Management Studies: Buying Decision

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Organizational Buying Behavior | Meaning and Features | Organizational Buying Process

Meaning of Organizational Behavior

The behavior of an organization shown in buying goods or services is called organizational buying behavior. The organizations buy goods or services for business use, resale, produce other goods or provide services. Business and industrial organizations buy goods to use in business or produce other goods. Resellers buy goods for reselling them at profitable price. Similarly, government bodies buy goods for office and conducting development program. Non-governmental organizations, hospitals, educational institutes, social organizations, religious organizations etc. buy goods to provide services to their followers or customers.

Users, influencers, buyers, deciders and gate keepers take part in organizational buying process. Users who are the members of organization use bought goods or services. They prepare buying proposal and help in preparing product specification. They also help in preparing special report and analyzing alternatives. Influencers influence buying decision. They help in preparing products specification and analyzing alternatives. Those who buy goods or services are called buyers. Buyers select suppliers and make buying terms and conditions. The person who makes the last decision to buy goods or services from the selected supplier is called decider. Goods are purchased from the supplier selected by the decider. Gatekeeper controls follow of information and other things. Technical staff and personal assistant work as gate keeper.

Organizational buying behavior is influenced by marketing stimuli and other stimuli. Marketing stimuli includes product, price, place and promotion and other stimuli includes economic, technological, political, cultural and competition. These motivators bring changes in the buyers’ behavior after they enter in an organization. Or these

stimuli influence selection of goods or service, selection of suppliers, order, quantities, delivery time, terms and conditions of goods or services etc.

According to Pette D. Bennett, “Organizational buying behavior is the decision making process by which a buying group establishes the needs for goods and services and identifies, evaluate, and chooses among alternative brand and suppliers.”

According to W. M. Pride and O. C. Ferrel, “Organizational buying behavior refers to the purchase behavior of producers, government units, institutions and resellers.”

In conclusion, the behavior shown by an organization while buying goods or services is called organizational buying behavior. User, influencer, buyer, decider and gate keeper are involved in organizational buying process. Organizational buying behavior is influenced by marketing stimuli and other stimuli. Generally, these stimuli influence selection of goods or services, selection of suppliers, buying quantity, terms of delivery, terms of service and terms of payment.

The model of organizational buying behavior can be shown in the following figure:-

The Model of Organizational Buying Behavior

Features of Organizational Buying Behavior

Few buyers, close relationship between buyers and suppliers, rational buyers, direct channel, adaptation of certain purchase policy made by business organization etc. are the main features of organizational buying behavior.

1. Few buyers

As organization itself become buyer, organizational buyers are few in number. But they buy in huge quantity. Organization buyers live scattered in different places.

2. Close relationship

Organizational buyers and suppliers have close relations. It may be long lasting. Such relation has positive effect on future buying. Generally all organizational buyer and suppliers have close relation.

3. Rational buyers

Buyer becomes rational in organizational buying. Professional and trained buyers are involved in buying. So, buying decision becomes rational.

4. Direct channel

As organizational buyers buy a huge quantity, they buy goods directly from producer. So, marketing channel becomes direct. But some organizations buy goods through intermediaries or agencies.

5. Purchase policy

The buying method of organization and persons become different. An organization makes certain policy for buying and buys goods according to the policy. Buying through quotation, buying through tender, buying through contract etc. are the major buying policies of organizations.

Organizational Buying Process

Organizational buying has certain processes. The following figure shows organizational buying process. There are eight stages. An organization may go through all of these stages as following or it may change some of them. This depends on buying quantity, buying price, nature of goods, buying frequency etc.

Stages of Organizational Buying Process

1. Need Recognition

Organizational buying process starts from need recognition. In an organization, a certain person recognizes need of certain goods and after buying the needed goods, need is fulfilled. Needs in organization can be recognized in two ways. They are: external stimuli and internal stimuli. If a company decides to produce new goods, it is internal stimuli. It needs to buy new goods and equipment. Similarly, when a buyer observes trade exhibition, s/he may make his/her idea to buy new goods. Such idea is external stimuli, because this idea is made from outer environment and materials should be purchased for this.

