Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Gilbert A. Churchill, Jr. J. Paul Peter Chapter 7 Organizational Buying Behavior Marketing

A Comparison of Organizational Buyers and Consumers Figure 7.1 Slide 7-1 Characteristic Number of buyers in market Few Size of Purchases Organizational Buyers Consumers Interdependence between buyer and seller Number of people involved in purchase decisions Source: Based in part on information in Philip R. Cateora, International Marketing, 9th ed. (Burr Ridge, Ill: Irwin, 1996) chapter 10. Decision Criteria Large Primarily Rational Strong Many Rational and emotional Few Weak Small Many

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Categories of Organizational Buyers Slide 7-2 IntermediariesProducers Government Agencies Other Air Force Park Service New York City Harvard University St Mary’s Hospital United Way Crown Books Campus Store Amazon.com General Motors Boeing

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Business Classification Systems Slide 7-3 StandardIndustrialClassificationCode Thomas Register US Government System Private System

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Demand Principles Slide 7-4 Derived Demand Accelerated Principle Demand for organizational goods that is dependent on the demand for consumer goods. A small change in consumer demand for a product can result in a large change in the demand for organizational goods and services to produce the product.

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 The Organizational Buying Process Slide 7-5 Figure 7.5 Assign Responsibility for Making a Purchase Decision Recognize a Need or Problem Search for Alternatives Evaluate and Select an Alternative Evaluate Performance of Product and Supplier Make a Purchase

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Types of Organizational Purchases Slide 7-6 Table 7.2 Purchase Type Straight rebuy Complexity Modified buy New task purchase Short Time Frame Number of Suppliers Applications Medium Long Simple Moderate Complex One Few Many Frequently purchased routine products, such as printer cartridges Routine purchase that has changed in some way, such as air travel (new fares, flights, destinations) Expensive, seldom- purchased products, such as new production equipment

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Functional Areas and Their Key Purchasing Concerns Slide 7-7 Table 7.3 Functional Area Design and development engineering Production Quality Control Key Concerns in Purchasing Decision Making Name reputation of vendor; ability of vendors to meet design specifications Delivery and reliability of purchases Sales/Marketing Maintenance Finance/accounting Purchasing Impact of purchased items on marketability of the company’s products Compatibility with existing facilities, maintenance service and installation arrangements Effects of purchases on cash flow, financial statements and existing budgets Obtaining lowest possible price at acceptable quality levels; maintaining good relations with vendors Assurance that purchased items meet prescribed specifications

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 Approaches to Organizational Buying Slide 7-8 Inspection Buying Buyer Sampling Buying Description Buying Contract Buying Competitive Bidding Fruits & Vegetables Bolts New Building Government Contracts Office Space

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1998 The Buying Center Slide 7-9 Figure 7.8 Initiator Identifies Need User Uses Product Influencer Affects Buying Decision Buyer Has Responsibility to Select Vendor and Negotiate Terms Gatekeeper Controls Information Flow Decider Has Expertise or Power to Make or Approve Selection