Organizational Buying Behavior

1
Organizational Buying Behavior

• David Forlani
• University of Colorado at Denver and Health
  Sciences Center

2
Overview

• Defining OBB Types and Levels
• Decision Making
• A Very Basic Model
• Comparing CBB with OBB
• Decision Influences
• Environmental
• Organizational
• Interpersonal
• Individual

3
Why Are Marketers Concerned with Understanding
the Buying Behaviors of Consumers and
Organizations?

• This information provides the foundation for all
  marketing decisions relative to a particular
  market.
• It is the basis for forming ongoing relationships.

4
Defining Organizational Buyers

• Industrial Firms that transform raw materials.
  They add value by creating form utility for
  commercial or consumer markets
• Resellers Do not create form utility, but add
  value by providing time and place utility.
  Resellers operate in commercial and consumer
  markets and are often referred to as
  distributors, wholesalers, jobbers and retailers
• Governments Generally consume what they buy but
  use buying processes like organizations

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Examples of Organizational Exchanges
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How Do Organizations Decide?
Problem identification
Information search
Evaluation of alternatives
Feedback
Purchase
Postpurchase evaluation
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Levels of Problem Solving
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Differences Between Organizational and Consumer
Markets (1 of 3)
Demand Characteristics
The demand for industrial goods and services
is 1. Derived from the demand for consumer goods
and services. 2. Relatively inelasticprice
changes in the short run are not likely to
significantly affect demand. 3. More erratic
because small increases or decreases in consumer
demand can, over time, strongly affect the demand
for manufacturing plants and equipment. 4. More
cyclical.
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Differences Between Organizational and Consumer
Markets (2 of 3)
Market Demographics

• Compared to Consumers, Organizational buyers are
• Fewer in number.
• Larger in size.
• Geographically concentrated.

10
Differences Between Organizational and Consumer
Markets (3 of 3)

• Characteristics of Buyer Behavior
• Compared with markets for Consumer goods,
  Organizational markets are characterized by
• The use of professional buying specialists
  following prescribed procedures.
• Closer buyerseller relationships.
• Presence of multiple individuals in the buying
  process (Relevant Others).
• More apt to buy on specification than price.

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Illustrating Process Differences
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Influences on Organizational Buyers Behavior
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Environmental Influences

• Economic Outlook Overall Demand
• Primary Demand Market Strength
• Cost of Money Impact of Financing
• Supply Conditions Time Availability
• Rate of Tech Change Demand Stability
• Political Reg Devels Legal Concerns
• Competitive Devels Industry Situation

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Organizational Influences

• Objectives Focus-Effectiveness/Efficiency
• Organizational Structure Level of Centralization
• Policies Ability to Make Changes
• Procedures Process Rules
• Systems Compatibility Issues (esp. small firms)

15
Interpersonal Influences

• Authority Formal Decision Latitude
• Status Informal Decision Latitude
• Empathy Level of Understanding
• Persuasiveness Negotiation Skills

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Individual Influences

• Age Flexibility
• Education Complexity of Presentation
• Job Position Relative Decision Role
• Personality Job Perspective
• Risk Attitudes Willingness to Change Status Quo

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The Buying Center
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The Relative Influence of Various Functional
Departments at Different Stages in Two Types of
Organizational Purchasing Decisions (1 of 2)
Straight rebuy
Relative influence
Purchase stages
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The Relative Influence of Various Functional
Departments at Different Stages in Two Types of
Organizational Purchasing Decisions (2 of 2)
New buy
Relative influence
Purchase stages