Organisational buying behaviour

Organisational buying behaviour

Table of Contents:-

  • Organisational buying behaviour
  • Understanding Organisational Buying Behaviour
  • Industrial Buying Behaviour
  • Industrial Buying Behaviour Meaning
  • Industrial buying behaviour influence
  • Exploring Industrial Buying Behaviour
  • Organisational buying behaviour characteristics
  • Complexities in Organisational Buying Behavior
  • Decision Approach and Purchase Patterns of Organisational Buying Behaviour
  • Structure and Demand Patterns in Organisational Buying Behavior
  • Objectives of Organisational Buying Behaviour
  • The Industrial Buying Process
  • Factors Influencing Industrial Buying Behaviour
  • Buying Centers
  • Industrial Buying Decision Process

Organisational buying behaviour

Another name for organisational buying behaviour is business buying behaviour. Organisational buying behaviour is a process that businesses go through to purchase all the products and services needed for their operations. It is the behaviour that organizations have while purchasing products or services that they may purchase for resale, reproduction, or the organization’s operations.

Organisational/Business/Industrial buyers are the entities (individuals, manufacturers, producers or other organisations), involved in buying goods and services to produce new goods and services. These buyers sell, rent or supply the produced goods and services to others. The process of determining needs for buying products and services and selecting the most suitable supplier or brand from available alternatives through identifying and evaluating them is called organisational buying, business buying or industrial buying. The buying approaches are different for different businesses or organizations. However, the sellers try to identify and explore common buying methods and processes to develop suitable marketing and targeting strategies.

Understanding Organisational Buying Behaviour

Understanding the phenomena and characteristics of industrial buying behaviour is crucial for organisational marketers to develop suitable target marketing strategies to attract organisational buyers. This involves exploring the buying situations, the process of buying for making buying decisions, the way different members of the organisation affect these buying decisions, the criteria used in making such decisions, etc.

Purchase managers need to communicate with different people in the organisation having a variety of responsibilities, to design criteria. Generally, normal consumers are dispersed in a geographical area, whereas organisational buyers are a group of individuals who exhibit similar yet derived demand. Therefore, it is very challenging to understand organisational buying behaviour as a group of decision-makers are associated with it.

Industrial buying behaviour is the decision making process by which formal organizations establish the need for bought products, and services, and identify, evaluate and select among alternative brands and suppliers. Organizations buy into a surplus of organizational objectives, such as manufacturing, and distributing goods and services to members, customers, or society.

Industrial Buying Behaviour

Industrial buying behaviour is the total of the organisation’s behaviour, intentions, preferences, and decisions regarding buying behaviour in the market when purchasing goods for manufacturing or resale.

The business buyers (also referred to as the producer/ manufacturer/ organisational /industrial buyers) consist of all the individuals or organisations who acquire goods and services that enter into the production of other products or services that are rented, sold, or supplied to others.

Industrial buying is very influenced by derived demand, i.e., the demand for the final product or service to be sold by the buyer’s customers. The demand for elements by a manufacturer will depend on the demand coming from their customers, retailers and wholesalers, who in turn are reacting to the demand from their customers, and consumers.

Overall consumer demand can in turn be influenced by economic, social, political and technological factors in the environment.

The Industrial buying process is quite different from the consumer buying process. While buying decisions by individual customers are made relatively easily and quickly, organizational buying involves a thorough analysis. Organizations purchase products differing from extremely complex machinery to small components.

Industrial Buying Behaviour Meaning

Industrial buying can be defined as the decision making process by which formal organisations establish the need to purchase products and services and identify, evaluate, and choose among alternative brands and suppliers. Although no two companies buy similarly, the seller hopes to identify clusters of business firms that buy similarly to permit marketing targets and strategies.

Developing effective marketing strategies to reach organisational buyers rests on the organisational marketers working towards understanding the nature of organisational buying. This entails knowledge of the different types of buying situations that organisations encounter, the process that organisational buyers go through in reaching purchasing decisions, and how those decisions are affected by different members of the firm & the criteria they apply in making purchasing decisions. 

In making decisions, purchasing managers must coordinate with numerous people with diverse organisational responsibilities who apply different criteria to purchasing decisions.

