Marketing 1_The Buying Behavior of Organizational Markets

1. The Buying Behavior
of Organizational
Markets

2. Organizational Marketers
 Are those that buy goods for production purposes
or for reselling. They may be classified into the
following:
1. Industrial Marketers
2. Reseller Marketers
3. Government Marketers
4. Non-profit Organizations

3. Industrial Marketers
Are those organizations that require
goods and services for the purpose of
producing good services. The product
output of the industrial firms are sold for
profit.

4. Reseller Marketers
Are organizations that buy goods
and services which they later sell at a
profit. Wholesalers and retailers of
drugs will qualify as the reseller
market of drug manufacturing
companies.

5. Contrasting Characteristics of
Organizational and Consumers Markets
Characteristics Organizational Market Consumer Market
1. Few Buyers YES NO
2. Close supplier/customer relationship YES NO
3. Geographical concentration YES NO
4. Derived demand YES NO
5. Large Buyers YES NO
6. Inelastic demand YES NO
7. Fluctuating demand YES NO
8. Professional purchasing YES NO
More buying influences YES NO

6. Organizational Markets
1. Industrial Markets
Ex. -Farms, fisheries, forestry, mining operations, construction firms
- Financial institutions and other service providers
2. Reseller Markets
Ex. Wholesalers and Retailers
3. Government Market
Ex. National and Local
4. Non-profit Organizations
Ex. National Groups (Boy Scout, Red Cross, Knights and Columbus)
Local Groups (Churches, Colleges, Museums)

7. Government Markets
Are government agencies that buy
products and services for use in the
production of public goods and services.
These include the national, regional,
provincial, and municipal governments.

8. Non-profit Organizations
Are nongovernmental
organizations that serve their
customers but do not have profits
as organizational goal.

9. Organizational
Buying and Its
Characteristics

10. Unique Characteristics of
Organizational Buying
1. DEMAND
2. POTENTIAL BUYERS
3. BUYING OBJECTIVES
4. BUYING CRITERIA
5. SIZE OF ORDER OR PURCHASE
6. BUYER-SELLER INTERACTION
7. THE BUYING CENTER

11. Demand
Demand for product and services as required
by organizations are derived from the demand
for consumer products and services. The
consumer demand for insurance will be the
basis of insurance firms in buying reinsurance
services.

12. Potential Buyers
Are buyers that are capable of
buying a certain product.

13. Buying Objectives
Buying based on facts
Buying of products and
services to satisfy their
respective needs.

14. Buying Criteria
1. Price
2. Ability of seller to meet the quality specifications required for the
item
3. Ability of the seller to meet required delivery schedules
4. Technical capability of the seller
5. Warranties and claim policies in the event of poor performance
6. Past performance of the seller on previous contracts
7. Production facilities and capacity of the seller

15. Size of Order or Purchase
The size of goods purchased by an
organization is typically larger than those
purchased by an individual consumer.
Usually, the organization sets certain
requirements concerning the size of the
order.

16. Buyer-Seller Interaction
Interaction between buyer and seller in
consumer buying is different from those in
organizational buying. The complexity of
organizational buying makes it necessary for
buyer and seller interaction to be more time
consuming.

17. The Buying Centre
Is a group consisting of several people from
different departments who participate in the
decision process of buying. The members share
knowledge of information relevant to the
purchase of a product or service.
Is formed to make purchasing decisions.

18. Kinds of Buying Process
1. New-task buying happens when the organization has a new need
and the buyer wants a great deal information.
 setting product specifications
 Identifying sources of supply
 Establishing an order routine for possible future purchases.
2. Straight rebuy is a routine repeat purchase and happens when
previous purchase is satisfactory
3. Modified rebuy is undertaken when the items purchased remain the
same, but the members of the buying centre are not satisfied with
the products quality, price or the service provided by the supplier.

