Organizational Buying Process

Dr. Priyanka Suresh

 Buying Process
Consumer Buying Process
Five stages:
1. Recognition of a problem or need.
2. Search for information.
3. Evaluation of alternatives.
4. Make purchasing decisions.
5. Post-purchase behavior
Organizational Buying Process
Eight stages:
1. Problem/ need recognition.
2. Decide characteristics and quantity of the needed
product.
3. Develop specifications/ description of the needed
product (technical help)
4. Search for and qualifications of potential suppliers.
5. Obtain and analyze supplier proposals (RFPs &
RFQs)
6. Evaluate proposals and select suppliers.
7. Select an order routine.
8. Performance review.
 Types of Buying/Purchase Situations (Buyclasses)
1. New Task
• Company buys the product for the first time.
• Buyers have limited knowledge and no previous experience.
• Hence, more information, risk, decision time and people involved.
2. Modified Rebuy
• Due to existing suppliers’ poor performance, need for change in
specifications, cost reduction or quality improvement.
• Hence, search for information for alternate supplier(s).

3. Straight Rebuy
• Buying firm places repeat orders with existing suppliers.
• Due to existing suppliers’ good performance
• Routine and low risk decision; less information needed.
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Marketing Strategies for Different Buying Situations

1.Strategies for new task
• Need to buy anew may be due to internal (like diversification) or external
factors.
• If buyer undertakes expansion/ diversification project, they might adopt
extensive problem-solving approach involving all stages of buying.
• Suitable solution a priority than lowest price
• Hence, selling firm should involve its sales team from the very initial stages of
the buying process-
2. Strategies for modified rebuy
• Salesperson from existing supplier should be continuously in touch with
buying firm’s requirements and take prompt actions if any changes occur.5/15
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• Salesperson from potential supplier should find out reasons why the
buying firm is changing existing supplier and make proposal that gives
performance guarantee. Also, understand buying firm’s purchase
needs, buying orientation, purchase practices, supplier selection
criteria, and key influencers for developing effective marketing strategy.
3. Strategies for straight rebuy
• Existing supplier should maintain good product and service quality,
buyer relationship and be responsive to buying firm’s changing needs.
• Potential supplier salesperson to regularly find if any dissatisfaction
arises with existing supplier(s), offer something that gives large
benefits to the buyer firm or get a small initial order and increase
business share over time period.
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Buygrid Framework
Buyphases Buyclasses
New Modified Straight
Task Rebuy Rebuy
1. Problem/need recognition Yes May be No
2. Characteristics, Quantity of needed product Yes May be No
3. Specification of the needed product Yes May be No
4. Potential suppliers’ search Yes Yes No
5. Obtain and analyze supplier proposals Yes Yes May be
6. Evaluate proposals and select suppliers Yes Yes No
7. Select an order routine Yes Yes May be
8. Performance review Yes Yes Yes

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Multiple Buying Influences
The Buying Center
• The buying center or purchase committee consists of representatives of
various functions, who make buying decisions and share common objectives
and risks.
• The size of buying center varies for different firms and buying situations.
• Key influencers are the few most influential individuals, who influence the
buying process. Identifying key buying influencers is an important and difficult
task of salespeople.
• Buying center members are :
- Top management persons
- Technical persons: Key influencers for new task and modified rebuy situations
and technical products.
- Buyers/purchase executives: Key influencers for straight rebuy situation.
- Commercial persons: Finance and Marketing persons 8/15
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Roles in Organizational Buying

• Users use the product. Sometimes they initiate purchase action.
• Buyers/purchase executives/purchasing agents implement purchase
procedure.
• Influencers are individuals who influence the buying process
(technical people, design engineers- sometimes even individuals
outside the firm like architects, consultants etc.)
• Deciders are members who make buying decisions on the supplier or
the brand of a product. For routine/small value purchases- buyers
may be the deciders; for complex products they may be different.
• Gatekeepers control information to buying center members.

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Factors Influencing Organizational Buying
Behavior
Buying determinants theory states that organizational buying
behavior is influenced by:
1. Organizational
2. Individual
3. Environmental
4. Market

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 1) Organizational factors include

(i) The technology of the buying organization

a) Unit Production (customized final product)
b) Mass Production ( Standardized, high volume final product)
c) Process Production (Processing of raw materials used in other industries-
commoditized final product)
(ii) The role of purchasing function
Expanded to include strategic issues like identification of key strategic suppliers, creating
long term value and effective use of e-capabilities
(iii) The purchasing orientation of the buying organization
May not only vary within organizations of the same industry but may also vary between
various products of the same organization.
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Factors Influencing Organizational Buying Behavior
(Continued)
2) Individual factors include
(i) Demographic.
(ii) Psychological.
3) Environmental factors include mainly:
(iii) Economic.
(iv) Technological.
(v) Political.
4) Market factors in a particular market include :
(vi) Number and relative size of competitors
(vii)Number and relative size of customers.
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The Sheth Model of Organizational Buyer Behavior

Componet-1 Componet-2 Componet-3

Differences in Variables that determine if • Methods used for

individual buyers’ the buying decision is
autonomous or joint: conflict resolution Situational Factors:
expectations • Product specific in joint Labour disputes,
caused by factors: factors: Time pressure,
decision making M&A etc.
perceived risk, type of
• Background purchase process
• Information • Company specific • Problem solving
factors: Organizational
sources orientation, size and • Persuasion Supplier or Brand
• Past purchases decentralization • Bargaining choice
• Perceptional degree
• Politicking
distortion
• Active search
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Various Aspects of Purchasing Function

1. The purchasing objectives.
2. The strategic issues in purchasing.
3. The contemporary purchasing practices.
The Purchasing Objectives
• Delivery / Availability.
• Product quality.
• Lowest price.
• Service quality.
• Good long-term supplier relationship.
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The Strategic Issues in Purchasing

• Identifying key strategic suppliers for collaborative
relationships for developing an effective supply chain.
• Searching and finding the best and cost-effective
suppliers through global sources.
• Creating a long-term value by using the abilities of
suppliers.
• Creating and using an effective e-procurement system.

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Contemporary Purchasing Practices

• Just-in-time (JIT) delivery system
• Outsourcing
• World-sourcing
• Single-sourcing
• Multi-sourcing
• Value analysis
• Adoption of information technology.

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