Organisational marketing is characterised by complex interaction processes both within the marketing and purchasing companies and between these companies. Financial and technological dependencies are generally more pronounced in organisational buyer-seller relations than in consumer markets. 

This tends to increase both the time dimension and involvement of the exchange process. The understanding of this typically multi-phased and multi-objective process is essential for effective purchase planning, and supplier negotiations, as well as for designing organisational marketing programs.

The organisational buyers have a derived demand and a homogenous mix as compared to consumers, divided on the geographical area and are more complex to deal with since there is more than one decision-maker involved.

Industrial buying behaviour influence

In an organization, purchase decisions are influenced by several people and are not made in isolation by a person. Organizational buyers are more concerned about the price and quality of the product than the service being provided by the seller.

Price plays a major role, as the cost of raw materials is the investment that generates profits. Thus, price is a major factor that affects the profitability of the firm. Service also plays an important role, as no organization would like to buy goods from a businessperson who cannot provide timely and efficient service.

Organizations use certain methods for purchasing products such as checking a sample before the actual purchase. Most organizational buying involves the purchase of products on a large scale. Therefore it is not possible to examine each object separately.

In such situations, one sample is checked assuming that this sample represents the entire lot. Like consumer markets, the industrial market also has certain demand characteristics. Organizational demand for products or services may be inelastic, derivative, compound or fluctuating.

Related Article: Organisational Behaviour

Exploring Industrial Buying Behaviour

The industrial market typically purchases goods or services to produce other goods and services using these as raw materials. There are also resellers, who purchase products to sell directly to other customers without modification.

Apart from producers and resellers, there are institutional customers and the government who buy goods. The government buys goods for public utility in its departments or for production purposes.

The buying decisions of organizations are influenced by organizational factors, social factors, environmental factors, and individual factors. Institutional buying participants play seven roles: initiator, influencer, user, decider, approver, buyer and gatekeeper.

Although organizations differ greatly from each other in their purchasing process, the various stages of industrial procurement include problem identification, general need recognition, product specification, value analysis, vendor analysis, order routine specification, multiple sourcing and performance reviews.

Marketers need relevant information about the characteristics of industries to effectively market their goods and services. Search for such information, the major sources are government and industrial publications. Standard industrial classification is a process where such characteristics of the manufacturing, financial and service sectors are represented in a coded format.

Related Article: Consumer Behaviour

Organisational buying behaviour characteristics

The nature of industrial buying behaviour is given below:

Organisational buying behaviour characteristics

1) Formal Activity

The technical complexities of industrial buying have high monetary values, but still, it has to follow all the formal procedures of the organisation. The organisation adheres to certain policies even in times of emergency and suppliers must know these policies. All the decisions made during industrial buying take the form of a contract, where the parties to the contract are suppliers and buyers.

2) Multiperson Buying Activity

Industrial buying behaviour is a very complex process because it involves interactions among people, e.g., the buying process of industries or organisations such as hospitals, government organisations, educational institutions, etc. The people who participate in these buying decisions may be from many departments like, production, purchase, design, maintenance, etc., and these people may also have different educational qualifications such as engineers, business graduates, etc. Other than that, these people may also be from different hierarchical levels in the organisation ranging from front-line staff to senior-level managers. The people involved in the buying situation may also adopt different roles in the buying process. This concept of varied roles in the buying process is known as the ‘Buying Centre’.

3) Longer Time Lag between Efforts and Results

Since industrial buying behaviour is complex and involves the interaction of many people, it takes a comparatively longer time than individual buying. Thus there is a great time lag between the initiation of the marketing effort and the actual buying taking place. The marketer needs to have a good idea of the time lag in getting the response from the customers; otherwise, he may end up doing impractical planning

4) Uniqueness of Organisations

Several commonalities exist in the industrial buying processes, yet no two organisations possess the same behaviour and make the same decisions. This is because there is a wide divergence concerning the buying situations, resources, capabilities of the organisations, the suppliers and their relationships, etc. Hence, it is very important to consider every organisational buyer as a separate entity in the process of industrial selling.

