Consumer and Organisational Buyer Behaviour

• Differences between consumer and organisational

buying
• Consumer buyer behaviour
• Factors affecting the consumer decision-making
process
• Organisational buyer behaviour
• Factors affecting organisational buyer behaviour
• Developments in purchasing practice
• Relationship management
 Purpose of Buying
• The individual consumers buy goods and
services for ultimate use or satisfy their needs.
The buying purpose of such consumers is not to
earn profit by reselling the goods and services

• The organizations buy goods and services for

their business needs. The buying purpose of
them is to earn profit by using and reselling the
goods and services
 Quantity
• Although consumers buy various kinds of goods, the quantity
of goods remains small. They buy only the necessary
quantity of goods, which they need for regular use.

• Organizational buying is done in large quantities. There are

several reasons why organizations must buy the goods they
need in bulk. In the first place, they use large quantities of
each item and must maintain inventories at a level high
enough that they will not run out of stock. Secondly, it is
cheaper and more efficient to make large-volume purchases.
 Purchase Decision
• Consumer buying takes decision by consumers
themselves. Sometimes they can consult with family
members and friends. They need not fulfill any
formality like organizational buying.

• Organizational purchasing is a rational process

because the purchasing behavior of organizations is
guided by objective factors having to do with
production and distribution. It takes long time than
consumer buying.
 Market Knowledge
• Most of the consumers may not have adequate knowledge
and information about market situation, available goods and
services, etc. The educated customers may be aware and
have knowledge about market and goods.
• Organizational purchase criteria are specifically defined.
Organizational buyers usually have fewer brands to choose
from than do individuals, and their purchases must be
evaluated on the basis of criteria that are specific to the
overall needs of the organization. The organizational buyers
have full knowledge of market and suppliers
 Types of Goods
• Consumers buy many goods to use to satisfy
personal or family needs.

• Organizational buyers buy limited goods to

use to conduct business.
 Effect
• Consumer buying behavior is effected by age,
occupation, income level, education, gender etc. of
consumers

• Many individuals are involved in the buying process.

Within large organizations, rarely is one individual
solely responsible for the purchase of products for the
purchase of products or services. Instead, many
individuals and departments may be involved and
departments may be involved in the buying process
 Buying Process
• The consumer buying process is very simple.
No need to fulfill any formality. There is also
no need to maintain extensive contact with
sellers
• Buyers and sellers in the organizational market
must maintain extensive contact
 Consumer buyer behaviour

• Economic Man Model

• In this model, consumers follow the principle of maximum utility based on the law
of diminishing marginal utility. Economic man model is based on the following
effects −

• Price Effect − Lower the price of the product more will be the quantity purchase.

• Substitution Effect − Lower the price of the substitute product, lower will be the
utility of the original product purchase.

• Income Effect − When more income is earned, or more money is available,

quantity purchased will be more. The economic theory of buyer’s decision-making
was based on the following assumptions −
 Learning Model

• This model suggests that human behaviour is

based on some core concepts − the drives,
stimuli, cues, responses and reinforcements
which determine the human needs and wants
and needs satisfying behaviour
• Drive − A strong internal stimulus which compels action.

• Stimuli − These are inputs which are capable of arousing drives or motives.

• Cues − It is a sign or signal which acts as a stimulus to a particular drive.

• Response − The way or mode in which an individual reacts to the stimuli.

• If the response to a given stimulus is “rewarding”, it reinforces the possibility of similar

response when faced with the same stimulus or cues. Applied to marketing if an
informational cue like advertising, the buyer purchases a product (response); the
favourable experience with the product increases the probability that the response
would be repeated the next time the need stimulus arises (reinforcement)
 Engel, Kollet, Blackwell (EKB) Model

• The EKB Model expands on the Theory of Reasoned Action, and lays out a
five-step process that consumers use when making a purchase. The first
step, input, is where consumers absorb most of the marketing materials
they see on television, newspapers or online. Once the consumer collects
the data, he or she moves into information processing, where the
consumer compares the input to past experiences and expectations.

• Consumers move to the decision-making stage after a period of thought,

choosing to make a purchase based on rational insight. Consumers are
affected in the decision-making phase by process variables and external
influences, including how the consumer envisions his or herself after
making the purchase.
• Under the EKB Model, marketers have two periods
where their input is the most valuable. During the initial
information stage, marketers must provide consumers
with enough information about the product to drive the
consumer to keep the company’s products under
consideration for purchase. Marketing becomes a factor
again in the phase of external influences. Lifestyle brands
are very good at instilling a desire in the consumer to
look or feel a certain way with the product, even if the
brand’s product is not fundamentally different from the
competition
 AIDA model
• AIDA model assumes four consecutive reactions of the consumer, whose first letters are
indicated by the acronym AIDA:

• A - Attention

• The first stage of the reaction of the recipient of the marketing message is to draw attention to
the product or offering. Effective advertising message is therefore geared primarily to stick in the
minds of consumers and then to attract interest of the largest possible number of them
influencing move to the next stage. Marketers must guess the needs and interests of the
potential consumer and build the marketing message according to it.

