organisational buyer behaviour Chapter 3 Consumer and organisational buyer behaviour

Objectives After studying this chapter, you should be able to: Understand the different motivations of consumer and organisational buyers. Formulate strategies for approaching consumer and organisational buyers. Recognise the importance of relationship management.

Differences between consumer and organisation buying Fewer organisational buyers: 80% of output will be sold to perhaps 10-15 organizations. Close, long-term relationships between organisational buyers and sellers: ın consumer markets customers and manufacturrers rarely meet and for many supermarket products, brand switcing is common. Organisational buyers are more rational: decisions will be made on economic criteria. Organisational buying may be to specific requirements: buyers determine product specifications and sellers tailor their product offerings to meet them. Reciprocal buying may be important in organisational buying: demand concessions in return for placing the order.

Consumer buyer behaviour For both types of buyer, an understanding of customers can only be obtained by answering the following five questions: 1. Who is important in the buying decision? 2. How do they buy? 3. What are their choice criteria? 4. Where do they buy? 5. What do they buy?

Who buys? Impulse buying 1. Initiator: the person who begins the process of considering a purchase. Information may be gathered by this person to help the decision. 2. Influencer: the person who attempts to persuade others in the group concerning the outcome of the decision. Influencers typically gather information and attempt to impose their choice criteria on the decision. 3. Decider: the individual with the power and/or financial authority to make the ultimate choice regarding which product to buy. 4. Buyer: the person who conducts the transaction: who calls the supplier, visits the store, makes the payment and effects delivery. 5. User: the actual consumer/user of the product.

How they buy

The Buyer Decision Process Need Recognition Occurs when the buyer recognizes a problem or need triggered by: Internal stimuli External stimuli The buying process starts long before the actual purchase and continues long after. In fact, it might result in a decision not to buy. Therefore, marketers must focus on the entire buying process, not just the purchase decision. Internal stimuli when one of the person’s normal needs—for example, hunger or thirst—rises to a level high enough to become a drive External stimuli. For example, an advertisement or a discussion with a friend might get you thinking about buying a new car.

The Buyer Decision Process Information Search Sources of Information Personal sources—family and friends Commercial sources—advertising, Internet Public sources—mass media, consumer organizations Experiential sources—handling, examining, using the product

The Buyer Decision Process Evaluation of Alternatives How the consumer processes information to arrive at brand choices Note to Instructor This Web link brings you to PriceGrabber—an online comparison shopping site. What is interesting on this site is on the left hand side, you can search by features. These features help a consumer know how to evaluate a product. For instance, this example is laptop computers and one can search by processing speed, processor type, screen size, etc.

The Buyer Decision Process Purchase Decision The act by the consumer to buy the most preferred brand The purchase decision can be affected by: Attitudes of others Unexpected situational factors

The Buyer Decision Process Post-Purchase Decision The satisfaction or dissatisfaction that the consumer feels about the purchase Relationship between: Consumer’s expectations Product’s perceived performance The larger the gap between expectation and performance, the greater the consumer’s dissatisfaction

The Buyer Decision Process Post-Purchase Decision Customer satisfaction is a key to building profitable relationships with consumers—to keeping and growing consumers and reaping their customer lifetime value

Organizational Buyer Behavior Three elements: 1.STRUCTURE Decision making Unit or Buying center is all of the individuals and units that participate in the business decision-making process Initiators: those who begin the purchase process Users: those who actually use the product Influencers: provide information Buyers: have authority to execute the contractual arrangements Deciders: have the authority to select the supplier Gatekeepers: those who control the information flow

Organizational Buyer Behavior 2. process Figure 3.5 The organisational decision-making process (buy phases)

Organizational Buyer Behavior The Buying Process Problem recognition occurs when someone in the company recognizes a problem or need Internal stimuli Need for new product or production equipment External stimuli Idea from a trade show or advertising

Business Buyer Behavior The Buying Process General need description describes the characteristics and quantity of the needed item Product specification describes the technical criteria Value analysis is an approach to cost reduction where components are studied to determine if they can be redesigned, standardized, or made with less costly methods of production

Business Buyer Behavior The Buying Process Supplier search involves compiling a list of qualified suppliers Proposal solicitation is the process of requesting proposals from qualified suppliers Note to Instructor This Web link brings the class to IDES which is a search engine for suppliers. The current page shows the vast number of plastics suppliers.

Business Buyer Behavior The Buying Process Supplier selection is the process when the buying center creates a list of desired supplier attributes and negotiates with preferred suppliers for favorable terms and conditions Order-routine specifications is the final order with the chosen supplier and lists all of the specifications and terms of the purchase Note to Instructor This Web link brings you to staples.com, a leading supplier of office supplies for business and end consumers. It would be interesting to ask students what Staples can do to market themselves more effectively to businesses so they become the sole supplier of office products.

Business Buyer Behavior The Buying Process Performance review involves a critique of supplier performance to the purchase terms

Organizational Buyer Behavior 3. Content This aspect of organisational buyer behaviour refers to the choice criteria used by members of the DMU to evaluate supplier proposals. Table.3.2

Factors affecting organizational buyer behaviour The buy class: A new task occurs when the need for the product has not arisen previously so that there is little or no relevant experience in the company, and a great deal of information is required. A straight re-buy, on the other hand, occurs where an organisation buys previously purchased items from suppliers already judged acceptable. Routine purchasing procedures are set up to facilitate straight re-buys. The modified re-buy lies between the two extremes. A regular requirement for the type of product exists and the buying alternatives are known, but sufficient change has occurred to require some alteration of the normal supply procedure.

The product type Products can be classified according to four types: 1. Materials to be used in the production process, e.g. steel. 2. Components to be incorporated in the finished product, e.g. alternator. 3. Plant and equipment. 4. Products and services for maintenance, repair and operation (MROs), e.g. spanners, welding equipment and lubricants.

Importance of purchase to buying organisation A purchase is likely to be perceived as important to the buying organisation when it involves: large sums of money, when the cost of making the wrong decision, for example in lost production, is high and when there is considerable uncertainty about the outcome of alternative offerings. In such situations, many people at different organisational levels are likely to be involved in the decision and the process is likely to be long, with extensive search and analysis of information.