Organizational Buying Behavior

Organizational Organizational Buying Buying

BehaviorBehavior

Chapter FiveChapter Five

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 5-2

Key Learning PointsKey Learning Points

The key differences between The key differences between consumer and industrial marketingconsumer and industrial marketingMarket segmentation for marketing Market segmentation for marketing to organizationsto organizationsUnderstanding why organizational Understanding why organizational buyers make decisionsbuyers make decisionsUnderstanding how organizations Understanding how organizations make purchasing decisionsmake purchasing decisionsThe importance of knowing where The importance of knowing where and when such purchases are madeand when such purchases are made


““When a firm markets a When a firm markets a product or service to another product or service to another organization, it is called organization, it is called organizational marketingorganizational marketing, , industrial marketingindustrial marketing, and since , and since the Internet boom of the late the Internet boom of the late 1990s, 1990s, B-to-B (business-to-B-to-B (business-to-business) marketingbusiness) marketing..””

- Russell S. Winer


Organizational BuyingOrganizational Buying

Buying centers:Buying centers:A group of individuals who are A group of individuals who are collectively involved in an collectively involved in an organizational buying decisionorganizational buying decision

Group decision-making differs Group decision-making differs from individual decision-from individual decision-making. making.


Industrial vs. Consumer Industrial vs. Consumer MarketingMarketing

Key differences between Key differences between industrial and consumer industrial and consumer purchasing behavior:purchasing behavior:

Derived demandDerived demand

Product complexityProduct complexity

Buyer–seller interdependenceBuyer–seller interdependence

Buying process complexityBuying process complexity


Table 5.1Table 5.1Market Segmentation Variables for Market Segmentation Variables for

Business MarketsBusiness Markets


IllustrationIllustration

UPS segments their UPS segments their market by how market by how quickly the customer quickly the customer needs a package to needs a package to arrive, with higher arrive, with higher prices charged for prices charged for faster delivery. UPS faster delivery. UPS also caters to also caters to consumers who wish consumers who wish to visit their retail to visit their retail stores. stores.


Table 5.2Table 5.2Market Segmentation Scheme for Market Segmentation Scheme for

aaMedical Equipment ManufacturerMedical Equipment Manufacturer


Table 5.3Table 5.3Kevlar Segmentation SchemeKevlar Segmentation Scheme


Who Are the Customers?Who Are the Customers?

Vertical segmenting schemes:Vertical segmenting schemes:Occurs when firms focus on an Occurs when firms focus on an industry, often creating a separate set industry, often creating a separate set of distribution channels for industry.of distribution channels for industry.

Horizontal segmenting schemes:Horizontal segmenting schemes:Occurs across industries, where needs Occurs across industries, where needs and uses are similar.and uses are similar.

Organizations make different types Organizations make different types of purchases, which can be of purchases, which can be classified into different buy classes.classified into different buy classes.


Table 5.4Table 5.4Different Types of Different Types of

Organizational PurchasesOrganizational Purchases


Discussion QuestionDiscussion Question

Universities must buy equipment, furniture, and other items from many businesses.

Think about your university. Can you identify products which represent straight rebuys, modified rebuys, new-task purchases, or a solutions buy?



Segmenting in technology-based Segmenting in technology-based markets: The Chasm Modelmarkets: The Chasm Model

Some firms adopt new technologies Some firms adopt new technologies earlier than others.earlier than others.

Lead users engage in beta testing, and Lead users engage in beta testing, and can help new technologies be adopted.can help new technologies be adopted.

However, the standard diffusion model However, the standard diffusion model must be modified for high-tech must be modified for high-tech markets.markets.


Figure 5.1Figure 5.1The Chasm ModelThe Chasm Model


Table 5.5Table 5.5Visionaries Vs. PragmatistsVisionaries Vs. Pragmatists



Marketing research implications – Marketing research implications – data collection:data collection:

Primary research is used less.Primary research is used less.

Secondary data are used most often.Secondary data are used most often.

Trade associations and consulting Trade associations and consulting firms often provide useful data.firms often provide useful data.

Satisfaction data may also be Satisfaction data may also be available.available.

American Customer Satisfaction Index


Table 5.6Table 5.6Secondary Source Segmentation Secondary Source Segmentation

DataData



Marketing research implicationsMarketing research implications – – developing target markets:developing target markets:

Parsimony is important when selecting Parsimony is important when selecting target markets.target markets.

Understand horizontal and vertical Understand horizontal and vertical segment considerations and the segment considerations and the benefits of each.benefits of each.

Target market selection criteria is the Target market selection criteria is the same as that used in consumer same as that used in consumer markets.markets.


Table 5.7Table 5.7Organizational Buying StagesOrganizational Buying Stages


Why Do Customers Buy?Why Do Customers Buy?

Identifying the need:Identifying the need:Recognition can be stimulated by Recognition can be stimulated by low inventory or marketing low inventory or marketing communications.communications.

Need recognition phase varies Need recognition phase varies according to buy class.according to buy class.

Purchasing decisions are feature/ Purchasing decisions are feature/ benefit driven.benefit driven.


How Do Customers Make How Do Customers Make Purchase Decisions?Purchase Decisions?

Members of the buying center:Members of the buying center:InitiatorInitiatorInfluencerInfluencerDeciderDeciderPurchaserPurchaserUserUser


Business-to-business marketers must Business-to-business marketers must understand patterns of influence understand patterns of influence within organizations.within organizations.

