Organisational Buying Behaviour Flashcards
Organisational buyers
Organisational buyer behaviour refers to the buying behaviour of organisations that buy goods and services for use in the production of other products and products and services
Basic philosophy is similar to consumer markets:
An orientation to satisfy the needs of the market
Targeting of key sectors of the market
However the objectives,motivations and requirements of organisational buyers differ
Types of organisational buyers
Industry : they add value by transforming raw materials
Resellers: do not create value by providing extra service around raw materials. Resellers operate in commercial and consumer markets and are often referred to as distributors, wholesalers,jobbers and retailers
Government: generally consume what they buy; but use buying processes like organisations
Differences in Organisational and consumer markets : characteristics of demand
The demand for industrial goods and services is :
Derived from the demand for consumer goods and services
Relatively inelastic - price changes in the short run are not likely to significantly affect demand
More erratic because small increases or decreases in consumer demand can,over time for manufacturing plants and equipment
More cyclical
Without consumer demand,there is no organisation
Stages in the organisational buying process
Problem recognition ¥ Need description ¥ product specification ¥ Information search ¥ Suppliers search ¥ Call for proposal/tender ¥ Evaluation and selection of products and suppliers ¥ Purchase decision ¥ Use(trial) Maintain relationship ¥ Supplier evaluation
Three buying situations (need)
Straight re buy: automatic and regular purchase of familiar and understood products
Modified re buy: current supplier no longer appropriate so need to shop around
New buy: buyer seeks to fulfil a need never before addressed
Who participates in the organisational buying process
Most buying tends to involve more than one individual
A buying centre is a group that is involved in the buying decision
A buying centre is also known as a decision making unit in industrial buying situations
A DMU includes various stages that organisations and people pass through through when purchasing a physical product or service
DMU Initiators Buyers Deciders Influencers Approvers Users Gatekeepers
-Environmental influences
External
- Economic outlook : overall demand
- primary demand - market strength
- cost of money- impact of financing
- supply conditions- time and availability
- Rate of technological change : demand stability
- politics and regulation: legal concern
- competitive/industry situation
Organisational influences Internal
Objectives: quality/efficiency Organisational structure: level of centralisation Policies: abilities to make change Procedures: process rules Systems: compatibility issues
Personal and interpersonal influences
Education : complexity of offer/presentation
Job position: ability to make decision Personality Risk attitudes Authority : levels of spending authorisation Status : levels of spending authorisation Empathy : level of understanding Persuasiveness: negotiation skills Age:degree of flexibility
Maintaining relationships
Buyer seller relationships
Complex patterns of interaction
Marketers and purchases often more involved with supporting relationships than actually buying and selling
Links between buyers and sellers may become institutionalised
Supplier evaluation
Assessment of existing or new suppliers on the basis of their delivery,prices, production capacity, quality of management,technical capabilities, and service
Technical criteria : reliability, durability, performance, style/looks, comfort,delivery, convenience,taste
Economic criteria: price, value for money, running and lifecycle costs, value
Social criteria : status,social belonging, convention, fashion
Personal criteria : self image, risk reduction,morals, emotion
Differences between organisational buyers and consumers
Organisational buyers often:
- Purchase to meet specific business needs
- Emphasis on economic benefits
- Lengthy purchasing process and policies
- Involve large groups when making decisions
- Want a customised package
- Major problems if supply falls
- Hard to switch supplier
- Negotiate directly with suppliers
- Justify an emphasis on personal selling
Consumers often :
- Purchase to meet personal or family needs
- emphasis on psychological benefits
- but on impulse or minimal process
- purchase as individuals or as a family
- content with standardised product
- minor irritation if supply falls
- switching suppliers is easy
- accept the stated price
- Purchase from intermediaries
- justify an emphasis on mass or segmented communication
Differences in organisational and consumer markets: market dynamics
Compared to consumers,Organisational buyers are:
- fewer in number
- Larger in size
- Geographically concentrated
- Has an impact on marketing mix from segmentation, targeting , research
Differences between organisational and consumer markets : buyer behaviour
Compared with markets for consumer goods, organisational markets are cleared by:
- the use of professional buying specialists following prescribed procedures
- closer “buyer - seller” relationships
- presence of multiple individuals in the buying process
- more likely to buy on specification than price
Features and trends
1) just in time (JIT) : aims to minimise stocks by organising a supply system that provides materials and components as they are required
2) online purchasing : includes vertical and horizontal electronic market places
3) centralised purchasing : involves bulk buying from a central office
4) relationship marketing : the process of creating, maintaining, and enhancing strong relationships with customers and other stakeholders
5) reverse marketing : the process whereby the buyer attempts to persuade the supplier to provide exactly what the organisation wants