19. Organizational Buying Process
Characteristic New-Task
Buying
Modified Rebuy Straight Rebuy
Time required Much Not so much Little
Multiple influence Much Not so much Little
Review Supplier Much Not so much None
Information needed Much Not so much Little

20. Participants in Organizational Buying
Process
1. USERS are the ones who will use the product or service that is the subject of
purchase.
2. INFLUENCERS are persons who influence the buying decision.
3. DECIDERS are the persons who make decisions on product requirements and
suppliers.
4. APPROVERS are the persons who authorize the propose actions of deciders or
buyers.
5. BUYERS are the persons who are authorized to select the supplier, and arrange
the terms of purchase.
6. GATEKEEPERS are the persons who have the power to prevent sellers or
information from reaching members of the buying centre.

21. Purchase Decision-making Process
in Organizations
1. Recognition of a problem or need
2. Search for information about products and
suppliers
3. Evaluation and selection of supplier
4. The purchase
5. Performance evaluation and feedback

22. Recognition of a Problem or Need
 When someone in the business firm recognizes a need that can be satisfied
by buying the appropriate product or service, the purchasing process has
begun. However, there are some factors that must be considered.
1. Organizational purchasing is a result of product and operational needs
2. An organization’s need can be identified by different employees of the firm
3. Progressive firms are engaged in requirements planning
4. The firm needs to determine product specifications.

23. Search for Information About
Products and Suppliers
 If the problem or need has been recognized, the next
logical step is to find possible solutions. As such, the
following must be undertaken:
1. A listing products or services that will solve the
problem.
2. Make or buy analysis.
3. Information must be gathered about potential
suppliers.

24. Evaluation and Selection of
Suppliers
 Both the consumers and organizations evaluate alternative suppliers
and their products or services. The criteria used and the importance of
each vary according to the following:
1. The quality of goods or services being considered for purchase
2. The characteristics and need of the buyer
3. The supplier’s ability to meet quality standards
4. The supplier’s ability to meet delivery schedules
5. The price
6. The technical ability of the supplier.

25. Rating Sheet for Suppliers
Choice
Criteria
Importance
Weight
Supplier A
Rating Score
Supplier B
Rating Score
Supplier C
Rating Score
Product
Quality
7 9 63 6 42 7 49
Product
Reliability
6 9 54 6 36 8 48
Delivery
Reliability
10 5 50 10 100 7 70
Price 7 6 42 9 63 9 63
Technical
Reliability
6 8 48 7 42 7 42
Total 257 283 272
Rank 3 1 2

26. The Purchase
In support of the efficiency objective,
organizations prefer to routinize their
purchases. If the new-task buying is
satisfactory, the organization would shift to
the straight rebuy situation for the repeat
purchases.

27. Performance Evaluation and
Feedback
 The efficiency objective of the organization is carried through all activities of
the firm including purchasing. One way is performance evaluation of the
product and the suppliers. The evaluation commences as soon as the products
delivered. The following are steps undertaken:
1. The buyer inspects the delivered products to determine whether it meets the
required specifications
2. The user will determine if the purchased product performs according to
expectation
3. The buyer evaluates the supplier’s performance on:
a. promptness of delivery b. product quality c. after sales service

28. What Influences Organizational
Buyers?
1. ECONOMIC
Ex. price, product, quality, and service
2. PERSONAL
Ex. Favors, attention, and risk
avoidance

29. Factors Classifications of
Influences on Organizational
Buyers

30. 1. ENVIRONMENTAL FACTORS
The economic situation, as well as developments in technology,
politics, and competition are the environmental factors affecting
organizational buying.
2. ORGANIZATIONAL FACTORS
Organizations are different in terms of policies, organizational
structure, procedures, systems, and past experiences.
3. INTERPERSONAL FACTORS
Members of the organization’s buying centre will have different
interests, authority, and persuasiveness.
4. INDIVIDUAL FACTORS
Each buying centre member has his own personal motivations,
preferences and perceptions.

31. Thank you.