1. Understanding Organizational Buying Behaviour

2. Consumer or Organizational Products
Why was the product purchased ?
For use in the operation of a business or organization.
To manufacture other products
For resale to others
For personal or household use
ORGANIZATIONAL PRODUCT
CONSUMER
PRODUCT 1 1 3 3 2

3. Some Examples of Organizational Buying
Paper cups by McDonald's
Computer chips by Toshiba
Concrete by Local Authorities
Oil by Electricity Generators
Fertiliser by Farmers
Accountancy services by Ltd. Companies
TV’s by Comet or Dixons 8 8 10 10 9

4. Characteristics of Organizational Buying
Nature and size
of customers
Complexity
of buying
Economic
and technical choice
criteria
Buying to specific
requirements
Organizational
Purchases
Risks
Reciprocal
buying
Derived demand
Negotiations

5. Decision-making Unit Decider (Decision Maker) Initiator Buyer
Gatekeeper
Decider
(Decision
Maker)
User
Influencer 15 15 16 17 17

6. Decision-making Unit Initiators begin the purchase Gatekeepers
Process.
Gatekeepers
control the flow
of information to the
buying centre. Purchasing
department Staff frequently
fill the role but it could be
any member
of the
organization.
Buyers
Have the authority
to execute the contractual
arrangements
Deciders
(Decision Makers)
have the authority
to approve
the purchase.
Users
actually use the
product. They may
be the one who initiates
the purchase process
and may develop the
product
specification.
Influencers
supply information
and advice. Outsiders
such as consultants
sometimes perform
the role. 15 15 17 17 16

7. Decision-making Unit Implications.
Need to identify key actors in buying decisions.
Composition and roles played in the decision-making unit have implications for communications – target audience and message.

8. Buy phases: the organizational decision-making process
Recognition of a problem (need)
Determination of specification and quantity of needed item
Search for and qualification of potential sources
Acquisition and analysis of proposals
Evaluation of proposals and selection of supplier(s)
Selection of an order routine
Performance feedback and evaluation

9. awareness of its capability to keep employees in touch
Microsoft
Microsoft creates
awareness of its capability
to keep employees in touch
with one another.

10. Organizational Decision-making Process
Implications.
Marketing advantage can be gained by:
1. Influencing need recognition.
2. Involvement in the determination of the characteristics of the needed product.

11. Choice Criteria In all cases PERCEPTION is critical. Types. Economic.
e.g. price, return on investment.
Technical.
e.g. reliability, delivery.
Social (Organizational).
e.g. status, office politics.
Personal.
e.g. personal risk reduction, liking/disliking.
In all cases PERCEPTION is critical.

12. Choice Criteria Implications.
1. Marketing and sales appeals may need to be modified to different members of the decision-making unit.
2. Choice criteria may change over time as circumstances change. Suppliers may need to change their offerings and communications as a result.

13. Mercedes reduces perceived risk in this advertisement for its trucks.
© Daimler AG. Kindly reproduced with the permission of Mercedes–Benz UK Ltd.

14. Influences on organizational purchasing behaviour
Buy class
Product type
straight re-buy
modified re-buy
new task
product constituents
product facilities
MROs
Organizational buyer
Importance of purchase

15. Buy Class Time taken for decision
New
Task
Modified
Rebuy
Time taken for decision
Straight
Rebuy
No. of people involved in buying centre 14 14 16 16 15

16. New Task Buying
The organization makes an initial purchase of an item to be used to perform a new job or to solve a new problem. Often this involves development of specifications for products and suppliers as well as procedures for future purchases. High information requirement from many suppliers.
Example: new IT facility. 11 11 13 13 12

17. Modified Rebuy
When a new task purchase is changed on repeat purchases. The buyer may require faster delivery, lower prices or modified specifications. Regular suppliers become more competitive and new suppliers may be included in the selection. Moderate amounts of information are required.
Example: upgrading office software. 12 12 14 14 13

18. Straight Rebuy
The buyer purchases the same products again routinely under approximately the same terms of sale. Suppliers are familiar, have provided satisfactory service in the past and may even have set up automatic re-ordering systems. Little information is required.
Example: re-ordering photocopying paper. 13 13 15 15 14

19. Buy Class
Implications.
1. New Task.
- big gains for those suppliers involved in the decision- making process at the start.
- many people are involved and the process is long – suppliers need to invest heavily in time to influence all of them.
2. Straight Rebuy.
- current suppliers need to build a strong defensible position and maintain it.
- potential suppliers need to reduce risk of change for purchaser.

20. Developments in Purchasing Practice
Just-in-time purchasing
Centralised purchasing
Online purchasing
Reverse marketing
Leasing
System purchasing

21. Reverse marketing Supplier sells by taking initiative Supplier Buyer
Traditional marketing
Reverse marketing
Buyer takes initiative to persuade supplier to provide

22. Relationship Marketing
Definition.
The process of creating, maintaining and enhancing strong relationships with customers and other stakeholders.

23. Development of buyer–seller relationships in Industrial Markets
Pre-relationship stage Evaluation of a new potential supplier
Early stage Negotiation of a trial
Development stage Contract signed or delivery built up
Long term stage Several major purchases or large-scale deliveries have been made
Final stage Established patterns of trading in long-term stable markets

24. Core Reading
Core reading to support this topic can be found in Chapter 5 of your recommended text