Organizational buying behavior refers to how businesses purchase goods and services. It is influenced by several factors, including the type of organization, size, the nature of the product or service being purchased, and the organizational buyer's role. Organizational buying behavior can be divided into three main types: routine buying, modified rebuying, and new buying. Routine buying occurs when an organization purchases goods or services similar to those previously purchased.
The decision-making process is relatively simple and well-defined and usually occurs within a single department or function. Modified rebuy occurs when an organization purchases goods or services similar to those it has purchased before, but there are some changes in the specification or requirement. A team from different departments within the organization usually makes this buying decision and may involve some negotiation with suppliers.
New buy occurs when an organization purchases goods or services that are entirely new to it. This type of decision is usually made by a team of senior managers from different departments and involves much research and analysis.
Organizational Purchasing Behavior entails far more than simply placing an order with vendors. In this sense, they describe organizational purchasing behavior as the process by which formal organizations determine the demand for acquired items and services and identify, assess, and select among alternative brands and suppliers. It is critical to recognize that the emphasis here is on the choice process rather than on a single act of making an order.
The desert cooler scenario demonstrates the procedure that began with identifying a requirement and ended with making an order. Robinson, Faris, and Wind defined eight phases of this decision process based on many observations of purchasing situations. We can identify some common organizational purchasing behavior aspects based on previous conversations. To begin, we will utilize the instance of 'Pragati' to identify and then conceptualize some of these common qualities.
Corporate purchasing is a multi-person purchasing activity: Many people would be involved in many purchasing scenarios in organizations (industry, government, hospitals, and educational institutions). These individuals may come from various roles (manufacturing, purchasing, design, and maintenance), have various backgrounds (engineers, MBAs, grads, and so on), and may be at various hierarchical positions within the organization (Managing Director, General Manager, Material Manager). Furthermore, people in a buying situation may play many roles during the buying decision process.
It is a formal action that adheres to an organization's procedures: Regardless of the monetary worth of technological intricacies of items and services, purchasing operations must adhere to established processes and procedures. A typical organization will have procedures even in an emergency, and suppliers must know these. Furthermore, all purchasing choices are eventually formalized into contracts between buyers and suppliers.
Organizational purchasing choices often take longer due to multiperson and formal activity. This results in longer time gaps between applying market effort and receiving a purchase reaction. If a marketer is informed of his customer's response time for various purchasing circumstances, he may build realistic plans.
Although it is a formal activity with rational assessment standards, organizational buying cannot be free of emotional (or irrational) components. This is because it involves human beings in purchasing decisions. The case of Pragati Enterprises has hints in it (familiar friend) where the decision appears to have been influenced by some human or emotional considerations; These human considerations are likely to play a vital role in situations of almost similar alternatives or similar choices like purchasing of commodities, raw materials, standard products, and components.
No two organizations will have similar buying behavior and decisions despite the above common characteristics. These differences will be due to the nature of buying problems, objectives, resources, capabilities, and so on. It is, therefore, essential to consider each organization as a separate selling segment. The above features are sufficient to conclude that organizational purchasing behavior is more sophisticated than consumer purchasing behavior. It is more complicated than consumer purchasing behavior and more complex than any other organizational choice. According to Webster and Wind, the increased complexity is primarily attributable to four factors −
The purchasing workflow is virtually cross-organizational.
Formal authority over buyers (purchase department executives) might be held by a purchasing manager or another functional manager, such as a production manager.
The 'buy function' works extensively with persons outside the organization.
Buying is a service function, which may give the impression that it has a lesser standing inside the buying organization.
The purpose of providing some generalizable features of organizational behavior was not just to illustrate the intricacies and variances but also to inspire you to think about some of your own experiences about these traits. You can confirm the generalizations with the assistance of some known experiences or disapprove of some.
Other than the 'household' client, individuals who buy for themselves are good examples of organizational customers. Nevertheless, visualizing the whole chain of players involved in manufacturing and selling goods and services is a valuable and comprehensive technique for identifying organizational clients. Hence, the producer of a desert cooler may require galvanized iron sheets for the body, angle iron for the frames, wood shavings for the water pads, an exhaust fan for the air, and so on.
Similarly, any provider of required commodities would require downstream products in raw materials, components, and parts. An exhaust fan maker, for example, would require cold rolled strips for fan blades, silicon iron laminations for the motor's rotor, wires for coils, and so on. As you can see, the chain is rather lengthy.
Similarly, in order to market, distributors and retailers would be required. You will quickly see that this 'ghost organizational consumer' may come in various shapes and sizes. They might include −
Coal India Limited, ONGC, and Hindustan Copper Limited are examples of mining and extractive industries.
Examples are Tata Steel, Steel Authority of India Limited (SAIL), and Bharat Aluminium Corporation (BALCO).
Manufacturing of Components and Assembly: Bharat Forge, MICO, Sundaram Clayton, Semiconductors of India Limited, GEC, and Larsen & Toubro are just a few of the many part and assembly makers.
Desert Cooler Manufacturers (there are various local brands), T.V. Manufacturers (Onida, Weston, Nelco), Truck Manufacturers (TELCO, Ashok Leyland), and the like are some instances of final assembly. As with component and part manufacturers, several assembly units may exist for various final products.
Distributors: There may be multiple for each product, such as bearings, tubes, steel, and electrical appliances.
Perhaps it is clear to you that the scope of "organizational marketing" is quite broad and diverse. A reasonable question in such a circumstance would be the legitimacy of generalizations in the form of 'typical traits.' Consequently, from a practical standpoint, it is critical to investigate organizational purchasing behavior for the unique product-market situation. A second method for identifying organizational clients is to divide them into three groups.
Industrial organizations (all industrial organizations), institutional organizations (service organizations such as colleges, hospitals, hotels, and distribution corporations), and government organizations (CPWD, DGS&D, Defence, and so on). Apart from the ownership pattern (public, private, government) and kind of company (production, service), it is vital to note that neither the size (large, medium, or trim) nor the goods distinguish between organizational and household clients.
Organizational purchasing behavior is a complex decision-making process. Several effects and variables exacerbate its intricacy. A firm's purchasing behavior would differ between 'new purchase' and repeat buy' scenarios. The field is enormous because it involves thousands upon thousands of product market circumstances that may appear distinctive and distinct. As a result, it is advised that some unique instances be linked to broader viewpoints. This will aid your understanding of this intricate variety.
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