Table of Contents
Introduction
Organizational buying behavior, also known as business buying behavior or organizational buying decision or organizational purchasing behaviour refers to the actions organizations take when purchasing products or services, whether for resale, reproduction, or to execute operations. Organizational purchasing behavior is the decision-making process by which an organization determines its need for products or services and identifies, evaluates, and selects among alternative brands and suppliers.
Organizations are also interested in purchasing goods and services on the market, in addition to individuals. The primary organizational purchasers may include producers, resellers, institutions, and the government. Where producers are organizations that purchase things for further manufacture or reproduction. Resellers are organizations that purchase things for resale, including wholesalers, retailers, and agents, among others. Institutions include NGOs, schools, colleges, and other private organizations. And government organizations may include ministries, departments, and public companies, among others.
Characteristics of Organizational buying
- The organizational market is comprised of a small number of purchasers who purchase their necessities in bulk.
- Businesses maintain extremely close relationships with their suppliers and customers.
- Organizations frequently modify their products, services, and other components of their marketing mix to satisfy the needs of their customers.
- Organizations purchase goods and services in accordance with government and organization-specific laws, rules, and regulations.
- The majority of organizational purchases are based on technical and logical considerations.
- Organizational purchasing is characterized by infrequent purchases, i.e., organizations do not typically make purchases as regularly as individuals.
Types of Organizational Buying
Primarily, there are three distinct sorts of organizational purchasing decisions or behavior:
1) Straight Repurchase Decision
Using the following criteria, the purchasing organization will review its previous procurements in detail:
- Quality of products
- Terms and conditions of the supplier
- Regularity of the supply of goods
- Relationship of the organization
- Personnel with the supplier
- Ease of purchasing
If these requirements are met, the organization or purchasing department makes a straight repurchase choice with the same vendor without completing the preceding stages. This is known as a straight repurchase choice.
2) Modified Purchase Decision
Sometimes the purchasing organization or purchasing department may be content with the supplier, but they may wish to modify some product specifications or purchase terms. This is referred to as a modified purchase decision. In this case, it may not be necessary for the business to modify its purchasing procedure again. If required for future repurchases with the same or another supplier, the purchasing department may modify some purchasing or product parameters.
3) New Purchase Decision
If the organization’s changed circumstances necessitate the acquisition of new products, it may choose a different purchasing method. In this circumstance, the purchasing department must determine the demands of the organization and then follow the organization’s purchase method.
Organizational Buying Procedures
The organizational purchasing procedure has eight steps, or crucial phases. Although these phases are similar to those of the consumer purchasing process, there are significant variances that have direct influence on the marketing strategy. Only when a new task is performed does the full procedure occur. Even under this context, however, the industrial buying process is significantly more formal than the consumer buying process. The majority of the information an industrial purchaser receives is transmitted through direct contacts, such as sales people or information packets. It is doubtful that an industrial buyer would make a selection based solely on the facts presented in a classified advertisement.
1. Problem recognition: The process begins when a member of the organization identifies an issue or need that can be addressed by obtaining a good or service. Problem recognition may be prompted by either internal or external events. A salesperson’s presentation, an advertisement, or information gathered at a trade show are examples of external stimuli.
2. General need description: Having identified the existence of a demand, the purchasers must now refine the description of that requirement. In collaboration with engineers, end-users, purchasing agents, and others, the buyer determines and ranks the importance of key product qualities. Possessing significant product knowledge, a person is capable of handling the vast majority of a normal customer’s product-related questions. Smaller or more isolated customers receive a reduced amount of useful information from trade advertising. Numerous trade advertisements make heavy use of direct marketing strategies (such as toll-free numbers and information cards). Through the placement of articles in numerous trade publications, public relations also play a key role.
3. Product Specification: Typically, the engineering department is accountable for this. Engineers construct a variety of options based on a previously set priority list.
4. Searching for suppliers: The buyer is currently identifying the best suitable vendor. The purchaser may consult trade directories, conduct an Internet search, or contact other businesses for referrals. Marketers can participate by contacting potential opinion leaders and requesting their support, or by approaching the buyer directly. At this stage, personal selling is a key factor.
5. Proposal solicitation: Next, proposals are requested from qualified vendors. Some vendors merely send a sales representative or a catalog. Development of a proposal is a hard undertaking that necessitates in-depth research as well as proficient writing and presentation skills. In extreme instances, such suggestions are analogous to comprehensive marketing campaigns found in the consumer industry.
6. Selection of a supplier: At this point, the numerous proposals are examined, and a decision is taken. Evaluation of the seller is an important aspect of this choosing. According to one study, purchasing managers deemed the vendor more important than the proposal more often than not. The three most significant features of a vendor, according to purchasing managers, are delivery capabilities, quality consistency, and a reasonable pricing. Another study discovered that the relative value of certain traits fluctuates according on the nature of the purchase circumstance. For products ordered on a regular basis, for instance, delivery, dependability, pricing, and the reputation of the source are crucial factors. These elements may be utilized as selling points in sales presentations and commercial advertisements.
7. Order-routine specification: Now, the buyer writes the final order with the selected vendor, including the technical parameters, quantity required, warranty, etc.
8. Evaluation of performance: In this last phase, the buyer evaluates the supplier’s performance. This may be an extremely simple or quite complex procedure.
Factors Influencing Organizational Buying Behaviour
A marketer must carefully examine a number of aspects that determine and are influenced by organizational buying behavior. Factors include:
1) Environmental Factors
Environmental aspects of organization purchasing typically entail issues that are external to the organization and over which the management has the least control. A detailed examination of these aspects can assist the manager in comprehending their effects on the quality of service provided to clients. Such environmental influences include the amount of demand, economic outlook, technological advancements, legal and political changes, the competitive environment, the availability of natural resources, etc.
2) Organizational Factors
Also influencing purchase behavior are organizational factors. It covers organizational policy, objectives, purchasing policy, purchasing method, organizational structure, and production system, among other things. It may affect how the purchasing practices of one commercial buyer differ from those of another and how a purchase decision is likely to be made.
3) Interpersonal Factors
Within the organization, different levels of employees, managers, and other authorities have differing perspectives on the purchase, application, and preference of products, all of which influence the purchasing decision. These variables may include the buyer’s income and interest, their educational background, their work title, their purchasing and decision-making authority, etc.
4) Individual Factors
In every organization, there is a single individual responsible for acquiring goods and services on behalf of the organization. These individuals influence the purchasing choice of the firm. Such characteristics may include the buyer’s age, income, educational background, employment status, personality, culture, and risk tolerance, among others.
