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1
Chapter Three:
Organizational
Buying
Behavior
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OrganizationalBuying Process
1. Problem
Recognition
2. General
Descriptionof Need
3. Product
Specifications
4. SupplierSearch
5. Acquisitionand Analysis
of Proposals
6. Supplier
Selection
7. Selection
of
Order Routine
8. Performance
Review
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Three Buying Situations(slide 1 of 4)
1. New task
2. Modified rebuy
3. Straight rebuy
4. System buy
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characteristics of organizational buyers
1. Consumer market is a huge market in millions of consumerswhere organizational buyers are limited in number for most of theproducts.
2. The purchases are in large quantities.
3. Close relationships and service are required.
4. Demand is derived from the production and sales of buyers.
5. Demand fluctuations are high as purchases from business buyersmagnify fluctuation in demand for their products.
6. The organizational buyers are trained professionals inpurchasing.
7. Several persons in organization influence purchase.
8. Lot of buying occurs in direct dealing with manufacturers.
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Participants in the Business Buying Process
Users
The persons who use the item. Say forsafety gloves the operators.
Initiators
The persons who request thepurchase. The safety officer mayinitiate the request for the purchase.
Influencers
Persons who held definespecifications.
In this case of safety gloves, the
safety officer may himself definespecifications.
If an industrial engineer is in theorganization, he may also beconsulted.
There can a different gloves fordifferent working situations andindustrial engineer may be moreaware of specific requirementsdue to his special nature of work -human effort engineering.
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Buyers
They are the person whoactually do the buying
transaction.
Gatekeepers
They control access topersonnel in a company.The receptionist, thesecretaries etc.
Deciders
People who decide on productrequireements and suppliers. Itis the final approval for product
specfications and suppliers'list.
Approvers
Persons who approve the
purchase. In the case of safetygloves, the personal managermay have the power toapprove.
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Three Buying Situations1. New Task (slide 2 of 4)
New taskproblem or need totally different
from previous experiences.
Significant amount of information required
Buyers operate in extensive problem solving
stage
Buyers lack well defined criteria.
Lack strong predisposition towardsolution
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Three Buying Situations2. Modified Rebuy (slide 3 of 4)
Modified rebuydecision makers feel
benefits to be derived by reevaluating
alternatives.
Most likely to occur when buyers displeased
with current suppliers performance
Buyers operate in limited problem-solving
stage. Buyers have well-defined criteria.
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Three Buying Situations3. Straight rebuy (slide 4 of 4)
Straight rebuyproblem or need is recurring
or continuing requirement.
Buyers have experience in area.
Require little or no new information
Buyers operate in routine problem-solving
stage
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Buying Decision Approaches
Casual purchasesinvolve no information search or analysis.
Routine low prioritydecisions more important and
involve moderate amount of analysis.
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Forces Influencing Organizational Buying
Behavior
Environmental
Forces
OrganizationalForces
Group
Forces
Individual
Forces
Organizational
Buying
Behavior
Economic Outlook:
Domestic & GlobalPace of Technological
Change
Global Trade Relations
Goals, Objectives, and
StrategiesOrganizational Position
of Purchasing
Roles, relative
influence, and patterns
of interaction of buying
decision participants
Job function, past
experience, and buying
motives of individual
decision participants
Projected change in
business conditions
can drastically alter
buying plan.
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Strategic Priorities in Purchasing
Becoming Business Partners,Not Just Buyers
Exploring New Value Frontiers:Its Not Just About Price
Putting Suppliers Inside:The Best Value Chain Wins
Pursuing Los-Cost Sources:A World Worth Exploring
Shift from administrative role to value-creating function that serves internal stakeholdersand provides competitive edge in market.
Focus on suppliers capabilities, emphasizingbusiness outcomes, total ownership costs, and
potential for long-term value creation.
Develop fewer and deeper relationships withstrategic suppliers and involve them in decision-making processes, ranging from new productdevelopment to cost-reduction initiatives.
