Organizational

Buying Behavior
Learning Outcomes
To define organizational buying behavior

To understand process of buying
decisions by organizations

To discuss on the model of organizational
buying behavior

Organizational Buying Behavior
the decision-making process by which
organisations establish the need for
purchased products and services, and
identify, evaluate and choose among
alternative brands and suppliers
Webster and Wind (1972)


The eight stage model
organizational buying process

The eight stages may be contracted depending
upon the nature of the purchasing situation.

The next focus of the chapter is a discussion of
the types of buying situations which occur in
organizational buying. These include "new task,"
"straight rebuy," and "modified rebuy."
Organizational Buying Situation
Straight rebuy
In this buying situation, only purchasing department is involved.
They get an information from inventory control department or section
to reorder the material or item and they seek quotations from
vendors in an approved list.
The "in-suppliers" make efforts to maintain product and service
quality. The "out-suppliers" have to make efforts to get their name
list in the approved vendors' list and for this purpose they have to
offer something new or find out any issues of dissatisfaction with
current suppliers and promise to provide better service.


Organizational Buying Situation
Modified rebuy
In this buying situation, there is a modification to the specifications of
the product or specifications related to delivery. Executives apart
from the purchasing department are involved in the buying
decisions. The company is looking for additional suppliers or is
ready to modify the approved vendors list based on the technical
capabilities and delivery capabilities.

New task buy
In this situation, the buyer is buying the product for the first time. As
the cost of the product or consumption value becomes higher, more
number of executives are involved in the process. The stages of
awareness, interest, evaluation, trial, and adoption will be there for
the products of each potential supplier. Only the products which
pass all the stages will be on the approved list and price competition
will follow subsequently.

Organizational Buying Process
Problem recognition
Determine product dimensions and quantity
Precise description of product characteristics
Search and qualification of potential sources
Acquisition and analysis of proposals
Evaluation of proposals and supplier selection
Selection of an order routine
Performance feedback and evaluation

Problem Recognition
The buying process begins when someone in the
company recognizes a problem or need that can be met
by acquiring a good or a service.
problem recognition can occur because of internal
or external stimuli
Internally, a new product may create the need for a
series of meetings to explain the product to the sales
force.
Externally, the buyer sees an ad or receives a call from a
hotel sales representative who offers a favorable
corporate program
Determine product dimensions
and quantity

Having recognized a need, the buyer goes on to
determine the requirements of the product and
to formulate a general need description.
The corporate meeting planner works with
others to gain insight into the requirements of
the meeting.
they determine the importance of the price,
meeting space, sleeping rooms, food and
beverage, and other factors

Product Specification
Once the general requirements are determined, the
specific requirements for the meeting can be developed.
Information often requested includes availability
of water, ceiling heights, door widths, security, and
procedures for receiving and storing materials prior to
the event.
A salesperson must be prepared to answer their
prospective clients questions about their hotels
capabilities to fulfill the product specification
Supplier Search
The buyer now conducts a supplier search to
identify the most appropriate hotels.
the buyer can examine trade directories, do a
computer search, or phone familiar hotels
Hotels that qualify may receive a site visit from
the meeting planner, who eventually develops a
short list of qualified suppliers.

Proposal Solicitations
Once the meeting planner has drawn up a short list of
suppliers, qualified hotels are invited to submit
proposals.
hotel marketers must be skilled in researching, writing
& presenting proposals
Proposals should be marketing oriented, not simply
technical documents.
they should position their companys capabilities and
resources so that they stand out from the competition
many hotels have developed videos for this purpose

Supplier Selection
In this stage, members of the buying
center review the proposals and move
toward supplier selection.
they conduct an analysis of the hotel,
considering physical facilities, ability to
deliver service, and the professionalism of
its employees.

Order-Routine Specification
The buyer writes the final order with the chosen hotels,
listing technical order-routine specifications of the
meeting.
the hotel responds by offering the buyer a formal
contract
The contract specifies cutoff dates for room blocks, date
when hotel will release the room block for sale to other
guests, and minimum guarantees for food and beverage
functions.
Many hotels & restaurants have turned what should have
been a profitable banquet into a loss by not having or
enforcing minimum guarantees
Performance Review
The buyer does a postpurchase performance
review of the product to determine if the product
meets the buyers specifications and if the buyer
will purchase from the company again.
It is important for hotels to have at least daily
meetings with a meeting planner to make sure
everything is going well and correct things that
did not go well.
This manages the buyers perceived service &
helps avoid a negative postpurchase evaluation
by the buyer.