2. Need Description

After the need is recognized, the buyers should describe need. This task is completed in the second stage of organizational buying process. While describing need, features of needed goods and needed quantity should be described. If the goods have standard, this task becomes easy; if otherwise, it becomes complicated. Help of engineers, users and consultants should be taken for complex goods.

3. Product Specification

The task of preparing specific description of goods is the third stage of organizational buying process. In this stage, description performance of goods is prepared to solve the problems. Technician’s help should be taken for this task. In this stage, the value of goods is analyzed.

4. Supplier Search

At this stage of organizational buying process, the buyer searches proper suppliers or sellers. Buyer prepares a list of suppliers to select good and proper suppliers. This list is prepared by looking at trade directory, searching in Internet, asking other companies for suggestions etc. If the goods to be bought are new, complicated and costly, it needs long time to search suppliers.

5. Proposal Solicitation

Proposal solicitation is the fifth stage of organizational buying process. At this stage, buyer calls best suppliers for submitting proposal. As the reaction, some send catalog or sellers to the organization. If the product is costly and complicated, the buyer demands detailed proposal, and if the product is technical, business organization calls for presenting the product itself.

6. Supplier Selection

At the sixth stage of organizational buying process, buyers assess the proposal and select one or more suppliers. For selecting the suppliers, a list is prepared and rating is made on the basis of their attribute and importance. Then the best supplier is selected. Analysis of the suppliers is done in the following ways.

Supplier attribute	Rating
Supplier attribute	Very poor (1)	Poor (2)	Fair (3)	Good (4)	Excellent (5)
Price competitiveness			x
Product quality, reliability					x
Service and repair capabilities					x
On-time delivery			x
Quality of sales representatives				x
Overall responsiveness to customer needs					x
Overall reputation Average Score = 4.29					x

7. Order Routine Specification

After the best suppliers have been selected, the buyer prepares final order. In this order, all the matters such as attribute of goods, quantity, specification, time for supply, warranty, method of payment, service after sale etc. should be clearly mentioned.

8. Performance Review

This is the last process of organizational buying. At this stage, the buyer reviews suppliers’ performance. This type of review helps to take decision whether to continue relation with the supplier or change or end the relation. If the performance of the supplier is satisfactory, the relation can be continued; if it is somewhat defective, if partial correction is made and the relation is maintained. But if the performance is disagreeable, it is broken.

Stages of the buying process	Buying situations
Stages of the buying process	New task	Modified rebuy	Straight rebuy
1. Problem recognition	Yes	May be	No
2. General need description	Yes	May be	No
3. Product specification	Yes	Yes	Yes
4. Supplier search	Yes	May be	No
5. Proposal solicitation	Yes	May be	No
6. Supplier selection	Yes	May be	No
7. Order-routine specification	Yes	May be	No
8. Performance review	Yes	Yes	Yes

Factors Determining Consumer Buying Decisions

Economic, demographic, psychological and socio-cultural factors determine consumer buying decisions. These factors directly affect consumer behavior.

Factors determining Consumer Buying Decision

I. Economic Factors

Economic factors play an important role in consumer buying behavior decision. It also directly affects purchasing power of the consumers. If consumers’ purchasing power is weak, they cannot make decision to buy goods or services even if they like very much. But, if they have purchasing power, they can take prompt decision to buy goods or services they like. Income level, income of their family members, liquid asset, spending attitude, credit facility etc. are the economic factors to determine consumers’ buying decision.