Salespeople must tailor their messages.Salespeople must tailor their messages.

A single salesperson or channel may be A single salesperson or channel may be insufficient to reach the customer.insufficient to reach the customer.

Testing and design engineers help Testing and design engineers help specify many products.specify many products.



Figure 5.2Figure 5.2LVDS Drivers & ReceiversLVDS Drivers & Receivers



Characteristics of the product or Characteristics of the product or service are determined after service are determined after need recognition.need recognition.

Typically stated in terms of benefitsTypically stated in terms of benefits

Specifications must be Specifications must be established.established.

Needs are translated into specific Needs are translated into specific product features.product features.



Potential suppliers are Potential suppliers are searched for and qualified.searched for and qualified.

Selling organization’s must be in Selling organization’s must be in evoked set.evoked set.Potential suppliers must also be Potential suppliers must also be qualified.qualified.Many factors are used for Many factors are used for qualification purposes.qualification purposes.



Request for proposals (RFP) are Request for proposals (RFP) are sent to suppliers.sent to suppliers.Returned RFPs include bid and Returned RFPs include bid and project specifications.project specifications.

This is unnecessary for straight This is unnecessary for straight repurchase situations.repurchase situations.The Internet has accelerated The Internet has accelerated distribution and receipt of RFPs.distribution and receipt of RFPs.



Proposals are evaluated and a Proposals are evaluated and a supplier is selected.supplier is selected.

Each buying center member has Each buying center member has input.input.A multiattribute model can be A multiattribute model can be applied to the decision-making applied to the decision-making process to formalize the process to formalize the evaluation process.evaluation process.


Table 5.8Table 5.8Buyer Center Decision MakingBuyer Center Decision Making


Table 5.9Table 5.9Buyer Center Decision Making Buyer Center Decision Making

Online Customers Service Online Customers Service IllustrationIllustration


Discussion QuestionDiscussion Question

Suppose that an organization was Suppose that an organization was going to equip its sales force with going to equip its sales force with laptop computers for the first time.laptop computers for the first time.

1.1. What positions within the firm would What positions within the firm would most likely be part of the buying most likely be part of the buying center? center?

2.2. What roles could people in each What roles could people in each position fulfill?position fulfill?

3.3. Which attributes would you suggest Which attributes would you suggest using for the supplier evaluation? using for the supplier evaluation?

4.4. How would you weight the importance How would you weight the importance of each selected attribute?of each selected attribute?



Perform postpurchase evaluation:Perform postpurchase evaluation:Information normally flows readily Information normally flows readily between suppliers and customers.between suppliers and customers.

Supplier’s sales force are key Supplier’s sales force are key providers of feedback as to how providers of feedback as to how product is performing.product is performing.

If no information is forthcoming, If no information is forthcoming, suppliers must solicit information.suppliers must solicit information.



Several external and internal Several external and internal factors influence the purchase factors influence the purchase process:process:

Environmental factorsEnvironmental factorsOrganizational characteristicsOrganizational characteristicsBuying center member Buying center member characteristicscharacteristicsGroup characteristicsGroup characteristics



Effects of culture on Effects of culture on organizational buying behavior:organizational buying behavior:

Organizational cultureOrganizational cultureCorporate cultures are unique.Corporate cultures are unique.

Global cultural diversityGlobal cultural diversity



Effects of culture on Effects of culture on organizational buying behavior:organizational buying behavior:

Several classification systems Several classification systems for global organizational for global organizational culture exist.culture exist.


Figure 5.3Figure 5.3Position of 40 Countries on the Position of 40 Countries on the

Power Distance and Individualism Power Distance and Individualism ScalesScales


Where Do Customers Buy?Where Do Customers Buy?

Where do customers buy?Where do customers buy?Watch for changes in buying Watch for changes in buying patterns.patterns.

Sales force, industrial distributor Sales force, industrial distributor channelschannels

Mail and Internet channelsMail and Internet channels90% of Internet commerce is B2B.90% of Internet commerce is B2B.

Trend towards disintermediationTrend towards disintermediation


When Do Customers Buy?When Do Customers Buy?

When do customers buy?When do customers buy?Time of day or week has little Time of day or week has little relevance.relevance.

Beginning of fiscal year is key.Beginning of fiscal year is key.

General economic cycles are General economic cycles are important.important.


Executive SummaryExecutive Summary

Analyzing industrial buying behavior Analyzing industrial buying behavior requires answering of questions.requires answering of questions.Differences exist between consumer Differences exist between consumer and industrial buying behavior.and industrial buying behavior.Segmentation involves application of Segmentation involves application of descriptor and behavioral variables.descriptor and behavioral variables.Nature of customer-oriented Nature of customer-oriented organizations.organizations.Industrial buyers recognize needs Industrial buyers recognize needs internally or externally.internally or externally.


Executive SummaryExecutive Summary

Buying centers make industrial Buying centers make industrial purchasing decisions.purchasing decisions.

The buying process contains eight The buying process contains eight steps.steps.

Greater use of the internet and Greater use of the internet and direct marketing has influenced direct marketing has influenced where purchases are made.where purchases are made.

Budgeting and business cycles Budgeting and business cycles influence when purchases are made.influence when purchases are made.


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Organizational Buying Behavior

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