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BELTEI INTERNATIONAL UNIVERSITY

Faculty of Business Administration

Bachelor’s Program

Lecturer, Moeung Phanny ( MBA )

Moeung Phanny Master of Business Administration

(MBA)/(MJM) Tel: 011 78 78 80 E-mail: phannyart@yahoo.com

Chapter

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

Understanding Organization as

Consumers

Chapter

66

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Understanding Organization as Consumers

Organizational buyers: are those manufacturers , wholesalers , retailers, and government agencies that buy goods and services for their own use or for resale.

Organizational buyers are divided into three different markets: 1.Industrial 2. Reseller 3.Government markets

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Organizational buyers

Industrial markets: Industrial markets: These industrial firms in These industrial firms in some way reprocess a product or services some way reprocess a product or services they buy before selling it again to the buyer.they buy before selling it again to the buyer.Reseller markets: Reseller markets: Wholesalers and retailers Wholesalers and retailers that buy physical products and resell them that buy physical products and resell them again without any reprocessing are called again without any reprocessing are called resellers.resellers.Government markets :Government markets :tend to favor domestic tend to favor domestic suppliers and require suppliers to submit bids suppliers and require suppliers to submit bids and normally award to the lowest bidderand normally award to the lowest bidder

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Main Influences on Government BuyersMain Influences on Government Buyers -Government buyers -Government buyers are affected by environmental;are affected by environmental;

organisational; interpersonal; and individual organisational; interpersonal; and individual factors. factors.

-Government -Government is watched by outside publics that areis watched by outside publics that are interested in how taxpayers’ money is spent.interested in how taxpayers’ money is spent.-Governments -Governments usually require suppliers to submit usually require suppliers to submit

bids or tenders which are evaluated. (often low bids or tenders which are evaluated. (often low costcost

wins).wins).-Governments -Governments normally favour domestic suppliers.normally favour domestic suppliers.-Government -Government buying decisions often seem complex buying decisions often seem complex

to suppliers, but government is generallyto suppliers, but government is generally helpful in providing information about its needs helpful in providing information about its needs and procedures.and procedures.

Government markets

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Characteristics of organizational buying

- Characteristics of organizational buying:- Characteristics of organizational buying:

is the decision-making process that is the decision-making process that organizations use to establish the need for organizations use to establish the need for products and services and identify , products and services and identify , evaluate , and choose among alternative evaluate , and choose among alternative brands and suppliers.brands and suppliers.

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Need RecognitionNeed Recognition

Information SearchInformation Search

Evaluation of AlternativesEvaluation of Alternatives

Purchase DecisionPurchase Decision

Post-purchase BehaviorPost-purchase Behavior

The Buyer Decision ProcessThe Buyer Decision Process

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Stage in the Buying Decision Process

Stage 1: Problem recognition Stage 1: Problem recognition Purchase-decision processes are triggered by Purchase-decision processes are triggered by

unsatisfied needs or wants.unsatisfied needs or wants. We tend to focus on those needs that are We tend to focus on those needs that are

strongest. strongest. A need can become stronger and be brought to A need can become stronger and be brought to

our attention by a deterioration of our actual state our attention by a deterioration of our actual state or an upward revision of our ideal state.or an upward revision of our ideal state.

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Stage in the Buying Decision Process

Stage 2: Information searchStage 2: Information search People seek additional information about People seek additional information about

alternatives brands until they perceive that the alternatives brands until they perceive that the costs of obtaining more information are equal to costs of obtaining more information are equal to the additional value or benefit derived.the additional value or benefit derived.

Opportunity cost of the time involved in seeking Opportunity cost of the time involved in seeking information.information.

Psychological costs involved in searching for Psychological costs involved in searching for information. information.

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Stage in the Buying Decision Process

Sources of informationSources of information Personal sources Personal sources Commercial sources Commercial sources Public sources of informationPublic sources of information

Commercial sources perform an Commercial sources perform an informing function for consumers. informing function for consumers.

Personal and public sources serve an Personal and public sources serve an evaluating and legitimizing function. evaluating and legitimizing function.

The Internet is reducing the opportunity The Internet is reducing the opportunity costs of information gatheringcosts of information gathering

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Stage in the Buying Decision Process

Stage 3: Evaluation of alternativesStage 3: Evaluation of alternatives Consumers simplify their evaluation in several Consumers simplify their evaluation in several

ways. ways. They focus on their evoked set.They focus on their evoked set.They evaluate each of the brands in the evoked They evaluate each of the brands in the evoked

set on a limited number of product dimensions set on a limited number of product dimensions or attributes. or attributes.