5) Rational yet Emotional Activity

Industrial buying is a formalised process with very clear rules and procedures, yet it cannot be said that it is an unemotional or rational process. The reason behind this is the entities that carry out the industrial buying i.e., human beings. Therefore, human characteristics can also impact the activities of industrial buying, such as buying raw materials, commodities, standard products, components, etc.

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Complexities in Organisational Buying Behavior

The characteristics mentioned above indicate the complexity inherent in organizational buying behaviour, surpassing consumer buying behaviour and other types of decisions within an organization. This added complexity, as asserted by Webster and Wind, primarily stems from four factors:

1) Purchasing workflow is predominantly cross-functional within organizations.

2) Formal authority over buyers (purchase department executives) can lie with either a purchase manager or another functional manager, such as a production manager.

3) Most of the ‘purchase function’ involves interactions with individuals outside the organization.

4) Purchasing is considered a service function, which may be perceived as having a lower status within the buying organization.

The intent behind highlighting these generalizable characteristics of organizational behaviour is to underscore the complexities and differences and to stimulate thought in connecting personal experiences with these traits. Drawing upon your own experiences, you may either corroborate these generalizations or challenge some. Consider this as your initial exercise for this lesson.

Decision Approach and Purchase Patterns of Organisational Buying Behaviour

Organisational buying behaviour differs from individual consumer buying behaviour in many ways. These are as follows:

1) Less Frequent Purchases

The frequency of purchase in organisational buying is lesser than in the individual buying process. An organisation which buys capital goods typically uses it for a considerable time. Similarly, other items that are bought like computer hardware, photocopying machines etc., are also purchased once a month. The raw material that is consumed in the production process is used continuously but the purchase is usually made on an annual contract. These are negotiated once and are in motion for a certain period.

2) Reciprocity

Organisations often get into a reciprocal agreement with each other. For example, an organisation that makes software may have a reciprocal agreement with a company that is in the computer hardware trade. This results in an agreement which is mutually beneficial for both types of organisations. 

3) Formality

The buying behaviour of organisations is typically much more complex. The process is much more technical and the degree of financial risk is also much higher. As a result, the buying process is very formal. There is much more documentation, tendering and quotation involved in an industrial buying process.

4) Negotiations

The process of buying also involves protracted negotiations between the buyers and sellers.

Some of the main reasons for negotiating are given below: 

i) Since the product that is being bought is very complicated, the specifications and details are very important.

ii) The ticket size of the order is large and the price also plays a vital role in the buying process. 

iii) The number of parties that are involved in a buying process is also many. In the opinion of Paul Dion and Peter Banting, there is a certain degree of cooperation that is shown in the negotiation process between the purchasing and the selling entity.

5) Service

Organisational buying also often requires the provision of add-on services like free installation. demonstration, after-sales services, etc.

Structure and Demand Patterns in Organisational Buying Behaviour

Organisational buying behaviour also differs from individual buying behaviour in terms of the nature and spread of the demand. The main points of difference are given as follows: 

i) Geographical Concentration

In contrast to individual buyers, organisational buyers tend to be concentrated in a smaller geography. For example, the Indian IT industry is dominated by the Southern states. Hence, most of the buying of the IT industry happens in these states. 

ii) Fewer but Larger Buyers

In terms of the number of buyers, individual buyers are typically huge in number. Organisational buyers are typically much fewer in number. Organisations may be fewer in number but the amount of orders placed by them is huge. In the automobile industry, there are only a few manufacturers. However, these manufacturers place orders for a huge number of tyres. In the same consumer buying context, organisations have millions of customers who will need components like tyres. Similarly, there are very few players in the computer manufacturing industry but these companies require Intel or AMD processors in huge numbers.

iii) Derived Demand

The demand in organisational buying is a derived demand. This is because organisations demand products which are used in the manufacture of products for consumer buying. For example, a branded computer is bought by a consumer. However, a computer can be manufactured from hardware like keyboards, monitors etc., and also software. The demand for these components is a function of consumer demand. If the consumer demand falls, then the demand for these other products will also reduce.

iv) Demand is Inelastic

The demand for organisational products is also largely not influenced by price. The increase or decrease in the price of the product does not significantly impact the demand for the product. This is in stark contrast to consumer demand which is severely impacted by any price volatility. 

v) Joint Demand

Organisational products can also be complementary. In other words, they can be used along with other products. This leads to a certain joint demand where the demand for one product increases the demand for the other product as well.