Consumer’s income level: Income of all consumers’ cannot be same. Some have more and others have low income level. If the income of consumers is high, purchasing power and readiness become high, otherwise their purchasing power and readiness become low. The consumers having high level income take quick decision to buy high quality goods or services. But those having low income take slow decision to buy low quality goods or services.
Income of other members of family: Consumer lives in family. Family expense is managed by adding the income of all members of the family. Any change in income of other members also affects the purchasing decision of the consumer. If income of the other family members increases, purchasing power also increases; if decreases, it also decreases. In the countries like Nepal where joint families live together, income of other family members also should be studied and analyzed while analyzing the economic determining factors.
Liquid assets: If the consumers have liquid assets such bank balance, gold, silver, share, government bond etc., their purchasing power does not drop off even if incomes become irregular or drop down, because such liquid assets increase their purchasing power.
Attitude towards spending: Consumers’ spending attitude becomes different. Some consumers form positive and others form negative attitude towards expense. Such attitude also influences buying decision.
Credit facility: Credit facility also influences consumers’ purchasing power and readiness. If credit facility is available, consumers’ spending level increases. Just the opposite, if no credit facility is available, consumers’ spending level decreases.

II. Demographic Factors

Demographic factors play an important role in purchasing decision of the consumers. It directly or indirectly influences the consumers’ buying decision. The demographic factors include family size, family life cycle, occupation, age, sex or gender etc.

a) Family size and life cycle: Family size of all consumers may not be same. Size of some family may be small and others may be big. The size of family influences selection of goods and buying quantity. If the family size is big, such consumers, generally, purchase large quantity of same brand. If family size is small, they purchase small quantity of goods of different brands.

Life cycle of a family also influences consumers’ buying behavior. Unmarried, married but have no children, married and have children, old and other consumers have their own behaviors towards selecting and buying goods. Behaviors of consumers are different. Such behaviors also directly influence buying decision.

b) Occupation: Occupation of the consumers also influences their buying behavior. For example, workers buy cheap clothes to wear while working in factory. Teachers, professors, advocates, managers etc. buy costly dresses to wear while working in their offices. So, the occupation affects buying behavior of the consumers.

c) Sex or Gender: Buying behavior and decision also differs between men and women. Women buyers give importance to price, quality and warranty of goods and evaluate alternatives. They take longer time and make efforts for making buying decision. But males give comparatively less importance to price, quality and warranty of the goods. They are influenced by advertisements, sale promotion and other activities. They do not take long time and efforts to take buying decision. They take buying decision promptly. They also do not base on evaluation of alternatives as many as the women base on.

III. Psychological Factors

Psychological factors also play important role in buying behavior of consumers. Consumer’s psychology becomes more self-centered. These factors include learning, motivation, perception, personality, attitudes, life style etc.

a) Learning: The changes that come in consumers from observation, experiment and experience is called learning. Consumers take buying decision after learning. Without learning and knowing anything about goods, they cannot take buying decision. Learning affects human behavior directly. Learning involves four factors such as curiosity, cue, response and reinforcement. Learning has two main theories. They are:

Stimulus response theory: This is called S-R theory. Consumers express response as a result of stimulus. For example; consumers can be simulated by advertisement and they buy goods or services as response to the advertisement.
Modern theory: This theory includes drive, cue, response and reinforcement. Drive stimulates consumers to buy goods or services, cue gives information how the consumers respond. If the response is positive, its enforce takes place, otherwise it does not.

b) Motivation: Motivation is the power sprung from the heart of a man. It leads towards objective. Until the man does not achieve objective, he becomes restless. So, whatever activities a man does, they are all the results of motivation. Motivation also affects buying behavior of consumers. Motivation brings purposeful changes in human behavior. Motivated consumer becomes heartily ready to buy goods or services. There are many theories of motivation. Among them Maslow’s Hierarchy of Need Theory and Herzberg’s Two-Factor Theory have been discussed as follows:

i) Maslow’s Hierarchy of Need Theory

Abraham Maslow’s hierarchy of need theory believes that human being acts like motivated by need and need has a certain hierarchy. These needs are fulfilled one after another setting them in hierarchy. But men cannot be motivated by satisfied needs, only unsatisfied need affects human behavior. Abraham Maslow’s hierarchy of need theory can be presented as follows:

