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Copyright 2007 by South-Western, a division of Thomson Learning, Inc. All rights reserved.Developed by Cool Pictures and MultiMe dia Presentations

1

Chapter Three:

Organizational

Buying

Behavior

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Copyright 2007 by South-Western, a division of Thomson Learning, Inc. All rights reserved.Developed by Cool Pictures and MultiMe dia Presentations2

OrganizationalBuying Process

1. Problem

Recognition

2. General

Descriptionof Need

3. Product

Specifications

4. SupplierSearch

5. Acquisitionand Analysis

of Proposals

6. Supplier

Selection

7. Selection

of

Order Routine

8. Performance

Review

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Three Buying Situations(slide 1 of 4)

1. New task

2. Modified rebuy

3. Straight rebuy

4. System buy

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characteristics of organizational buyers

1. Consumer market is a huge market in millions of consumerswhere organizational buyers are limited in number for most of theproducts.

2. The purchases are in large quantities.

3. Close relationships and service are required.

4. Demand is derived from the production and sales of buyers.

5. Demand fluctuations are high as purchases from business buyersmagnify fluctuation in demand for their products.

6. The organizational buyers are trained professionals inpurchasing.

7. Several persons in organization influence purchase.

8. Lot of buying occurs in direct dealing with manufacturers.

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Participants in the Business Buying Process

Users

The persons who use the item. Say forsafety gloves the operators.

Initiators

The persons who request thepurchase. The safety officer mayinitiate the request for the purchase.

Influencers

Persons who held definespecifications.

In this case of safety gloves, the

safety officer may himself definespecifications.

If an industrial engineer is in theorganization, he may also beconsulted.

There can a different gloves fordifferent working situations andindustrial engineer may be moreaware of specific requirementsdue to his special nature of work -human effort engineering.

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Buyers

They are the person whoactually do the buying

transaction.

Gatekeepers

They control access topersonnel in a company.The receptionist, thesecretaries etc.

Deciders

People who decide on productrequireements and suppliers. Itis the final approval for product

specfications and suppliers'list.

Approvers

Persons who approve the

purchase. In the case of safetygloves, the personal managermay have the power toapprove.

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Three Buying Situations1. New Task (slide 2 of 4)

New taskproblem or need totally different

from previous experiences.

Significant amount of information required

Buyers operate in extensive problem solving

stage

Buyers lack well defined criteria.

Lack strong predisposition towardsolution

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Copyright 2007 by South-Western, a division of Thomson Learning, Inc. All rights reserved.Developed by Cool Pictures and MultiMe dia Presentations

9

Three Buying Situations2. Modified Rebuy (slide 3 of 4)

Modified rebuydecision makers feel

benefits to be derived by reevaluating

alternatives.

Most likely to occur when buyers displeased

with current suppliers performance

Buyers operate in limited problem-solving

stage. Buyers have well-defined criteria.

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Three Buying Situations3. Straight rebuy (slide 4 of 4)

Straight rebuyproblem or need is recurring

or continuing requirement.

Buyers have experience in area.

Require little or no new information

Buyers operate in routine problem-solving

stage

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Buying Decision Approaches

Casual purchasesinvolve no information search or analysis.

Routine low prioritydecisions more important and

involve moderate amount of analysis.

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Forces Influencing Organizational Buying

Behavior

Environmental

Forces

OrganizationalForces

Group

Forces

Individual

Forces

Organizational

Buying

Behavior

Economic Outlook:

Domestic & GlobalPace of Technological

Change

Global Trade Relations

Goals, Objectives, and

StrategiesOrganizational Position

of Purchasing

Roles, relative

influence, and patterns

of interaction of buying

decision participants

Job function, past

experience, and buying

motives of individual

decision participants

Projected change in

business conditions

can drastically alter

buying plan.

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Strategic Priorities in Purchasing

Becoming Business Partners,Not Just Buyers

Exploring New Value Frontiers:Its Not Just About Price

Putting Suppliers Inside:The Best Value Chain Wins

Pursuing Los-Cost Sources:A World Worth Exploring

Shift from administrative role to value-creating function that serves internal stakeholdersand provides competitive edge in market.

