Chapter 3.1 Organizational Behavior

8/12/2019 Chapter 3.1 Organizational Behavior

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Chapter 4 1

Organizational

Buying Behavior


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Learning Outcomes

To define organizational buying behavior

To understand process of buyingdecisions by organizations

To discuss on the model of organizationalbuying behavior


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Organizational Buying Behavior the decision-making process by which

organisations establish the need for

purchased products and services, andidentify, evaluate and choose among

alternative brands and suppliers

Webster and Wind (1972)


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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."


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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.


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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 isready 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. Asthe 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 competitionwill follow subsequently.


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Organizational Buying Process

Problem recognition

Determine product dimensions and quantity

Precise description of product characteristics

Search and qualification of potential sourcesAcquisition and analysis of proposals

Evaluation of proposals and supplier selection

Selection of an order routine

Performance feedback and evaluation


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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


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e erm ne pro uc mens onsand 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 withothers 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


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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


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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.


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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


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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.


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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


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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.


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Determinants and definition

of organisational buying

Environment

Government regulations

Economic climate

Technological change

Derived demand

OrganisationStructure and style

Politics

Product useBuying centre

Group decisions

Individual behaviour

GatekeeperConflict 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


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Buying centre influences

Market factorscharacteristics whichdifferentiate organizational buying marketsfrom consumer markets (bulk, value, demand,geographical concentration, reciprocal tradingarrangements)

Company factorssize, specialisation,orientation

Buying situationnew buy, modified rebuy,straight rebuy

Product factorsessentiality, technicalcomplexity, value, consequence of failure,novelty, frequency


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Organization Buying Roles

Policy makersgeneral corporate policies dictate

purchase decisions

Purchasersperson with formal authority for ordering

Usersof product or servicemost concerned withperformance and ease of use

Technologistsspecialist knowledge allows

objective differentiation of product performance

Influencersanyone not in any of other categoriesinside or outside organisation

Gatekeeperopinion leadermay have another role

Decidersformal authority for approving purchase


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Models of organisational buying

THE SHETH MODEL

The psychological world ofthe decision maker

Product and companyvariables

Structure and methods forproblem solving

Situational factors

organisational buyingdecisions are often

determined by ad hocsituational factors and not byany systematic decisionmaking process

THE WEBSTER AND WINDMODEL

The firms environment

The organisation

The buying team(interpersonal influences)

The individual

the individual as the realdecision maker in the

organisation .motivation,personality, perception,learning and experience areall vital to the decisionprocess


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Sheths model of organisational buying


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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


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The Need for

Market Segmentation

Mass market ing

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

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

If firms ignored the differing customer needs, another firm likelywould enter the market with a product that serves a specificgroup, and the incumbent firms would lose those customers.


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Target marketing

on the other hand, recognizes thediversity 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 andtheir needs.


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Bases for Segmentation in

Consumer Markets

Consumer markets can

be segmented on the

following customer characteristics

Geographic

Demographic

Psychographic

Behavioralistic


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GeographicSegmentation

The following are some examples of geographic

variables often used in segmentation.

Region: by continent, country, state, or evenneighborhood

Size of metropolitan area: segmented according to sizeof population

Population density: often classified as urban, suburban,

or rural

Climate: according to weather patterns common tocertain geographic regions


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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


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Psychographic Segmentation

Psychographic segmentation groups customersaccording to their lifestyle. Activities, interests, andopinions (AIO) surveys are one tool for measuringlifestyle. Some psychographic variables include:

Activities Interests

Opinions

Attitudes

Values


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Behavioralistic Segmentation

Behavioral segmentation is based on actual customerbehavior toward products. Some behavioralisticvariables include:

Benefits sought

Usage rate

Brand loyalty

User status: potential, first-time, regular, etc.

Readiness to buy

Occasions: holidays and events that stimulate purchases


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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.

Chapter 3.1 Organizational Behavior

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