For example, the petroleum industry also requires additives in the form of octane and boron. An increase in the demand for petroleum will also increase the demand for these additives.

vi) Fluctuating Demand

Organisational demand can be quite volatile, unlike consumer demand which is quite stable. In many ways, the demand for organisational products is a direct function of the state of the economy. In a state of growth, the demand for organisational products increases, whereas the reverse happens when the economy is not doing so well.

Objectives of Organisational Buying Behaviour

The industrial buying process is handled by the procurement unit. This department is governed by the overall strategy of the organisation and also by the specific rules which the department has laid down for itself. 

Organisational buying has the following key objectives: 

1) Non-Task Objectives

These objectives should be used by the procurement department of a company to achieve the task-related objectives. Transparent and non-discriminatory policies, answerability of management, and proficiency in the process of procurement are some examples of non-task objectives

The procurement process should not favour any particular supplier or a group of suppliers. It should also not be biased towards any supplier and should conduct the entire process fairly and equitably. The efficiency of the procurement unit affects the efficiency of the whole organisation. Hence, the procurement department should function effectively by acquiring the required resources of the best possible quality in the stipulated time. This also helps in building the brand image of the company for example. successful brands like Maruti differentiate themselves in the marketplace through their efficient and transparent procurement policies.

2) Objectives

The task-based objectives of the procurement department are determined to achieve the following specific objectives of the organisation:  

i) Cost: Keeping control over the cost of acquisition is one of the important facets of the procurement process. This can be done by ensuring that the procurement of the right product of the right quality, in the right quantity is done at the right time, and from the right source. In this process, the procurement department identifies the suppliers who meet their standards and then negotiates the rate at which the raw material will be supplied. In this manner, the procurement team delivers the maximum value to the company.

ii) Quality: The next important task for the procurement unit is to control the quality. This can be ensured by supervising that the manufacturing of products is done by using the best quality raw materials. The quality specifications are usually set by the end user or the production department, while the procurement department makes sure that these standards are being met. The procurement department also undertakes value analysis of all the alternatives so that the best among them can be selected such that the quality of the end product is not compromised in any case.

The Industrial Buying Process

The Industrial buying process has the following steps:

Industrial Buying Process

Stage1 – Identification of Need

The first stage of the business buying process is the identification of a need in which someone in the organisation identifies a need that can be solved by purchasing goods or services.

The Industrial buying process starts with the identification of needs. In an organization, a particular person identifies the need for certain goods and after buying the needed goods, the need is fulfilled. Needs in an organization can be recognized in two ways. They are – external stimuli and internal stimuli.

 If a firm chooses to produce new goods itself, it is an internal stimulus. It needs to purchase new goods and tools. Similarly, when a buyer witnesses a trade exhibition, he may approach to buy new goods. Such an idea is external stimuli because this idea is made from the external environment and materials should be purchased for this.

Stage2 – General Requirement Details

In this phase of the Industrial buying process, after the identification of need, the processing organization describes the general characteristics and quantity of the necessary items required. After the need is recognized, the buyers should describe the need. While describing the need, the features of required goods and their quantity should be defined. If the goods have standards, this task becomes simple; otherwise, it becomes difficult. The help of employees, users and experts should be taken for complex goods.

Stage3 – Product Specification

At this stage of the organizational buying process, the organization makes the purchase decision of the product and specifies the best technical product characteristics for the item required.

Stage4 – Price Analysis

An approach to cost reduction, in which components are thoroughly examined to determine whether they can be redesigned, ordered, or replaced by less expensive methods of production.

Stage5 – Supplier Search

At this stage of the business buying process, the client seeks to find the best sellers. The buyer prepares a list of all the well-known suppliers and selects good and proper suppliers. A list is prepared by looking at earlier trade records, searching on the internet, asking other businesses for suggestions etc. If the goods to be purchased are unique, complicated and expensive, it takes a great time to seek suppliers.