Maslow's Hierarchy of Need Theory

Physiological needs: Physiological needs of human being are compulsory nature. Food, shelter, clothes, thrust, hunger etc. are physiological needs.
Safety needs: When human’s physiological needs are fulfilled, security needs are realized. Security from physical danger, bad health, weak economic condition etc. are included in safety needs.
Social needs: After the security needs have been fulfilled, human begins realize social needs. Friendly behavior, socially acceptable, living with love, involvement in social organizations etc. are included in social needs.
Ego or esteem needs: After the human’s physiological, safety and social needs are fulfilled, she/he begins to realize ego or esteem needs. Under this, self respect, dignity, honor, freedom, praise, recognition of freedom etc. are included.
Self actualization needs: According to Maslow, after the ego or esteem needs are fulfilled, human realizes self-actualization needs. This includes use of special skill, ability, creativeness, self-development etc.

IV. Socio-cultural Factors

Social and cultural factors also play an important role in consumers’ buying behavior. The collective form of persons is called society, and their custom, tradition, wearing and eating, festivals, values and norms, religion, etc. on the whole is called culture. Social and cultural factors include family, reference group, social group etc.

a) Family: If the persons having same blood relations, married to others or adopted persons live in same home, they all are a family. A family includes father, mother, wife, children (sons and daughters), uncle and aunts, nephew etc. Family may be in joint or nuclear form. Different members of a family may play different roles. This influences buying decision. Generally the following roles are found in a family:-

Initiator: The person who first presents suggestion or proposes to buy any goods is called initiator.
Influencer: The person who influences buying decision is called influencer. Influencer plays an important role in buying decision.
Decider: The person who takes last decision about what to buy, how to buy, where to buy and when to buy is called decider.
User: The person who uses goods or services is called user.

The above mentioned roles may change in a family. The roles of each member of a family become different depending upon the nature of goods or services. For instance, all the members cannot have equal role in buying daily necessities for home, buying dolls, buying land or house, or buying expensive ornaments etc. Roles are found changing according to the nature of goods or services.

b) Social Class: High, middle and low class people live in society. Consumers’ class can be identified from their economic condition, life style, profession/occupation, education, premises, norms and values, belief, attitudes etc. The consumers who have high economic condition, prosperous psychology and customized life style are called or counted as high class. In the same way, middle class and lower class consumers can be identified.

The bases to distinguish social class are:

Economic condition
Life style
Values, beliefs and attitudes
Occupation/ profession
Education

Buying behavior becomes different according to social class. High social class selects high quality, prestigious sophisticated and famous brand of goods. Low social class people select low quality goods and middle class people middle class quality goods. High class people visit foreign countries in holidays, celebrate Good Friday, birthday party. But low and middle class people cannot, due to lack of money even if they want.

c) Culture: Language, religion, belief, food, dress etc. on the whole is called culture. Culture is the behavior learnt from generation to generation. It influences activities of all the people. It naturally influences buying behavior. Men learn different things from culture, which leaves deep and indelible impression. It becomes very difficult to change culture along with the time. Culture may be seen or unseen. Home, food, living style, dress, behavior, working style etc. are seen culture where as language, religion, belief, attitude etc. are unseen culture. Although culture also may change after a long time. Different societies have different cultures which direct the people of their own society. Culture forms deep seated tradition and behavior which cannot be broken easily.

d) Subculture: The community adopting same culture can be classified in different ways on the basis of region, language, caste, religion etc. The culture classified in this way is called sub-culture. For example, Nepal’s culture can be classified into two subcultures as western culture and eastern culture on the basis of region. Similarly, culture can be classified into subcultures on the basis of caste, race like Gurung, Magar, Newar, Brahmin, Kshetri etc. In the same way, it can be classified into other subcultures on other bases. Culture influences consumers’ behavior. As special introduction and identity of consumers’ can be learnt from the study of culture, it helps to make marketing mix more effective.

