Organisational Buyer

Q1. It is often stated that organizational buyers are more rational in their buying behaviour than are consumers. Critically discuss in relation to the level of involvement for new task/product purchases.

A.

Introduction: "The decision process and actions of people involved in buying and using products are termed their buying behaviour. Consumer buying behaviour is the buying behaviour of ultimate consumers - those who purchase products for personal or household use."(Dibb et al. 2001 p. 107). Most day to day products that are bought from a shop are classified as consumer goods and the purchase is termed as consumer buying. The examples include a box of cookies or a bottle of fruit juice bought from a nearby super market store.

"Webster and Wind define organizational buying as the decision-making process by which formal organizations establish the need for purchased products and services and identify, evaluate and choose among alternative brands and suppliers."(Kotler 2003 p. 216). The management process accountable for the swap over between the producer of commodities and services and their organizational customers can be termed as organizational buying or B2B Marketing.(Brassington and Pettitt 2005). The examples of organizational buying include a component manufacturer selling Integrated Circuit chips to HP.

Main body:

Different consumers have different needs and wants and they take decisions based on varied decision making behaviour, which involves a lot of time and effort and it changes from situation to situation. Consumer's decisions are, hence, classified into three broad categories: routine response behaviour, limited decision making, extensive decision making. (Dibb et al. 2001)

"A consumer practises the routine response behaviour, when buying frequently purchased, low cost, low risk items that need very little search and decision effort. Buyers engage in limited decision making behaviour when they buy products occasionally and when they need to obtain information about an unfamiliar brand in a familiar product category. The most complex decision making behaviour, extensive decision making, comes into play when a purchase involves unfamiliar, expensive, high risk or infrequently bought products - for instance cars, homes, holidays or personal pensions."(Dibb et al. 2001 p. 108)

The possible influences on the decision process include personal, psychological and social influences. Demographic, situational and involvement comes under the category of personal influences. Perception, motives, learning, attitudes and personality comes under psychological influences. Roles and family, reference groups, social classes, culture and subcultures are classified as social influences. The steps in the consumer buying decision process includes: problem recognition, information search, evaluation of alternatives, purchase and post purchase evaluation.(Dibb et al. 2001)

"An organizational (or industrial) market is defined as consisting of individuals or groups that purchase a specific type of product for re-sale, for use in making other products or for use in daily operations."(Dibb et al. 2001 p. 139). "There are four kinds of organizational or industrial markets: producers, resellers, governments and institutions. Individuals and business organizations that purchase products for the purpose of making a profit by using them to produce other products or by using them in their own operations are classified as producer markets. Reseller markets consist of intermediaries, such as wholesalers or retailers, who buy finished goods and re-sell them to make a profit. National and local governments make up government markets."(Dibb et al. 2001 p. 140)

The business buyers respond to four main influences: environmental, organizational, interpersonal and individual. Business buyers pay close attention to current and expected economic factors, such as the level of production, investment, consumer spending and the interest rate. Every organization has specific purchasing objectives, policies, procedures, organizational structures and systems and these contribute to the organization factor. Interpersonal factors include interests, authority, status and empathy. Age, income, education, job position, personality, risk attitudes and culture form the Individual factors.(Kotler 2003)

The three factors which influence who and how organizations buy and the choice criteria they use are: the buy class, the product type and the importance of the purchase. The buy class may be classified into a new task, a straight re-buy and a modified re-buy. A new task occurs when the need for the product has not arisen previously so that there is little or no relevant experience in the company and a great deal of information is required. A straight re-buy occurs where an organization buys previously purchased items from suppliers already judged acceptable.

Modified re-buy lies between the two extremes. The products can be classified according to four types: materials, components, plant and equipment and MROs (Maintenance Repair and Operation).(Jobber 2001)

"Business-to-business customers are usually viewed as more rational and more likely to seek information about a product's features and technical specifications than are ultimate consumers."(Dibb et al. 2001 p. 161)

It could be justified that organizational buyers are more rational in their buying behaviour than the consumer buyers, in relation to the level of involvement for new task/product purchases because, typically, the characteristics of organizational buyers includes: fewer, larger buyers and close supplier-customer relationship. This, hence, implies that the decision involved in organizational buying should be rational, that is reasonable, as huge money goes into the buying and the impact of the buying decision will have a direct effect on the company's output product, which affects the brand's name.(Jobber 2001)

The quality, service, delivery and price are of utmost consideration for organizational buyers. Quality is important because it directly affects the quality of the organizational buyer's ultimate product. A set of expressed characteristics called specifications is used to achieve an exact standard.