Focus on suppliers capabilities, emphasizingbusiness outcomes, total ownership costs, and

potential for long-term value creation.

Develop fewer and deeper relationships withstrategic suppliers and involve them in decision-making processes, ranging from new productdevelopment to cost-reduction initiatives.

Overcome hurdles imposed by geographicaldifferences and seek out cost-effective suppliersaround globe.

Source: Adapted from Marc Bourde, Charlie Hawker, and Theo Theocharides, Taking Center Stage: The 2005 ChiefProcurement Officer Survey, (Somers NY: IBM Global Services, May 2005), pp. 1-14. Accessed at http://www.ibm.com/bcs

on July 1, 2005.

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Questions for the Industrial Salesperson when

Assessing Group Forces

1. Which member takes part in the buying

process?

2. What is each members relative influence in

decision?

3. What criteria is important to each member in

evaluation process?

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Buying center composition

Changes with situations

Organizational buying is a

process not an act

Buyingcenter

participant

Identification ofneed

Establishment ofobjectives

Selectionofsuppliers

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Members of the buying center assume different roles

throughout the procurement process.

Clues for

Identifying

PowerfulBuying

Center

Members

1. Isolate the Personal Stakeholders

2. Follow the Information Flow

3. Identify the Experts

4. Trace the Connections to the Top

5. Understand Purchasing Role

SOURCE: Adapted from John R. Ronchetto, Michael D. Hutt, and Peter H. Reingen, Embedded Influence

Patterns in Organizational Buying Systems, Journal of Marketing53 (October 1989), pp. 51-62.

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Selective Processes in Information Processing

Selective exposure.

Selective attention.

Selective perception. Selective retention.

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Perceived Risk Components

1. Uncertainty about decision

outcomes.

2.Magnitude of consequencesassociated with making wrong

selection.

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Organizational buyers

behavior influenced by

environmental,

organizational, group,

and individual factors.

MajorElements of Organizational Buying Behavior

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Q-1

Capital Instruments has a major manufacturing plant that

falls within your new sales territory. On your initial visit

to this plant, you learn from a receptionist that the

purchasing department is in the very preliminary stages

of making a major purchase of the type of production

equipment that you sell. First, how would you predict the

likely composition of the buying center for this particular

purchase? Second, what questions could you ask to

determine the relative influence that differentorganizational members might exert on the buying

decision?

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Q-2

To remain competitive, Hindustan Equipment has

decided to adopt more sophisticated manufacturing

technology. The eight members of the firm who have

been actively involved in defining specifications and in

evaluating suppliers are evenly split over which way to

go. Four members are strong advocates for Supplier A;

four are committed to SupplierB. Describe the factors

that motivate individual decision makers during the

organizational buying process and explain why productperceptions and evaluation criteria often differ among

organizational decision makers.

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Q-3

Manoj recently completed the sales training program at DowChemical and has spent the past few months in Delhi, her assignedterritory. Today he plans to call on two accounts and then completea sales forecast for next quarter.

The first account is a small, high-tech firm that potentially could use

a Dow product directly in a production process. This productionprocess is new and the purchasing manager indicated that severalsubstitute products will likely receive consideration. What strategyshould Manoj follow in dealing with this customer?

The second account has been buying their chemical products fromAllied for the past three years. Of course, Manoj would like them to

change to Dow but the purchasing manager at this firm seemspreoccupied with other matters. What strategy should Manoj followhere? He wonders if it's even worth stopping by because he couldspend the time talking to an existing customer

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Q-4

Price is director of purchasing for a large high-tech firm thatproduces component parts and avionics systems for the aerospaceindustry. Boeing is one of the firm's largest customers. Mikeparticipates actively in the most important and strategic buyingdecisions that the firm faces. Outside of work, Prince's wife

complains that he is prone to making impulse purchases. Forexample, last Saturday, Mike went to a nearby mall to purchasesome golf balls and returned home with the golf balls and a newriding lawn mower. Describe how Prince's buying behavior differs inbuying products for the organization versus buying products forhimself or his family. Explore the factors that might shape the

particular evaluative criteria that Prince might emphasize whileparticipating in organizational buying decisions versus family buyingdecisions.

im 9e pp ch03

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