Stage6 – Proposal Solution

The stage of the business procurement process is in which the buyer invites qualified suppliers to send proposals. The proposed solution is the fifth stage of the organizational buying process. At this stage, the buyer calls the best suppliers to submit a proposal. As a result, some send records or agents to the organization. If the product is expensive and complicated, the buyer demands a complete proposal, and if the product is technical, the business organization calls for presenting the product itself.

Stage7 – Supplier Selection

The stage of the business procurement process is in which the buyer reviews the proposal and selects a supplier or supplier. At this stage of the organizational buying process, buyers evaluate the proposal and select one or more suppliers. For selecting the suppliers, a list is prepared and a rating is made based on their qualities and importance. Then the best supplier is selected. The supplier is analysed thoroughly and then a decision is made.

Step8 – Order-Routine Specification

The stage of the business buying process is in which the buyer writes a final order with selected suppliers, listing technical specifications, quantity required, expected time of delivery, return policies and warranties. After the selection of the best suppliers, the client makes the final purchase. In this order, all the things such as attributes of goods, specification, warranty, quantity, time for supply,  method of payment, service after sale etc. should be clearly stated.

Stage9 – Performance Review

This is the last step of the organizational buying process. In this step, the buyer measures his satisfaction with suppliers to decide whether to continue or change them. At this stage, the buyer evaluates the suppliers’ performance. This type of analysis helps to decide whether to continue the relationship with the supplier/change or end the relationship. If the performance of the supplier is satisfactory, the relationship can be continued; if it is somewhat poor partial correction is made and the relationship is maintained. But if the performance is offensive, it is broken.

Factors Influencing Industrial Buying Behaviour

There are four broad categories of factors that influence industrial buying behaviour:

Industrial Buying Behaviour

1) Environmental Factors

Seven environmental factors influence organisational buyers:

i) Physical

The physical environment includes such factors as the climate and geographical location of the organisation and can affect the behaviour of organisational members and determine the constraints and options for the buying organisation. A supplier’s geographical location, for example, is an important consideration in whether it is chosen or not. Many companies prefer local suppliers and in the international sphere, many shoppers prefer to use domestic suppliers where possible.

ii) Technological

The level of technological development defines what types of goods and services are available to the organisational buyer.

iii) Economic

The economic environment for the buying organisation is affected by price and wage conditions, money and credit availability, consumer demand, and levels of inventory in key organisational sectors, these sorts of factors will determine the availability of goods and services, the ability of buyers to finance purchases, and what price will be paid.

iv) Political

The political influence could include such factors as country trade agreements, tariff barriers, lobbying activities, defence spending, government assistance to certain organisations or companies, and government attitude toward business generally.

v) Legal

Local, state, and federal legal and regulatory environments influence buying activities that take place. Government regulation sets standards for what must be bought to be included in products (for example, auto and lawnmower safety equipment). Terms of sale and conditions of competition are also enforced by legal means on all the organisational buyers.

vi) Ethical

The ethical environment is of major importance in the buyer-salesperson relationship. Shoppers and salespeople must exhibit ethical behaviour if they are to be accepted as professionals. Thus, each group needs to know what is considered to be ethical and unethical behaviour.

vii) Cultural

Culture establishes values that are shared by members and which influence their buying behaviour. Large organisations, too, have developed their own corporate culture, which differs in its values, norms, habits, traditions, and customs. The nature of these differing values, styles, and behaviours may be evident in the organisation’s buying behaviour.

2) Organisational Factors

Because organisational buying occurs within the framework of a formal organisation, the organisation’s objectives, policies, procedures, structure, and systems of rewards, authority, status, and communication will all have a significant influence on every factor of the buying decision process.

i) Tasks

The buying task is performed by the organisation to accomplish its objectives. These tasks may be classified in different ways such as by purpose, level of expenditure, type of good or service purchased, the extent to which the process is routine or not, and the extent to which responsibility for purchasing is centralised or decentralised.

ii) Structure

The buying structure of the organisation affects the purchasing process. Organisations have a formal and informal organisation structure. The organisational chart illustrates the formal relationships between people in the organisation. Informal relationships and communication patterns may be entirely different, however, from the formal structure. Marketers must understand both the formal and informal organisation to effectively sell to a buyer.

iii) Technology

Technology may influence not only what is bought but also the buying decision process itself. Manual systems for directing and controlling the buying process are widespread in the industry. computerisation is rapidly taking over. Marketing success requires an understanding of the organisation’s technology so that any new product or service fits into the system that is already in place.

iv) People

The people in the organisation who are involved in the purchasing situation will be a major determinant of the organisational buying process. These people are interdependent and interact with each other to influence fellows’ buying behaviour. The marketer’s task is to identify those within the organisation with responsibility and authority for buying decisions to persuade them to purchase.

