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Organizational Buying and Buyer Behavior

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Title: Organizational Buying and Buyer Behavior


1
Chapter 3 Organizational Buying and Buyer Behavior
Prepared by John T. Drea, Western Illinois
University
2
The Consumer Buying Decision Process
Involvement influences whether some steps are
de-emphasized or extended. This is more of a
simultaneous than a sequential process.
3
Organizational Buying
  • Organizational buying involves many inputs from
    professional specialists within the organization.
  • The organization relies on inputs from decision
    makers and influencers (stakeholders) to
    satisfy the diverse set of needs within the
    organization.
  • This requires communication among stakeholders in
    the buying organization.

4
The Buying Center
External Factors
Customer needs and buying behavior
Independent standards-setting organizations
Internal Factors Technology
Accounting Management Marketing Legal
Production/Mfg. Finance Service
Government agencies
Various Publics
5
Major Differences, Organization Buying vs.
Consumer Buying
  • Organizational buying involves more buyers more
    decision makers or contributors to portions of
    the decisions.
  • Participants (stakeholders) in the buying center
    are driven by the specific needs of their
    professional responsibilities.
  • Different types of decisions are often occurring
    simultaneously in the process, spread throughout
    the buying organization.

6
Steps in the Buying Decision Process
1. Problem recognition
2. General need description
3. Product specification
4. Supplier/Source search
5. Proposal Solicitation
6. Selection
7. Make the transaction routine
8. Evaluate performance
7
Intricacies of the Buying Decision Process
Individual roles and personal needs
Relationships and loyalty
  • Three kinds of needs
  • Need for product benefits
  • Individual needs w/in buying center
  • Buying center members personal needs

Interaction creates fluidity (people w/in the
buying center interact)
The buying process is simultaneous,
not sequential
Cluster of stakeholders values
8
Stages in the Process Flow Model of the Buying
Decision Process Definition Stage
  • Process Flow Stages
  • Problem definition
  • Solution definition
  • Problem specification
  • Buying Decision Process Steps
  • Problem recognition
  • General need description
  • Problem specification

9
Stages in the Process Flow Model of the Buying
Decision Process Selection Stage
  • Process Flow Stages
  • Solution provider search
  • Acquire solution provider(s)
  • Buying Decision Process Steps
  • Supplier/Source search
  • Proposal solicitation
  • Contract for supplier(s)

10
Stages in the Process Flow Model of the Buying
Decision Process Deliver Solution Stage
  • Process Flow Stages
  • Customize as needed
  • Install/Test/Train
  • Buying Decision Process Steps
  • Make the transaction routine

11
Stages in the Process Flow Model of the Buying
Decision Process End Game Stage
  • Process Flow Stages
  • Operate solution
  • Reach end result
  • Evaluate outcomes
  • Determine next set of needs
  • Buying Decision Process Steps
  • Evaluate outcomes
  • Resell the job

12
Stage 1 Problem Recognition
  • A buying situation that has not been previously
    faced by the organization.
  • Significantly steep learning curve, organization
    seeks many sources of information.

New Task
  • A buying situation that is somewhat similar to
    past problems/solutions
  • Examines alternatives within a limited scope,
    involves fewer people than a new task situation
    and more than a straight rebuy.

Modified Rebuy
  • A routine buying situation with established
    solutions.
  • Abbreviated steps in the process, fewer people in
    the buying center, less time to completion.

Straight Rebuy
13
Stage 2 Vendor Selection
  • RFQ Request for Quotation
  • Usually associated with that which can be
    thoroughly and quantitatively defined
  • RFP Request for Proposal
  • Usually defined by a set of specifications that
    have more flexibility regarding the final form of
    the offering
  • For government purchases, RFP/RFQ are often
    published in a specified outlet.

14
Stage 3 Solution Delivery
  • Often takes longer than definition and selection
    combined.
  • Stage ends when delivery is complete and approved
    by the buyer.
  • Involves merging the logistics of the buyer with
    the logistics of the customer.

15
Stage 4 End Game
  • Buying organizations frequently formally evaluate
    purchase outcomes in terms of areas like
  • Market share
  • Position
  • Market ownership
  • Profitability
  • Individual buying center members also may
    evaluate the purchase, the purchase process, and
    the supplier.

16
Organization and Individuals Needs in the Buying
Decision Process
Steps in Flow Define problem Define
solution Acquire provider Develop
solution Install, test, train Operate
solution End result Evaluation outcomes
Organizational Needs Clear, concise,
tractable Appropriate, affordable Choice,
speed, Speed, easy use Ease of integration,
speed User friendly Effective, low
cost Information
Individual Needs Information time Design
assistance Information, assurance Execution
help Knowledge, comfort Easy to
maintain Recognition Communication, reward
17
Buying Decision Evolution
18
More Buying Decision Evolution
19
Variability of Rational Buying
Human Factors
  • Objective means are used to narrow choices.
  • Suppliers who recognize cultural/relationship
    needs of the organization become the in
    supplier.
  • A review of facts is often done because it is
    culturally acceptable.
  • Facts can be arranged to justify the decisions
    that individuals want to make
  • People seek reinforcement for their beliefs in
    every factor presented to them

20
Variability of Rational Buying
Mutual Dependence and Customer Loyalty
  • Long-term commitment increase both risk and
    rewards for both parties involved.
  • When both vendor and customer share financial
    interests that favor cooperation, there is
    greater motivation to continue the relationship
    through difficult times.

21
Value Image
  • Value Image
  • It is the total of all impressions that a
    customer has of the firm (whether relevant to the
    buying situation).
  • Value image is similar to product positioning
    that occurs with consumer goods.
  • Need to maximize the value image of the offering
    in the mind of the buyer.
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