Organizational Buying Behavior

Conceptual Framework
UNDERSTANDING CUSTOMER BEHAVIOR

Household Buying Behavior

Families and Households Family Decision Making Process Conflict in Family Decisions

Business Buying Behavior Buyer User

INSTITUTION CUSTOMER DECISION MAKING Components of the Business Buying Process

Payer

Government Buying Behavior

Government Buying Procedures Future of the Government as Customer

A business is a licensed entity engaged in the activity of making, buying, or selling products and services for profit or nonprofit objectives

Business Markets
Market Structure and Demand Fewer and larger buyers

Geographic concentration
Derived demand
Inelastic demand Fluctuating demand

Buyer and seller dependency

Business buyer behavior refers to the buying behavior of the organizations that buy goods and services for use in production of other products and services that are sold, rented, or supplied to others. Also included are retailing and wholesaling firms that acquire goods to resell or rent to others for profit.

Business buying process is the process where business buyers determine which products and services are needed to purchase, and then find, evaluate, and choose among alternative brands

Business Buyer Behavior

Major Types of Buying Situations
Straight re buy is a routine purchase decision such as reorder without any modification

Modified re buy is a purchase decision that requires some research where the buyer wants to modify the product specification, price, terms, or suppliers
New task is a purchase decision that requires thorough research such as a new product

Business Buyer Behavior

Participants in the Business Buying Process

Buying center is all of the individuals and units that participate in the business decision-making process

Users Influencers Buyers Deciders Gatekeepers

Business Buyer Behavior

Participants in the Business Buying Process

Buying center provides a major challenge Who participates in the process

Their relative authority What evaluation criteria each participant uses Informal participants

Business Buyer Behavior

Participants in the Business Buying Process Users are those that will use the product or service Influencers help define specifications and provide information for evaluating alternatives Buyers have formal authority to select the supplier and arrange terms of purchase Deciders have formal or informal power to select and approve final suppliers Gatekeepers control the flow of information

Business Buyer Behavior

Major Influences on Business Buyers

Economic Factors

Personal Factors

Price

Emotion
Service

Business Buyer Behavior

Major Influences on Business Buyers Environmental Factors
Demand for product Economic outlook Cost of money

Resource availability

Technology

Culture

Politics

Competition

Business Buyer Behavior

Major Influences on Business Buyers Organizational Factors

Objectives Policies Procedures Structure Systems

Business Buyer Behavior

Major Influences on Business Buyers Interpersonal Factors
Motives Perceptions Preferences

Age

Income

Education

Attitude toward risk

Organizational Characteristics
Four organizational characteristics of the customer firm affect buying behavior:

Size Structure Purchase resources Purchase orientation

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Decision Process
Business buying decisions comprise the following stages:

Need assessment Developing choice criteria Request for proposals (RFPs) Supplier evaluation Supplier selection Fulfillment and monitoring
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Business 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 Idea from a trade show or advertising

External stimuli

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

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

Business Buyer Behavior

The Buying Process

Performance review involves a critique of supplier performance to the purchase terms

Perceived Risk
Perceived risk refers to the expected probability that the purchase may not produce a satisfactory outcome It is a product of two factors:

The degree of uncertainty that a choice may be wrong The amount at stake should a wrong choice occur
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Importance
The importance of purchase is a combination of the amount at stake and the extent to which the product plays a strategic role in the organization

The higher the amount at stake, and the more strategic the products role, the more important the purchase
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Complexity
Complexity refers to the extensiveness of effort it takes to comprehend and manage the product during its acquisition Complexity has two dimensions:

The number of performance dimensions The technical and specialist knowledge required to understand those dimensions
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Time Pressure
Time pressure refers to how urgently the item is needed When the item is needed urgently the purchase decision will:

Short-circuit the usual process Make the process less deliberative Give more direct role to the user/requisitioner
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Psychology of Decision Makers

The decision-making process is primarily driven by two psychological processes occurring in the decision makers:

Their expectations Their perceptual distortions

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Conflict and Its Resolution

Problem solving Persuasion Bargaining Politicking

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A Comprehensive Model of Organizational Customer Behavior

Organization Characteristics
Size Centralization Purchase Orientation Rules and Procedures

Nature of Purchase Buying Task Straight Rebuy Modified Rebuy New task Perceived risk Importance Complexity Time pressure

Decision Process Need Identification Vendor Search Evaluation Criteria Vendor Evaluation Conflict Resolution Problem solving Persuasion Bargaining Politicking

Information Sources Salespersons Advertisements Product literature Syndicated research reports Trade/professional journals Trade associations Word-of-mouth Vendor referrals

Decision

THANKS.
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Copyright 1999 by Thomas Southwestern. All rights reserved.