Dr. S. Borna MBA 671

ObjectivesObjectives ä How Business & Consumer Markets Differ ä Organizational Buying Situations ä Participants in the Business Buying Process ä Major Influences on Organizational Buyers ä Business Buyer Decision Making ä Institutional & Government Buying

OrganizationalBuyers Manufactures Retailers Banking, Finance and Insurance Construction Wholesalers Farms, Forestry, Fisheries Communications Mining and Mineral Operations Service Governmentalunits BUSINESS ORGANIZATIONS

Industrial Buying -a definition ä Industrial buying refers to the buying activities of organizations that purchase products and services for further production, for use in further production, for use in operation, and for resale. operation, and for resale.

A Micro View of Organizational Buying Behavior ä Decision-making process that organizations go through when deciding what to buy.

A Macro View of Organizational Buying Behavior 1.Classification of organizational customers organizational customers and their characteristics. and their characteristics.

2. Classification of goods and services purchased and services purchased by organizational by organizational customers and customers and marketing considerations marketing considerations involved in selling them. involved in selling them.

Differences between organizational and consumer markets ä Derived demand ä Relatively inelastic demand ä More erratic ä More cyclical Demand characteristics

Buyer- Seller Relationships ä Use of professional buying specialists following prescribed procedures ä Close buyer-seller relationships ä Presence of multiple buying influences

Business vs. Consumer Markets ä Fewer buyers ä Larger buyers ä Close supplier-customer relationship ä Geographically concentrated ä Derived demand ä Inelastic demand ä Fluctuating demand

Business vs. Consumer Markets ä Professional purchasing ä Several buying influences ä Multiple sales calls ä Direct purchasing ä Reciprocity ä Leasing

Buying Decisions Made By Business Organizations Straight Rebuy Straight Rebuy Modified Rebuy Modified Rebuy New Task New Task

Participants in the Business Buying Process Gatekeepers Initiators Buyers Influencers Deciders Users Approvers

Who makes organizational purchase decisions? Who makes organizational purchase decisions? who is the decision-making unit? who is the decision-making unit? buying center individual

Key Questions to Ask 1. Which individuals in the buying center are buying center are responsible for my responsible for my products? products?

2. What is the relative influence of each member influence of each member in this group? in this group? 3. What are the decision criteria of each member? criteria of each member? Key Questions

Major Influences on Industrial Buying Behavior Level of demand Economic outlook Interest rate Rate of techno- logical change Political and regulatory developments Competitive developments Social responsi- bility concerns Environmental Objectives Policies Procedures Organizational structures Systems Organizational Interests Authority Status Empathy Persuasive- ness Interpersonal Age Income Education Job position Personality Risk attitudes Culture Individual Business Buyer

Major Factors influencing Business Buyers Business Buyers Economic Economic Environmental Environmental Organizational Organizational Interpersonal Interpersonal Personal Personal

Organizational Factors: ä Organizational orientation centralization, policies, procedures, decentralized purchasing of small items etc. etc.

Interpersonal Factors (Note: buying center and type of group dynamics type of group dynamics taking place during the buying decision process) taking place during the buying decision process) authority, status, interests authority, status, interests of group members. of group members.

Individual Factors: Education, Age, Cultural Background individual buyers needs companies needs job security money overlap in needs growth innovation

Examples of Individual & Org. Goals Personal Goals: Wants a feel of power, seeks personal pleasure, desires job security, wants respect. Wants a feel of power, seeks personal pleasure, desires job security, wants respect. Organizational Goals: Control costs, few breakdowns of products, cost within budget limit. Control costs, few breakdowns of products, cost within budget limit.

Organizational Purchase Decision- Making Process

Problem Recognition General Need Description Product Specification Supplier Search Proposal Solicitation Supplier Selection Order Routine Specification Performance Review PostPurchase Purchase InfoSearch/Eval NeedRecognition (Buy Phases)

Buy classes New task ModifiedRebuyStraightRebuy buyphases 1.Need Recog. 2.Need Desc. 3.Product Spec. 4.Supplier Search 5.Proposal Soli. 6.Supplier selec. 7.Order routine specification specification 8. Performance Review Review Yes Maybe No Yes Yes Yes Yes Maybe No yes Maybe No Yes Yes Yes Combining buy phases with buy classes

ReviewReview ä How Business & Consumer Markets Differ ä Organizational Buying Situations ä Participants in the Business Buying Process ä Major Influences on Organizational Buyers ä Business Buyer Decision Making ä Institutional & Government Buying