policies o Constraints o Requirements. i) Several buying influences o More people typically influence business buying decisions than in consumer buying decisions. o Buying committees consisting of technical experts and even senior managers are common in the purchase of major goods. j) Direct purchasing Business buyers often buy from manufacturers rather through intermediaries, especially those items that are technically complex and/or expensive. k) Reciprocity Business buyers normally buy from suppliers who buy from them. ) Leasing. o Many industrial buyers lease their equipment instead of buying it. o Advantages – Conserves capital – Gets sellers latest products – Receives better services – Gains some tax advantages. 3. BUYING SITUATIONS OR TYPES OF BUYING DECISIONS. Three types of buying situations have been identified;
a) Straight Rebuy ? The purchasing department orders on a routine basis e. g. office suppliers. ? The buyer chooses from the suppliers on its approved list, giving weight to past satisfaction with the various suppliers. b) Modified Rebuy The buyer wants to modify the: – Product specification, Prices, – Delivery requirements and – Other terms This usually involves additional discussions and more participants on both the buyer and the seller’s side. c) New task Rebuy ? A product is being bought for the first time. ? The greater the cost and/or risks, the lager will be the number of decision participants and the greater their information gathering. The time take to make a decision also increases. ? This situation offers the marketer the greatest opportunity and challenge. ? The marketer tries to reach as many key buying influencers as possible and provides helpful information and assistance. Because of the complicated nature of selling, many companies are using missionary sales force consisting of their best sales people. 4. BUYING ROLES/PARTICIPANTS IN THE ORGANIZATIONAL BUYING. I. e. the decision making unit (DMU) or buying centre. a) What is the buying center? It is composed of all those individuals and groups who participate in the purchase-decision process. It includes members of the organizations who play any of the following roles in the purchase-decision process. b) Buying roles i) Initiators – Those who suggest that an item be purchased – They may be users or other organizations. i) Users – Those who will use the product. – In most cases, they initiate the buying, write proposals and help define product specifications/requirements. iii) Influencers – Are persons who influence the buying decisions – They help define product specifications and provide information for evaluating alternatives. – Technical personnel are important as influencers. iv) Deciders Are the persons who have the power to decide on product requirements and/or suppliers. v) Approvers Are the persons who must authorize the proposed actions of deciders or buyers. vi) Buyers
Are persons with formal authority for selecting the supplier and arranging terms of purchase. vii) Gate-keepers Are persons who have the power to prevent information from reaching members of the buying center e. g. – Purchasing agents – Receptionists and – Telephone operators. They may prevent sales persons from talking to users or deciders. 5. BUYING DECISION PROCESS Eight stages in the buying decision process have been identified by marketers. These are described as:- i) Problem recognition The buying decision process starts when someone in the company recognizes a problem or need. This may arise from, ?
Internal stimuli e. g. o The company decides to develop a new product and needs new equipment o There may be a machine break-down which may require replacement or new parts o Purchased material may turn out to be unsatisfactory and the company needs another supplier. ? External stimuli e. g. o New ideas from trade shows. ii) General need description ? Buyer determines the general characteristics and quality of the needed item. ? He may not be aware of different product characteristics ? The marketer should help the company to define its needs. iii) Product specifications
At this stage, item’s technical specifications are developed. The decision makers may use of product value analysis. They may ask such questions as; o Does the use of the item contribute value? o Is its cost proportionate to its usefulness? o Can it be found elsewhere? iv) Supplier search Sources of suppliers may include ? Trade directories ? Business directories ? Word of mouth ? Experience. v) Proposal solicitation In this stage, the buyer invites qualified suppliers to submit proposals. vi) Supplier selection In selecting suppliers, decision makers, may use of vendor analysis.
The following attributes, may be used; Delivery capability; Quality ; Price;Repair service;Technical capability;Performance history;Reputation;Financial position. vii) Order routine specification Buyer now writes final order with the chosen suppliers, listing – Technical specification – Quantity needed – Expected time of delivery – Return policies, e. t. c. viii) Performance review Buyer reviews performance of a particular supplier(s) The buyer can contact end users and ask for their evaluation and then rate suppliers on several criteria. The review may lead the buyer to; Continue, – Modify or – Drop the supplier. 6. FACTORS INFLUENCING ORGANIZATIONAL BUYING DECISIONS. a) Environmental factors E. g. – Level of primary demand – Cost of money – Technology – Political/legal forces – Competitive developments – Organizational factors: Objectives, Policies, Procedures – Organization structure, e. t. c. b) Interpersonal factors Participants in their buying center have different statuses, authority, persuasiveness, e. t. c. c) Individual factors Each individual in the buying centre has; Personal motivators; Perceptions; Education; Personality, e. t. c.