• I - Interest

• The next step is to arouse interest in the product, its properties and benefits to be achieved
through the purchase. The potential customer is ready to make efforts to find additional
information about the interesting product which allow marketer to create the desire of
ownership in the mind of the customer.
• D - desire

• Generating the desire to take advantage of the offer presented in the

marketing communication is the next step in the AIDA model. The consumer
receiving the message has to be convinced that only this product best meets
his need. When this desire arises, then the customer will look for ways to
implement it (satisfy his needs).

• A - Action

• Final action taken by the recipient of marketing message in response to

effective communication. Convincing consumers to purchase a product or
service and his determination to achieve his felt desire is crucial to the success
Factors Affecting Decision Making Process of a Consumer

• Various factors influence the decision-making

process of a consumer. Some of these are
internal factors or personal influences that are
individualistic in nature. These factors are not
visible, though they influence the consumer to
a great extent. Learning, perception,
motivation, attitude, self-concept, etc. are
some such factors
• Perception

• Perception is the process by which a person

selects, organizes, and interprets sensory
stimulation to form a meaningful picture of
the world. It is the process by which a
consumer makes sense of the information that
he receives
 Selective Attention

• Exposure is the first step in the process of perception. The consumer has to first come
across the stimulus or be exposed to it, to interpret it. Attention is the next step in this
process.

• Customers screen those stimuli that are not meaningful to them or they are not consistent
with their experiences and beliefs. Consumers attend to only a small percentage of the
communication to which they are exposed to.

• Customers pay more attention to stimuli that contrast with their background than to stimuli
that blend with it.

• Size, color, position, and movement of the stimuli also affect attention.

• Customers also notice those images that relate to their needs and those that provide
surprises.
 Selective Distortion

Consumers process the information they have paid attention to. Consumers assign
meanings to these stimuli while interpreting them.

Consumers distort information, attitudes, and views. They may pretend that they
misheard the message or they can discount the message source. Therefore, it is important
to present the message clearly and use a highly credible source to minimize distortions.

Distortion can occur as people interpret the same information differently. For instance, a
cheaper price may signify low quality to one consumer and value for money to another.

Framing is the way information is presented to people. The message should be positively
reinforced.
Colors also influence interpretations. For instance, blue and green are considered to be
cool colors and evoke feelings of security
 Selective Retention

Only a selection of messages is retained in the customer’s memory. These

messages are in line with the consumer’s existing beliefs and attitudes.

Selective retention reduces cognitive dissonance. For instance, when reading

reviews of a recently purchased car, only positive messages are remembered.

The message about the product from word of mouth and advertising must be
consistent to prompt retention.

Perception depends on the customer, the stimulus, and the situation.

Thus, the same message can be perceived differently by different individuals.

• The quality of the stimulus can be enhanced to improve
the probability of exposure, attention, and retention.
Communication should be designed in a manner so as
to enable distortion-free perception.

• The same consumer can perceive some communication

differently in varying circumstances. For instance, price
off during festival con be interpreted as an event-
related discount, whereas price offs at other times can
be judged as poor brand performance.
 Life Cycle

• Disposable income, purchase, and purchase requirements may vary according

to life cycle stages. Not all people follow the classic family life cycle stages.
Consumer’s priorities regarding which products to buy undergo changes in
different stages of the life cycle. His attitude towards life also changes.

• A teenager is most bothered about his appearance, pleasing his peer group
members, and having fun in life along with building a career. A middle-aged
career person who is recently married is bothered about securing the family’s
financial future, buying a house, etc.

• Parents in a family with young children are most concerned about the future of
the children and their comforts. In all these stages, a person’s spending pattern
varies.
• For teenagers, food, entertainment, and appearance would be the
main areas where the money is spent. Among newly married couples,
spending on house and furnishings, car, household essentials may be
the areas where the money is spent, and for couples with children,
their education, comforts are where the money goes.

• Therefore, in various stages of the family life cycle, priorities about

where to spend money, changes. The attitudes also undergo changes,
with teenagers typically reflecting ego-centrism and carefree nature,
and a full-nest family driven by responsibility and safety concerns.
 Organizational Buying Behavior: Meaning and Features
Meaning of Organizational Behavior

