LECTURE 2: ORGANISATIONAL

B2B
BUYING BEHAVIOR AND MARKET Marketing
STRUCTURES (BUSI4508)
DR. DILIP S. MUTUM
TODAY’S OBJECTIVES

To examine the types of organisational

buyer and their buying needs.
To consider the influence of macro and
micro factors on organisational decision
making.
To examine differing types of market
structures on buying processes.

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TYPES OF ORGANISATIONAL CUSTOMER
Commercial Institutional Governmental

• Distributors • Government- • Health

• OEMs related • Education
• User (hospitals, • Military
organizations universities) • Transportation
• Retailers • NFP • Civil service
organizations
(charities,
churches)

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 INFLUENCES ON ORGANISATIONAL
PURCHASING DECISIONS

External Internal Individual Relational

1.Socio economic 1.Nature of firm’s 1.Perception of 1.Relational
changes business consequences approaches to
2.Globalisation of 2.Structure of 2.Extent of personal inter-firm
business purchasing influence relationships
3.Customer power 3.Purchasing policy 3.Social 2.Transactional
4.Market stagnation 4.Purchasing ethics relationships approaches to
5.Process mentality 5.Systems inter-firm
relationships
6.Technology

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 INTERNAL> NATURE OF THE FIRM’S
BUSINESS

Unit Production: Mass Production: Process Production:

Products made to specific Supplies high-volume Centres on processing of
customer requirements, standardized products . material for use in other
often extremely Often focussed on good supply chains rather than
technologically complex value and production assembling of finished
and large in scale. efficiency. products.
Draws heavily on suppliers Suppliers ensure a Typically buy via
of materials and consistently high quality of commodity markets.
components for assistance goods via a smoothly
in design and production running supply chain.
know-how.

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 TYPICAL ORGANISATIONAL BUYING
CLASSIFICATIONS
SOURCE: ENIS (1980)

Straight rebuy Modified rebuy New task

Bridges,
Some utilities Consulting dams
(electricity, services
water, gas)
New Custom-built
trucks offices
Complete
Pure negotiation
routine

Bulk Electrical Installations

chemicals components (machinery)

Office PC Weapon
supplies terminals systems

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POTENTIAL STAGES IN THE
ORGANISATIONAL BUYING PROCESS
1. Problem recognition

2. General need description

3. Specification

4. Supplier search

5. Proposals submission

6. Supplier selection

7. Order process specification

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8. Performance review
SINGLE VS. MULTIPLE SOURCING
SOURCE: WILSON (1999, P50)
Multiple sourcing advantages Single sourcing advantages

Avoids supplier dependence

One relationship to manage
Bargaining leverage
Greater commitment
(to maintain low prices)
Clearer responsibilities
Insurance against disrupted
supply
More leverage over supplier
Not limited to capacity of
Simplified monitoring
single supplier
Easier supplier training
Access to more supplier data
Cheaper tooling costs
Stimulus to competition
Simplified scheduling
Greater prompt to innovation
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 FACTORS AFFECTING PRICE SETTING
Company
Costs
Corporate objectives
Marketing plans
Competitors Product range Customers
Offerings Value perceptions
Pricing/costs Perceptions of product/firm
Competitive structure Ability to pay

Price
Setting

Context/
Channels Environment
Costs Economy
Capabilities Regulations
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Locus of power Currency
OUTSIDE-IN AND INSIDE-OUT PRICING
STRATEGIES
Outside- •• Price skimming
Penetration pricing
in • Target pricing

pricing

Inside- •
•
Mark-up/break-even
Peak load pricing
out •
•
Marginal cost pricing
Suggested resale pricing
pricing

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PARTICIPATION IN E-MARKETPLACES
Cost of participation
• Fee?

Confidentiality/Security
• Identity secret?
• False bidding?
Information within e-market
• Real time?
• Dissemination?
• Access?
Access to e-market
• Open to all?
• Group buying?
• Rival e-marketplaces?
• Future participation?

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RELATIONAL CONSIDERATIONS IN PRICE
NEGOTIATIONS
Transactional IORs Collaborative IORs

• Bundling • Premium pricing

goods/services opportunities
• Unbundling options • De-featuring
• ‘Milking’ customers • Sharing information
• Short-term ROI vs. • Value of learning
lifetime value • Inertia
• Price reduction
pressure & trust
• Umbrella
agreements

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SUMMARY
Different organizational markets and customers have different needs
Many factors influences industrial purchasing decisions
A number of internal and external factors can affect price-setting in
organizational markets

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THANK YOU Any Questions?

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