Edition Vitale and Giglierano Chapter 3 Organizational Buying and Buyer Behavior Prepared by John T. Drea, Western Illinois University

2 The Consumer Buying Decision Process Need Recognition Information Search Evaluation of Alternatives Purchase Decision Postpurchase Behavior Involvement influences whether some steps are de-emphasized or extended. This is more of a simultaneous than a sequential process.

3 Organizational Buying Organizational buying involves many inputs from professional specialists within the organization. The organization relies on inputs from decision makers and influencers (“stakeholders”) to satisfy the diverse set of needs within the organization. This requires communication among stakeholders in the buying organization.

4 The Buying Center Internal Factors Technology Accounting Management Marketing Legal Production/Mfg. Finance Service External Factors Customer needs and buying behavior Government agencies Independent standards- setting organizations Various Publics

5 Major Differences, Organization Buying vs. Consumer Buying Organizational buying involves more buyers – more decision makers or contributors to portions of the decisions. Participants (stakeholders) in the buying center are driven by the specific needs of their professional responsibilities. Different types of decisions are often occurring simultaneously in the process, spread throughout the buying organization.

6 Steps in the Buying Decision Process 1. Problem recognition 2. General need description 3. Product specification 4. Supplier/Source search 8. Evaluate performance 7. Make the transaction routine 6. Selection 5. Proposal Solicitation

7 Intricacies of the Buying Decision Process Individual roles and personal needs Interaction creates fluidity (people w/in the buying center interact) The buying process is simultaneous, not sequential Relationships and loyalty Three kinds of needs: 1.Need for product benefits 2.Individual needs w/in buying center 3.Buying center member’s personal needs Cluster of stakeholders’ values

8 Stages in the Process Flow Model of the Buying Decision Process: Definition Stage Process Flow Stages –Problem definition –Solution definition –Problem specification Buying Decision Process Steps –Problem recognition –General need description –Problem specification

9 Stages in the Process Flow Model of the Buying Decision Process: Selection Stage Process Flow Stages –Solution provider search –Acquire solution provider(s) Buying Decision Process Steps –Supplier/Source search –Proposal solicitation –Contract for supplier(s)

10 Stages in the Process Flow Model of the Buying Decision Process: Deliver Solution Stage Process Flow Stages –Customize as needed –Install/Test/Train Buying Decision Process Steps –Make the transaction routine

11 Stages in the Process Flow Model of the Buying Decision Process: End Game Stage Process Flow Stages –Operate solution –Reach end result –Evaluate outcomes –Determine next set of needs Buying Decision Process Steps –Evaluate outcomes –Resell the job

12 Stage 1: Problem Recognition New Task New Task A buying situation that has not been previously faced by the organization. Significantly steep learning curve, organization seeks many sources of information. Modified Rebuy Modified Rebuy Straight Rebuy Straight Rebuy A routine buying situation with established solutions. Abbreviated steps in the process, fewer people in the buying center, less time to completion. A buying situation that is somewhat similar to past problems/solutions Examines alternatives within a limited scope, involves fewer people than a new task situation and more than a straight rebuy.

13 Stage 2: Vendor Selection RFQ = Request for Quotation –Usually associated with that which can be thoroughly and quantitatively defined RFP = Request for Proposal –Usually defined by a set of specifications that have more flexibility regarding the final form of the offering For government purchases, RFP/RFQ are often published in a specified outlet.

14 Stage 3: Solution Delivery Often takes longer than definition and selection combined. Stage ends when delivery is complete and approved by the buyer. Involves merging the logistics of the buyer with the logistics of the customer.

15 Stage 4: End Game Buying organizations frequently formally evaluate purchase outcomes in terms of areas like –Market share –Position –Market ownership –Profitability Individual buying center members also may evaluate the purchase, the purchase process, and the supplier.

16 Organization and Individuals Needs in the Buying Decision Process Steps in Flow Define problem Define solution Acquire provider Develop solution Install, test, train Operate solution End result Evaluation outcomes Organizational Needs Clear, concise, tractable Appropriate, affordable Choice, speed, Speed, easy use Ease of integration, speed User friendly Effective, low cost Information Individual Needs Information & time Design assistance Information, assurance Execution help Knowledge, comfort Easy to maintain Recognition Communication, reward

17 Buying Decision Evolution

18 More Buying Decision Evolution

19 Variability of Rational Buying Human Factors Objective means are used to narrow choices. Suppliers who recognize cultural/relationship needs of the organization become the “in” supplier. A review of facts is often done because it is culturally acceptable. Facts can be arranged to justify the decisions that individuals want to make People seek reinforcement for their beliefs in every factor presented to them

20 Variability of Rational Buying Mutual Dependence and Customer Loyalty Long-term commitment increase both risk and rewards for both parties involved. When both vendor and customer share financial interests that favor cooperation, there is greater motivation to continue the relationship through difficult times.

21 Value Image –It is the total of all impressions that a customer has of the firm (whether relevant to the buying situation). –Value image is similar to product positioning that occurs with consumer goods. –Need to maximize the value image of the offering in the “mind” of the buyer.