3) Interpersonal Factors

The interaction between only two people or a larger number is a significant influence on organisational buying decisions. The influence of one person on another is what is meant by interpersonal influence.

i) The Buying Centre and its Roles

The buying centre is comprised of those people in the organisation who interact during the buying decision process. The buying centre usually involves several people with different formal authority, status and persuasiveness. The marketer needs to know who exerts the maximum authority and ability to persuade others to agree with his viewpoint. Knowledge of group dynamics helps the marketer evolve his strategy for selling to the buying centre.

ii) Power Relationships

The marketer must be careful to accurately assess the role and power relationships that may exist in a buying centre. Purchasing agents perceive themselves to have a higher level of involvement in buying decisions than other executives. Thus, the true locus of power in an organisational buying decision must be understood by the vendor.

4) Individual Factors

Participants in the organisational buying process bring to the situation their thoughts, feelings, and actions. These psychological factors are very relevant.

i) Motivation

Motivations of buying-centre members are difficult to assess accurately. They have generally been categorised into task-related and no task-related motives. Task-related motives include such needs as product quality, price, service, and delivery, or getting the “right” product for the “right” price at the “right” time from the “right” source. These pertain to the problems leading to the buying decisions.

No task-related motives include such variables as the potential for promotion, salary increases, more job security, and so forth. Generally, these pertain to the individual’s advancement, recognition, and desire to reduce uncertainty or risk.

ii) Perception

Individuals receive and interpret stimuli and organise them into a coherent picture of their world. Organisational buying-centre members’ perceptions are important to marketers’ development of effective strategies. Two dimensions of the element are significant: perceptions of the selling company’s products and people, and perceptions of their role in the buying centre decision process.

iii) Learning

Learning is another variable strongly influencing the individual in the organisational buying process. Learning occurs as customers make decisions that are satisfactory and this reinforcement increases their tendency to make the same decision in future similar situations. The continual reinforcement of a decision leads to a habit, which is a fairly automatic response.

Buying Centers

A buying centre includes all those persons in an organisation who become involved in the purchase decision. Membership and influence differ from company to company. 

For example, 

  • In engineering-dominated firms like Bell Helicopter, the buying centre may consist almost entirely of engineers.
  • In marketing-oriented companies like Toyota and IBM, marketing and engineering have almost equal authority. 
  • In consumer goods, firms like Procter & Gamble, product managers and other marketing decision-makers may dominate the buying centre.
  • In a small manufacturing organisation, almost everyone may be a member.

A buying centre of an organisation has the following seven members  who play these roles:

1) Initiators

Usually, the need for a product or item and in turn, a supplier arises from the users. But there can be occasions when the maintenance, top management, engineering department or any such recognise, feel the need. Individuals who “initiate” or start the buying process are called initiators.

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2) Users

Under this category, users of various products come. If they are technically strong like the R&D, engineering can also communicate well. They play an important role in the buying process. They also work as initiators.

3) Buyers

They are individuals who have formal authority to select the supplier and arrange the purchase terms. They play a very important role in selecting vendors, negotiating and sometimes helping to shape product specifications. The major roles or responsibilities of buyers are obtaining proposals or quotes, evaluating and selecting the supplier, negotiating the terms and conditions, issuing purchase orders, follow-up and keeping track of deliveries.

4) Influencers

Technical personnel, experts, consultants and qualified engineers play the role of influencers by drawing specifications of products.

5) Deciders

Among the members, the marketing person must be aware of the deciders in the organisation, try to reach them and maintain contact with them. People who decide on product requirements,  specifications and suppliers are deciders.

