Organizational Buying Behavior

❑ The decision-making process by which formal

organizations :
establish the need to purchased products and services
identify, evaluate
choose among alternative brands and suppliers
Buying Situations
❑ The business buyer faces many decisions in making
a purchase .
❑ The number of decisions depends on the buying
situation:
• complexity of the problem being solved
• newness of the buying requirement
• number of people involved
• time required
Stages in the Buying Process
❑ Problem Recognition
❑ General Need Description &Product Specification
❑ Supplier Search
❑ Proposal Solicitation
❑ Supplier Selection
❑ Order-Routine Specification
❑ Performance Review
Types of buying situations
◻ Straight re-buy :
The purchasing department reorders on a routine basis
(e.g., office supplies, bulk chemicals) and chooses
from suppliers on an "approved list” .
"Out-suppliers" attempt to offer something new or to
exploit dissatisfaction with a current supplier
❑ Out-suppliers try to get a small order and then enlarge
their purchase share over time.
◻ Modify re-buy :
The buyer wants to modify product specifications,
prices, delivery requirements, or other terms .
❑ The in-suppliers become nervous and have to protect
the account .
❑ The out-suppliers see an opportunity to propose a
belter offer to gain some business.
◻ New Task :
A purchaser buys a product or service for the first time
.
Participants in the Business Buying
Process
❑ The Buying Center
It is composed of "all those individuals and groups
who participate in the purchasing decision-making
process, who share some common goals and the
risks arising from the decisions.
Members in buying center
❑ Initiators : Those who request that something be
purchased.
❑ Users : Those who will use the product or service.
In many cases, the users initiate the buying
proposal and help define the product requirements.
❑ Influencers : People who influence the buying
decision. They often help define specifications and
also provide information for evaluating
alternatives. Technical personnel are particularly
important influencers.
❑ Deciders: People who decide on product
requirements or on suppliers.
◻ Approvers : People who authorize the proposed
actions of deciders or buyers.
❑ Buyers : People who have formal authority to
select the supplier and arrange the purchase terms.
Buying Center Influences
❑ Buying centers usually include several participants
with differing interests, authority, status, and
persuasiveness .
❑ Each member of the buying center is likely to give
priority to very different decision criteria.
◻ For eg : financial personnel may focus on the
economics of the purchase; production personnel
may be concerned mainly with ease of use and
reliability of supply
The purchasing/procurement process

❑ Every organization has specific purchasing

objectives, policies, procedures, organizational
structures, and systems.

❑ In principle, business buyers seek to obtain the

highest benefit package (economic, technical,
service, and social) in relation to a market
offering's costs
Purchasing Orientations
❑ In the past, purchasing departments occupied a low
position in the management hierarchy .
❑ But now time has changed .
❑ Recent competitive pressures have led many
companies to upgrade their purchasing departments
.
 Company purchasing orientations:
❑ Buying Orientation :
❑ The purchaser's focus is short term and tactical.
❑ Buyers are rewarded on their ability to obtain the
lowest price from suppliers for the given level of
quality and availability
❑ Buyers use two tactics: commoditization, where they
imply that the product is a commodity and care only
about price; and multi-sourcing, where they use
several sources and make them compete for shares of
the company's purchases.
❑ Procurement Orientation :
❑ Buyers simultaneously seek quality improvements and
cost reductions.
❑ Buyers develop collaborative relationships with major
suppliers and seek savings through better management
of acquisition, conversion, and disposal costs.
Supply Chain Management Orientation
❑ Here , purchasing role is further broadened to
become a more strategic , Value-adding operation.
❑ Purchasing executives at the firm work with
marketing and other company executives to build a
seamless supply chain management system from
the purchase of raw materials to the on-time arrival
of finished goods to the end users.
Purchasing Processes
❑ Marketers need to understand how business
purchasing departments work .
◻ These departments purchase many types of
products, and the purchasing process will vary
depending on the types of products involved.
Managing Business-to-Business
Customer Relationships
❑ Business marketers must form strong bonds and
relationships with their customers and provide them
added value .
❑ Some customers, however, may prefer more of a
transactional relationship .
Institutional market
❑ The institutional market consists of schools,
hospitals, nursing homes, prisons, and other
institutions that must provide goods and services to
people in their care.
❑ Buyers for government organizations tend to
require a great deal of paperwork from their
vendors and to favor open bidding and domestic
companies .
Level of market
segmentation/marketing
◻ Mass Marketing
◻ Segment Marketing
◻ Niche Marketing
◻ Individual Marketing
◻ Local Marketing
Mass Marketing

◻ It is the strategy of targeting the entire potential

customer market by means of a single marketing
message .
◻ It does not target the specific requirements or needs
of customers .
◻ An example of mass marketing strategy is of
Baygon cockroach spray .
Segment Marketing
❑ Targeting a group of customers who share a similar
set of needs and wants.
❑ A marketer must be careful on two term a sector and
a segment .
◻ Thus the marketer does not create the segments; the
marketer's task is to identify the segments and decide
which one to target .
◻ Example : Scooter
Niche Marketing

◻ This strategy of marketing focuses on a small

customer segmentation .
◻ Marketers usually identify niches by dividing a
segment into sub segments .
◻ Example : Mountain Bike
Individual Marketing

◻ When the firm deals with each customer on a

one –to –one basis .
❑ In this marketing products are customized for
the customers .
❑ We can take example of Paint companies, such
as Asian paints, Kansai Nerolac, and Berger
Paints .
Local Marketing
◻ In local marketing , the marketer only focus and
concentrates in the local market .
◻ Example : Local TV channels , Local chain of
restaurants
Types of Consumer market
segmentation
◻ Geographic Segmentation
Dividing markets based on geographical consideration
–Eastern / Western / Central Nepal
–Himal/ Pahad/ Terai
–Cities
–Rural and urban areas
◻ Demographic Segmentation
Divide customer population based on different
variables
Age and Life Cycle
Gender
Income
Generation
Kool Kids for Kids
Targeting Men
Targeting Income
Psychographic Segmentation

◻ This type of market segmentation targets the :

Lifestyle
Personality
Interests
Behavioral Segmentation

◻ It refers to customer segmentation based on how

they use , behave or make decisions related to the
product .
Steps in Segmentation Process

◻ Needs-Based Segmentation:
Group customers into segments based on
similar needs and benefits sought by customer
in solving a particular problem.
◻ Segment Attractiveness: Using
pre-determined segment attractiveness criteria
(such as market growth, competitive intensity,
and market access), determine the overall
attractiveness of each segment.
◻ Segment Profitability: Determine
segment profitability.
◻ Segment Positioning: For each segment,
create a “value proposition” and product price
positioning strategy based on that segment's
unique customer needs and characteristics.
◻ Marketing Mix Strategy : Expand
segment positioning strategy to include all aspects
of the marketing mix; product, price, promotion
and place
Effective Segmentation Criteria
◻ Measurable – the size, purchasing power, and
characteristics of the segments can be measured.
◻ Substantial – the segments are profitable enough
to serve.
◻ Accessible – the segments can be effectively
reached and served.
◻ Actionable – effective programs can be formulated
for attracting and serving the segments
Segmentation, Targeting,
Positioning
◻ Segmentation
❑ grouping consumers by some criteria
Targeting:
❑

choosing which group(s) to sell to

Positioning:
❑

select the marketing mix most appropriate for the

target segment(s)