McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved Intermediaries, Business-to-Business, Straight Rebuys, Modified Rebuys, New Task Purchases, Structural Influences, Purchasing Roles, Initiators, Users, influencers, Deciders, Buyers, Gatekeepers, Organization-specific Factors, Purchasing Policies and Procedures, Sole Sourcing, Role Perceptions, Vendor Analysis Business, Government and Institutional Buying Chapter 4 Key Terms

McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved Organizational Buyer Categories  Producers – Businesses that buy goods and services in order to produce other goods and services  Intermediaries – Purchase products to resell at a profit  Government agencies – 86,000 government agencies spend trillions of dollars on machinery, equipment, facilities, supplies and services  Other institutions – Such as hospitals, museums, universities, nursing homes, and churches

McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved Organizational Buying Process A Model of the Organizational Buying Process

McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved Purchase-Type Influences  Straight rebuy – Routine reordering from a supplier used in the past  Common in organizations using just-in-time inventory  Modified rebuy – Purchase involves considering a limited number of alternatives before making a selection  Used when some aspects of the buying situation are unfamiliar  New task purchase – Involves an extensive search for information and a formal decision process  Often used for purchase of big-ticket items

McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved Purchase-Type Influences Differences in Types of Organizational Purchases Differences in Types of Organizational Purchases

McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved Key Differences in Marketing to Organizational Buyers

McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved Structural Influences – Purchasing Roles  Structural influences – Design of organizational environment and how it affects the purchasing process  Initiators  Users  Influencers  Buyers  Deciders  Gatekeepers

McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved Organization-Specific Factors  Orientation – Dominant function in an organization controlling purchasing decisions  Size of organization – Larger organizations tend to have higher degree of joint decision; smaller organizations tend to use autonomous decision making  Degree of centralization – This influences whether decisions are made individually or jointly with others

McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved Purchasing Policies and Procedures  Sole sourcing – All of a particular type of product is purchased from a single supplier  Direct buying – List of approved vendors for particular products  Competitive bidding – For large, one-time purchases

McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved Behavioral Influences  Personal motivations – Factors such as friendship, professional pride, fear and uncertainty/risk, trust and personal ambition  Role perceptions – Organizational buyers’ commitment depends on what they believe is  Expected of their role  The ‘maturity’ of the role type  Extent of management commitment to role type

McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved Behavioral Influences  Organizations can be divided into three groups based on commitment  Innovative  Adaptive  Lethargic

McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved Purchasing Agent Influences  One study involving purchasing agents revealed that there a greater degree of responsibility and control over decisions involving  Design of the product  Cost of the product  Determination of performance life  Naming a specific supplier  Assessing engineering support from the supplier  Reduction of rejects

McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved Stages in Organizational Buying Process  Organizational Need  Needs based on survivability and stated objectives of the organization  Vendor Analysis  Search for, locate and evaluate potential providers of goods and services  Rate them based on quality, on-time delivery, price, payment terms, and use of technology  Helps in developing a list of approved vendors, comparing competing vendors, and comparing vendor performance both before and after purchase

McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved Stages in Organizational Buying Process Sample Vendor Analysis Form

McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved Stages in Organizational Buying Process  Purchase Activities  Purchases can involve extensive negotiations on price, term of contract – increases with complex goods and services  Postpurchase Evaluation  Does the purchase perform as expected?  Should the supplier be used again?  Must be remembered that different functional areas have different evaluation criteria

McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved Stages in Organizational Buying Process Functional Areas and Their Key Concerns in Organizational Buying

McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved Code of Ethics for Organizational Buyers