6) Approvers

Individuals who authorise the proposed actions of deciders or buyers are approvers. They can also be personnel from top management the finance department or the users. 

7) Gatekeepers

A gatekeeper is like a filter of information. He controls the flow of information from the marketer to the decision-maker.

Industrial Buying Decision Process

The buying decision in a firm is not taken individually by someone but by a group of individuals therefore industrial buying decision process defers a lot from the consumer buying decision process.

The process includes eight stages which are as follows:

Industrial Buying Decision Process

1) Problem Recognition

The buying process starts when someone in the organization identifies a problem or a need which can be met by buying a good or service. The problem can arise as an outcome of internal or external stimuli.

The various factors which can act as internal stimuli are:

i) The company decides to launch a new product and requires new tools and materials for manufacturing the latest product.

ii) The breakdown of an appliance that requires new components or replacement immediately.

iii) The material purchased from a dealer proves to be unsatisfactory and the company is urgently looking out for another dealer.

iv) The purchase department head notices an opportunity to obtain better costs or quality materials.

So the organisational marketer has to act as the stimulant for problem recognition by developing informative and attractive advertisement, mailing literature to organisational buyers about the availability of technical products, and directing their sales personnel to call upon the buyers, prospects and so on.

2) General Need Description

Having recognised the problem, and realising to fulfilling the need, the shopper will now be involved in identifying the characteristic features and the quantity of the product which is required. Very much unlike the ultimate consumer, the organisational buyer will be motivated by budgetary considerations, such as profit goals, expense quotas and cost-benefit analysis.

3) Product Specification

The buying organisation in this step will proceed to the item’s technical specifications. For this, the buyer will do a value analysis to appraise a supplier’s effectiveness. Value analysis involves the review of product specifications about requirements, the identification of unnecessary cost elements and suggestions for their elimination.

4) Supplier Search

The shopper now tries to identify the most appropriate vendors. The customer has to be certain that their suppliers meet the standard of performance and quality for which they have worked out their operational plans. They will find ways to accurately assess vendor capabilities, mainly in the areas of production, financial strength, technology and management.

So, at times the vendors will be dropped from the list of considerations because they may not be able to supply the needed quantity or because of a poor reputation in the market. And finally, the customer will be left to choose the supplier from the ‘finally approved list’ of qualified suppliers.

5) Proposal Solicitation

The next stage demands qualified suppliers to submit proposals. Commonly, the supplier will furnish information in the form of a catalogue or send their sales representative to the customer with the necessary information. In case of a more complex or costly item, the buyer will prefer to have a detailed written proposal from the supplier.

The proposals must be marketing documents and not only technical documents. In the case of oral presentations, the supplier must be able to generate confidence in the buyer about the company’s capabilities and availability to be able to stand out amid the competition.

6) Supplier Selection

Now the stage is set whereby the members of the buying centre will review the proposals and make a decision for the final selection of the supplier. This buying centre will generally draw up a list of the desired supplier features and their relative importance. A few features looked out for in a prospective supplier are –

  1. Technical support services.
  2. Prompt delivery.
  3. Quick response to customer needs.
  4. Product quality.
  5. Supplier reputation in the market.
  6. Product price.
  7. Extension of credit, and so on.

In this stage, the buyer will do vendor analysis to ascertain not only the technical competence of the various suppliers but also their ability to deliver on time and provide the necessary services.

7) Purchase Routine Selection

This stage involves placing an order (specifying all terms of purchase) with a dealer who processes it and ships the product. It is then received, approved, and then payment is made. Status reports within the company will let management know whether time-tables are being met or not. Rather than writing a purchase order for each purchase in a straight re-buy situation, companies often negotiate a contract to cover purchases over a specific length of time.

8) Post-Purchase Evaluation

The last step in the buying decision process involves an evaluation of the supplier’s performance by the shopper. This is an important stage in providing feedback so that the buyer and seller will be reasonably able to work as a team. Management may periodically have several units rate the supplier’s performance on such criteria as product delivery, quality, and post-sale service. The overall rating developed is used by the buyer to decide between continuing to use the supplier items or perhaps switching to an alternative source. Dealers may also receive the report so that they can modify their performance where needed to better serve customers’ needs.

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