Overcome hurdles imposed by geographicaldifferences and seek out cost-effective suppliersaround globe.
Source: Adapted from Marc Bourde, Charlie Hawker, and Theo Theocharides, Taking Center Stage: The 2005 ChiefProcurement Officer Survey, (Somers NY: IBM Global Services, May 2005), pp. 1-14. Accessed at http://www.ibm.com/bcs
on July 1, 2005.
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Questions for the Industrial Salesperson when
Assessing Group Forces
1. Which member takes part in the buying
process?
2. What is each members relative influence in
decision?
3. What criteria is important to each member in
evaluation process?
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Buying center composition
Changes with situations
Organizational buying is a
process not an act
Buyingcenter
participant
Identification ofneed
Establishment ofobjectives
Selectionofsuppliers
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Members of the buying center assume different roles
throughout the procurement process.
Clues for
Identifying
PowerfulBuying
Center
Members
1. Isolate the Personal Stakeholders
2. Follow the Information Flow
3. Identify the Experts
4. Trace the Connections to the Top
5. Understand Purchasing Role
SOURCE: Adapted from John R. Ronchetto, Michael D. Hutt, and Peter H. Reingen, Embedded Influence
Patterns in Organizational Buying Systems, Journal of Marketing53 (October 1989), pp. 51-62.
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Selective Processes in Information Processing
Selective exposure.
Selective attention.
Selective perception. Selective retention.
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Perceived Risk Components
1. Uncertainty about decision
outcomes.
2.Magnitude of consequencesassociated with making wrong
selection.
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Organizational buyers
behavior influenced by
environmental,
organizational, group,
and individual factors.
MajorElements of Organizational Buying Behavior
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Q-1
Capital Instruments has a major manufacturing plant that
falls within your new sales territory. On your initial visit
to this plant, you learn from a receptionist that the
purchasing department is in the very preliminary stages
of making a major purchase of the type of production
equipment that you sell. First, how would you predict the
likely composition of the buying center for this particular
purchase? Second, what questions could you ask to
determine the relative influence that differentorganizational members might exert on the buying
decision?
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Q-2
To remain competitive, Hindustan Equipment has
decided to adopt more sophisticated manufacturing
technology. The eight members of the firm who have
been actively involved in defining specifications and in
evaluating suppliers are evenly split over which way to
go. Four members are strong advocates for Supplier A;
four are committed to SupplierB. Describe the factors
that motivate individual decision makers during the
organizational buying process and explain why productperceptions and evaluation criteria often differ among
organizational decision makers.
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Q-3
Manoj recently completed the sales training program at DowChemical and has spent the past few months in Delhi, her assignedterritory. Today he plans to call on two accounts and then completea sales forecast for next quarter.
The first account is a small, high-tech firm that potentially could use
a Dow product directly in a production process. This productionprocess is new and the purchasing manager indicated that severalsubstitute products will likely receive consideration. What strategyshould Manoj follow in dealing with this customer?
The second account has been buying their chemical products fromAllied for the past three years. Of course, Manoj would like them to
change to Dow but the purchasing manager at this firm seemspreoccupied with other matters. What strategy should Manoj followhere? He wonders if it's even worth stopping by because he couldspend the time talking to an existing customer
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Q-4
Price is director of purchasing for a large high-tech firm thatproduces component parts and avionics systems for the aerospaceindustry. Boeing is one of the firm's largest customers. Mikeparticipates actively in the most important and strategic buyingdecisions that the firm faces. Outside of work, Prince's wife
complains that he is prone to making impulse purchases. Forexample, last Saturday, Mike went to a nearby mall to purchasesome golf balls and returned home with the golf balls and a newriding lawn mower. Describe how Prince's buying behavior differs inbuying products for the organization versus buying products forhimself or his family. Explore the factors that might shape the
particular evaluative criteria that Prince might emphasize whileparticipating in organizational buying decisions versus family buyingdecisions.
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