Determinants and definition
of organisational buying
Environment
Government regulations
Economic climate
Technological change
Derived demand
Organisation
Structure and style
Politics
Product use
Buying centre
Group decisions
Individual behaviour
Gatekeeper
Conflict resolution
ORGANISATIONAL BUYING
the decision making process by which formal organisations
establish the need for purchased products and services and
identify, evaluate and choose among alternative brands and
suppliers Webster and Wind 1972
Buying centre influences
Market factors characteristics which
differentiate organizational buying markets
from consumer markets (bulk, value, demand,
geographical concentration, reciprocal trading
arrangements)
Company factors size, specialisation,
orientation
Buying situation new buy, modified rebuy,
straight rebuy
Product factors essentiality, technical
complexity, value, consequence of failure,
novelty, frequency
Organization Buying Roles
Policy makers general corporate policies dictate
purchase decisions
Purchasers person with formal authority for ordering
Users of product or service most concerned with
performance and ease of use
Technologists specialist knowledge allows
objective differentiation of product performance
Influencers anyone not in any of other categories
inside or outside organisation
Gatekeeper opinion leader may have another role
Deciders formal authority for approving purchase
Models of organisational buying
THE SHETH MODEL
The psychological world of
the decision maker
Product and company
variables
Structure and methods for
problem solving
Situational factors
organisational buying
decisions are often
determined by ad hoc
situational factors and not by
any systematic decision
making process
THE WEBSTER AND WIND
MODEL
The firms environment
The organisation
The buying team
(interpersonal influences)
The individual
the individual as the real
decision maker in the
organisation .motivation,
personality, perception,
learning and experience are
all vital to the decision
process
Sheths model of organisational buying
Market Segmentation
Market segmentation is the
identification of portions of the
market that are different from one
another. Segmentation allows the
firm to better satisfy the needs of
its potential customers
The Need for
Market Segmentation

Mass marketing
refers to treatment of the market as a homogenous group and
offering the same marketing mix to all customers. Mass
marketing allows economies of scale to be realized through
mass production, mass distribution, and mass communication.

The drawback of mass marketing is that customer needs and
preferences differ and the same offering is unlikely to be viewed
as optimal by all customers.

If firms ignored the differing customer needs, another firm likely
would enter the market with a product that serves a specific
group, and the incumbent firms would lose those customers.
Target marketing
on the other hand, recognizes the
diversity of customers and does not try to
please all of them with the same offering.
The first step in target marketing is to
identify different market segments and
their needs.

Bases for Segmentation in
Consumer Markets

Consumer markets can
be segmented on the
following customer characteristics
Geographic
Demographic
Psychographic
Behavioralistic
Geographic Segmentation

The following are some examples of geographic
variables often used in segmentation.

Region: by continent, country, state, or even
neighborhood

Size of metropolitan area: segmented according to size
of population

Population density: often classified as urban, suburban,
or rural

Climate: according to weather patterns common to
certain geographic regions

Demographic Segmentation

Some demographic segmentation
variables include:

Age
Gender
Family size
Family lifecycle
Generation: baby-boomers, Generation X, etc.
Income
Occupation
Education
Ethnicity
Nationality
Religion
Social class

Psychographic Segmentation

Psychographic segmentation groups customers
according to their lifestyle. Activities, interests, and
opinions (AIO) surveys are one tool for measuring
lifestyle. Some psychographic variables include:

Activities
Interests
Opinions
Attitudes
Values
Behavioralistic Segmentation

Behavioral segmentation is based on actual customer
behavior toward products. Some behavioralistic
variables include:
Benefits sought
Usage rate
Brand loyalty
User status: potential, first-time, regular, etc.
Readiness to buy
Occasions: holidays and events that stimulate purchases
Tutorial
Explain each steps in Consumer buying
behavior with examples

Explain each steps in Organization buying
behavior with examples.

Describe THREE (3) types of buying
situation.