e) Reference group: The group which influences consumers’ buying behavior is called reference group. Each consumer is associated with one or the other society and is directly influenced by the same. The group influences consumers’ buying behavior by providing information, influencing person’s attitude, giving pressure due to which they decide to buy goods or services. Generally, reference groups are as follows:

Membership group: This includes family, religious group, professional group, trade union, etc.
Aspiration group: The group interested to be member of any desired group is called aspiration group. For instance, political group, social or religious group, sport group, other extra activity group etc.
Disassociate group: The group which breaks up from one and joins any other group is called disassociation. For example, if any political leader renounces politics and starts religious, social or other activities, it is called dissociation.

Consumer Buying Process

Consumer buying process may be little different according to time and situation because people have to decide buying every day. Some buying decisions become complicated with high involvement and other with low involvement / simple. So, buying decisions are divided into two categories. They are (1) High involvement (2) Low involvement.

1. High Involvement Purchase

The purchase that takes more time and effort is called high involvement purchase. The goods to be purchased in this way are of special brand. They are more risky than others and have more prices. Information as well as knowledge about such goods is needed. So, it takes long time to purchase such goods. Car, other vehicles, land, house, machines etc. are included in high involvement purchase category. These goods serve for long time and increase social dignity. Such decision is taken occasionally.

2. Low Involvement Purchase

The purchase that takes comparatively short time and little effort is called low involvement purchase. Such purchase becomes behavior oriented. This purchase becomes of several brands and less risky. This has less price and takes little time. For instance, purchase of soap, shoes, clothes, toothpaste, matches etc. are included in this category. Such goods are of the nature of daily need and are short lasting.

The consumer adopts certain process with care in buying goods. While taking decision to purchase any such goods, the consumers go through five stages as shown in the following figure. They are need recognition, information search, evaluation of alternatives, purchase decision, post purchase behavior.

Consumers' purchase decision process

The above figure shows whatever goods the purchasers purchase and whatever times pass by five stages as shown in the figure. But in regular purchase, they may jump or miss any of the stages. For example, a customer recognizes his / her necessity to purchase regular brand of tea and decides to buy. He does not need seek information and analyze or evaluate alternatives. But the above figure shows the stages to be adopted for high involvement purchase.

1. Need recognition

Purchasing process starts from need recognition. In order to recognize consumers’ need, their internal and external sources of creating needs should be recognized. Hunger, thirst, sex, homes etc. are internal sources and personal influence, advertisement, exhibition etc. are external sources. At this stage of purchasing process, by considering these sources, a marketing manager should study and analyze them to find out their needs and problems. Not any person becomes ready to buy any goods or services without realizing need. So, purchasing process starts from recognition of unfulfilled need and problem. If a person feels hungry, she/he needs food. If toothpaste is finished, she/he needs to buy toothpaste. If a neighbor buys a quality television, we feel need to buy quality television. If some goods are advertised on television, we like to buy them being influenced by the advertisement. A consumer realizes need in many ways before buying any goods. So, this is called first stage of purchasing process.

2. Information searching

The second stage of purchasing process is searching for information. After the recognition of needs, the consumers try to find goods for satisfying such needs. They may or may not search information about such goods. If the consumers have unavoidable need and intense desire for any goods, they buy them promptly. If it is not so, they search information about the goods they want. While searching information, they may decide to buy by watching advertisement, looking goods being used by neighbors, friend etc. They may get information from friends through telephone, fax and e-mail, Internet or through other information sources. Consumers can get information about goods from different sources.

Personal sources: Personal source is important as well as confidential information. Such source of information about goods or services becomes very impressive to the consumers. This includes family, friends, neighbors, acquaintance etc.
Commercial source: The other important source to get information about goods or service is commercial source. Such source also provides ample information about goods and services. Some consumers get much influenced by commercial source. This includes advertising, sales people, dealers, packaging, display etc.
Public sources: Public sources are the other important sources to get information about goods and services. This includes mass media, consumer rating organizations etc. They also become confidential to provide information.
Experimental sources: Experimental source is also an important source of information about goods and services. This includes handling, examining, using etc. Such information becomes decisive and confidential.