• The behavior of an organization shown in buying goods or

services is called organizational buying behavior. The
organizations buy goods or services for business use, resale,
produce other goods or provide services. Business and
industrial organizations buy goods to use in business or
produce other goods.
• Resellers buy goods for reselling them at profitable price.
Similarly, government bodies buy goods for office and
conducting development program. Non-governmental
organizations, hospitals, educational institutes, social
organizations, religious organizations etc. buy goods to provide
services to their followers or customers
• Users, influencers, buyers, deciders and gate keepers take part in
organizational buying process. Users who are the members of organization
use bought goods or services. They prepare buying proposal and help in
preparing product specification. They also help in preparing special report
and analyzing alternatives. Influencers influence buying decision.
• They help in preparing products specification and analyzing alternatives.
Those who buy goods or services are called buyers. Buyers select suppliers
and make buying terms and conditions. The person who makes the last
decision to buy goods or services from the selected supplier is called
decider. Goods are purchased from the supplier selected by the decider.
• Gatekeeper controls follow of information and other things. Technical staff
and personal assistant work as gate keeper
• Organizational buying behavior is influenced by
marketing stimuli and other stimuli. Marketing stimuli
includes product, price, place and promotion and other
stimuli includes economic, technological, political,
cultural and competition. These motivators bring
changes in the buyers’ behavior after they enter in an
organization.
• Or these stimuli influence selection of goods or service,
selection of suppliers, order, quantities, delivery time,
terms and conditions of goods or services etc
 Features of Organizational Buying Behavior

• Few buyers, close relationship between buyers

and suppliers, rational buyers, direct channel,
adaptation of certain purchase policy made by
business organization etc. are the main
features of organizational buying behavior
• 1. Few buyers
• As organization itself become buyer, organizational buyers are few in
number. But they buy in huge quantity. Organization buyers live scattered
in different places.

• 2. Close relationship
• Organizational buyers and suppliers have close relations. It may be long
lasting. Such relation has positive effect on future buying. Generally all
organizational buyer and suppliers have close relation.

• 3. Rational buyers
• Buyer becomes rational in organizational buying. Professional and trained
buyers are involved in buying. So, buying decision becomes rational.
• 4. Direct channel
• As organizational buyers buy a huge quantity, they buy goods
directly from producer. So, marketing channel becomes direct. But
some organizations buy goods through intermediaries or agencies.

• 5. Purchase policy
• The buying method of organization and persons become different.
An organization makes certain policy for buying and buys goods
according to the policy. Buying through quotation, buying through
tender, buying through contract etc. are the major buying policies
of organizations.
 Organizational Buying Process

• Organizational buying has certain process. The

following figure shows organizational buying
process. There are eight stages. An
organization may go through all of these
stages as following or it may change some of
them. This depends on buying quantity,
buying price, nature of goods, buying
frequency
• 1. Need recognition
• Organizational buying process starts from need recognition. In
an organization, a certain person recognizes need of certain
goods and after buying the needed goods, need is fulfilled.
Needs in organization can be recognized in two ways. They are:
external stimuli and internal stimuli. If a company decides to
produce new goods, it is internal stimuli. It needs to buy new
goods and equipments. Similarly, when a buyer observes trade
exhibition, s/he may make his/her idea to buy new goods.
Such idea is external stimuli, because this idea is made from
outer environment and materials should be purchased for this.
 2. Need description

• After the need is recognized, the buyers should

describe need. This task is completed in the
second stage of organizational buying process.
While describing need, features of needed
goods and needed quantity should be
described. If the goods have standard, this task
becomes easy; if otherwise, it becomes
complicated. Help of engineers, users and
consultants should be taken for complex goods.
• 3. Product specification
• The task of preparing specific description of goods is the third stage of organizational buying
process. In this stage, description performance of goods is prepared to solve the problems.
Technician’s help should be taken for this task. In this stage, the value of goods is analyzed.

• 4. Supplier search
• At this stage of organizational buying process, the buyer searches proper suppliers or sellers.
Buyer prepares a list of suppliers to select good and proper suppliers. This list is prepared by
looking at trade directory, searching in Internet, asking other companies for suggestions etc. If
the goods to be bought are new, complicated and costly, it needs long time to search suppliers.

• 5. Proposal solicitation
• Proposal solicitation is the fifth stage of organizational buying process. At this stage, buyer calls
best suppliers for submitting proposal. As the reaction, some send catalog or sellers to the
organization. If the product is costly and complicated, the buyer demands detailed proposal,
and if the product is technical, business organization calls for presenting the product itself
 6. Supplier selection

• At the sixth stage of organizational buying

process, buyers assess the proposal and select
one or more suppliers. For selecting the
suppliers, a list is prepared and rating is made
on the basis of their attribute and importance.
Then the best supplier is selected. Analysis of
the suppliers is done in the following ways
 7. Order routine specification

• After the best suppliers have been selected,

the buyer prepares final order. In this order, all
the matters such as attribute of goods,
quantity, specification, time for supply,
warranty, method of payment, service after
sale etc. should be clearly mentioned
 8. Performance review

• This is the last process of organizational buying. At

this stage, the buyer reviews suppliers’
performance. This type of review helps to take
decision whether to continue relation with the
supplier or change or end the relation. If the
performance of the supplier is satisfactory, the
relation can be continued; if it is somewhat
defective, if partial correction is made and the
relation is maintained. But if the performance is
disagreeable, it is broken