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Marketing Analysis: Organisational Buyer Behaviour Jonathan Freeman.

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2 Marketing Analysis: Organisational Buyer Behaviour Jonathan Freeman

3 Buyer Behaviour Goals To understand: Models of organisational purchase decision processes. Influences on purchase decisions: –What –How Marketing implications of the models.

4 Consumer and Organisational Models of Purchase Decisions: Common Features Decision-makers move through stages to the decision. The extent to which all stages of each model applies varies with the nature of the task, and the nature of the people or organisation involved.

5 Organisational Vs Consumer Purchase Decisions Market Structure & Demand Nature of the Buying Unit Types of Decisions Decision process Size of Purchase Formalisation Professionalism Group involvement Time

6 Models of Buying Decision Processes Problem Recognition Information Search Evaluation of Alternatives Purchase Post-Purchase Evaluation CONSUMER Problem Recognition Develop Specifications Information Search (Products & Firms) Evaluation of Alternatives Select & Order Post-Purchase Evaluation ORGANISATION

7 Influences on Organisational Buying Environmental Organisational Interpersonal Individual

8 Org. Buying Terminology Buying Centre Buy Phases Buy Classes Buy Grid The people involved in the buying decision process. The stages in the organisational buying process Variations in the application of the stages Buy Phases x Buy Classes

9 Buying Roles Consumer Purchases Initiator Influencer Decider Buyer User Organisational Purchases Initiator Influencer Specifier Approver Decider Buyer User Gatekeeper

10 Roles in Buying Centres Different roles can be performed by the same person. More than one person may perform the same role. Compare with family decision-making? Initiator Influencer Specifier Approver Decider Buyer User Gatekeeper

11 Buying Centre Roles: Some Implications The marketer aims to identify members of the buying centre and evaluate the relative contribution of each to the PDP. Tailor communications campaign to make different appeals to different role holders. Deliver relevant communications to the right person at the right time.

12 What fundamentally distinguishes Organisational from Consumer buying is what distinguishes organisations from individuals. An understanding of organisational behaviour theory is obviously relevant here.

13 The Buy Grid Framework Robinson, Faris and Wind (1967) Based on in-depth observation of two large companies over two years. “One of the most useful frameworks ever developed in Industrial Buying.” Tested by Anderson, Chu and Weitz, (Journal of Marketing, July, 1987) and largely supported.

14 Org PDP: The Buy Phases Problem Recognition Development of Specifications Search for solutions: Qualify sources and acquire proposals Evaluation of Proposals Choice of product & supplier: order placed Evaluation of performance

15 Org PDP:The Buy Classes New Task - Purchasing something not bought before. – Relatively rare – Can be of large value & set the pattern for later, more routine purchases – Solution of the problem, (often ill- defined), is paramount; economic considerations secondary. – Perceived as high risk decisions

16 Org PDP: The Buy Classes Straight Re-buy - routine repurchase –The most common situation. –Assurance of delivery and adequate performance are critical, though price is often important. –The “in” supplier must avoid errors. –The “out” supplier is at a disadvantage because the buyer often perceives the cost of considering new alternatives to outweigh the benefits.

17 Org PDP: The Buy Classes Modified Re-buy –A mix of SR and NT features –Either an upgraded SR or a formerly NT becomes familiar. –New suppliers can win the contract by providing critical features, (e.g. short lead times, or superior packaging) –Window of opportunity can be short-lived.

18 The Buy Grid Recognise problem Describe general need Product specification Search for suppliers Ask for proposals/bids Select supplier Specify order-routine Review performance New Task Modified Rebuy Straight Rebuy

19 Criticisms of RF&W BuyClass Theory No allowance for: – Importance of purchase – Complexity of evaluation task Assumes newness is a surrogate for complexity. –E.g. First purchase of light bulbs vs replacement of auto fleet.

20 Anderson, Chu and Weitz, Journal of Marketing, V Findings generally support the Buyclass framework. However, they found that evaluation of alternatives differs in ways not suggested, e.g. sometimes alternatives are considered in Straight Rebuy, and sometimes few are considered in New Tasks.

21 Org PDP: Implications The framework defines the target for the marketer’s efforts - the steps through which s/he must respond to the buyer’s needs for information. But… problems need not be solved through purchasing.

22 Implications of PDP Models Commmunications –Where to provide information. –What information to provide. –How to provide information. Product –What features matter? Distribution –Narrow or broad. Price –Extent to which comparisons are made.

23 Models Suggest Marketing Actions Problem Recognition Stimulate? For what problems/uses? Stimulate Search? Provide info? What info? Where? When? How? How evaluated? Where? Against what criteria? Where? How? When? What’s important? PROMOTION PROMOTION; PLACE PROMOTION; PLACE; PRODUCT PRODUCT; PROMOTION... Information Search Evaluation of Alternatives Purchase Post-Purchase Evaluation

24 Further Strategic Uses Models suggest bases for segmenting markets - differences between people relevant to the marketing mix. Models can be diagnostic - if they can be monitored.

25 ANALYSING COMPETITIVE ADVANTAGE USING EVALUATION OF ALTERNATIVES STAGE OF PDP MODELS

26 “... a business is most likely to achieve its goals when it organises itself to meet the current and potential needs of customers more effectively than competitors.” Peter Doyle, (1994) A Philosophy: The Marketing Concept “The purpose of a business is to create a satisfied customer.” Peter Drucker

27 SUMMARY Consumers & Organisations: similar buying processes but they are NOT the same. Extent to which all stages are followed depends on the risk, complexity, and importance of the purchase and the time available for it. The tendency is for purchase decisions to become habituated or routinised over time. The models shown present an information- processing view of learning, which does not apply to all products.

28 How Advertising Works 1: Informative (e.g. Car, Insurance, House, Furniture) Model: Learn - Feel - Do Appeal: Informational Media: Long copy, Reflective 2: Affective (e.g. Jewellery, Cosmetics, Fashion, etc..) Model: Feel - Learn - Do Appeal: Emotional, self- image Media: Large space, Image 3: Habit formation (e.g. Food Household goods) Model: Do - Feel - Learn Appeal: Reinforce Media: Small space, Sound bites, POS 4: Self-satisfaction (e.g. Cigarettes, Sweets, Alcohol) Model: Do - Learn - Feel Appeal: Social Media: Billboards, print, POS Product Involvement High Low ThinkingFeeling (Adapted from Vaughn, 1980, p31) Motives for Purchase


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