3. Evaluation of alternatives

Evaluation of alternatives is the third stage of buying process. Various points of information collected from different sources are used in evaluating different alternatives and their attractiveness. While evaluating goods and services, different consumers use different bases. Generally, the consumers evaluate the alternatives on the basis of attributes of product, degree of importance, belief in brand, satisfaction etc. to choose correctly.

Product attribute: Products are of different attributes. For example, quality, simplicity in use, size, price, service, warranty, packaging, labeling etc. Consumers become eager to know the attributes of product at this stage of evaluation and make these attributes the base of selection.
Degree of importance: Products have different attributes. Generally, the consumers do not concern with all attributes. They become interested only in some important attributes. They evaluate the important attributes of the goods which they want to buy. So, they evaluate the products on the basis of the degree of importance.
Brand belief: Consumers have belief in attribute of certain brand of goods. They set belief in certain brand being influenced by own experience, suggestions, family neighbor and friends etc. Such belief may or may not be the actual features of the products.
Satisfaction: Total satisfaction becomes different according to the attributes of any products. This means that satisfaction depends on the attribute of the goods. So, the consumers evaluate the goods on the basis of the degree of satisfaction and select more satisfactory goods while selecting alternatives.

All the consumers do not base their evaluation on the same thing. They evaluate alternatives by focusing their attention on their satisfaction and priority. Consumers’ income level, experience, thought, perception, information abundance, information analyzing ability etc. influence the evaluation of alternatives.

4. Purchase decision

After the alternatives have been evaluated, consumers take decision to purchase products and services. While taking purchasing decision, the consumers select certain brand of goods and distribution channel. They decide to buy the best brand. But their decision is influenced by others’ attitude and situational factors.

Others’ attitude: After evaluating alternatives, the consumers like to buy certain products and product line. But their want / liking is affected by others’ attitude. Suppose a house wife made final decision to buy a costly and big refrigerator, but her husband suggested her to buy cheap and small one. Hence her possibility to buy costly and big refrigerator diminishes.
Situational factors: Even if costumers have decided to buy certain goods of certain quality and certain brand, situational factors affect them whether to buy or not. For example, they are income level, price, expected benefit, availability, dealer’s condition etc. If unexpected change takes place in such things, it also affects the purchasing decision.

5. Post purchase behavior

After taking decision, the consumers purchase goods. They may or may not be satisfied with the goods while using them. If the goods give satisfaction as expected, they become satisfied with and if more satisfied than expected, they become more satisfied with the goods. But, if the goods do not give satisfaction as expected, they become unsatisfied. If the customers are satisfied with the goods, they buy the same brand and quality regularly, otherwise they form negative attitude towards such goods and start searching other brands. So, the marketing manager should study and analyze the consumers’ behavior closely after the goods and services have been sold to them.

After buying any brand of goods, the consumers evaluate the quality, utility and benefit of the goods and take decision whether to buy the same regularly, stop buying temporarily or permanently.

Pages

Meaning of Organizational Behavior

Features of Organizational Buying Behavior

1. Few buyers

2. Close relationship

3. Rational buyers

4. Direct channel

5. Purchase policy

Organizational Buying Process

1. Need Recognition

2. Need Description

3. Product Specification

4. Supplier Search

5. Proposal Solicitation

6. Supplier Selection

7. Order Routine Specification

8. Performance Review

You may also like to read:

Factors Determining Consumer Buying Decisions

I. Economic Factors

II. Demographic Factors

III. Psychological Factors

Related Topic:

IV. Socio-cultural Factors

You may also like to read:

Consumer Buying Process

1. High Involvement Purchase

2. Low Involvement Purchase

1. Need recognition

2. Information searching

3. Evaluation of alternatives

4. Purchase decision

5. Post purchase behavior

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