They combine evaluations across attributes, They combine evaluations across attributes, taking into account the relative importance of taking into account the relative importance of those attributes. those attributes.

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Stage in the Buying Decision Process

Stage 4: Purchase decisionStage 4: Purchase decision Consumers usually select the source they perceive to be Consumers usually select the source they perceive to be

best on those attributes most important to them.best on those attributes most important to them.

Stage 5: Post-purchase behaviourStage 5: Post-purchase behaviour The person’s expectation level and evaluation of how well The person’s expectation level and evaluation of how well

the product actually did perform.the product actually did perform. The evaluation feeds back into memory where it can be The evaluation feeds back into memory where it can be

recalled for a similar decision.recalled for a similar decision. Consistent positive experiences can ultimately lead to Consistent positive experiences can ultimately lead to

brand loyalty.brand loyalty.

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Buying center a cross-functional group

Buying situation and The Buying Center:Buying situation and The Buying Center:

The number of people is the buying center The number of people is the buying center largely depends on the specific buying largely depends on the specific buying situationsituation

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UsersUsers are those that will use the product or service are those that will use the product or service

InfluencersInfluencers help define specifications and provide help define specifications and provide information for evaluating alternativesinformation for evaluating alternatives

BuyersBuyers have formal authority to select the supplier and have formal authority to select the supplier and arrange terms of purchasearrange terms of purchase

DecidersDeciders have formal or informal power to select and have formal or informal power to select and approve final suppliersapprove final suppliers

GatekeepersGatekeepers control the flow of information control the flow of information

Participants in the Business Buying Process

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i.  New Task / New buy : i.  New Task / New buy : Here, buyers have limited knowledge and experience

of the new product/service. Hence, more information is obtained, more people are involved, risks are more, and decisions take longer time.

ii. Modified Rebuy / Change in supplier :ii. Modified Rebuy / Change in supplier :This situation occurs when the firm is not satisfied

with the performance of existing suppliers, or there is a change in product specs. Hence, the need for searching alternate suppliers.

iii. Straight Rebuy / Repeat purchase :iii. Straight Rebuy / Repeat purchase :

Here, the buying firm places repeat orders on suppliers who are currently supplying certain products/services. Such decisions are routine, with less risks and less information needs, and can be taken by junior executives.

3. Common types of purchases / buying situations

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Environmental Variables

Physical, Techno logica l

Econom ic, C ultura l

Po litical and Legal

Labour unions

C ustom er dem ands

C om petitive practices

Supp lier in form ation

W EBSTER AND W IND MODEL

Organisation Variables

O bjectives and goa ls

O rganisa tion Structu re

Purchasing Po lic ies / P rocedures

Evalua tion & rew ard system s

D egree o f decentra lisation

Buying Centre Variables

Authority, S ize

Key influencers

Interpersona l re lationsh ip

C om m unication

Organisation Buying Decisions

C hoice o f Supp liers

D e lay decision & get m ore inform ation

M ake, Lease or buy

D o not buy

Individual Variables

Personal G oals , Values

Education, Experience

Expertise, Job Position

Lifesty le, Incom e

Model of industrial buyer behavior

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E-Marketplace

Virtual Organization MarketsVirtual Organization MarketsOnline purchasingOnline purchasing

Company-buying sitesCompany-buying sites

ExtranetsExtranets

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E-Marketplace

AdvantagesAdvantages Access to new suppliersAccess to new suppliers Lowers costsLowers costs Speeds order processing and deliverySpeeds order processing and delivery Shares informationShares information SalesSales Service and supportService and support

DisadvantagesDisadvantages+Can erode relationships as buyers search for new suppliers+Can erode relationships as buyers search for new suppliers

++SecuritySecurity

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Online Auctions in Organizational Markets

Online auctions have grown in popularity Online auctions have grown in popularity among organizational buyers and business among organizational buyers and business markets. Many e-marketplace offer this markets. Many e-marketplace offer this service.service.

Two general types of auctions are Two general types of auctions are common:common:

+ Traditional Auction + Traditional Auction ( number of buyers increase )

+ Reverse Auction + Reverse Auction ( number of sellers increase )

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Online Auctions in Organizational Markets

+ Traditional AuctionTraditional AuctionAA seller puts items up for sale and would-be-buyers are invited to bid in seller puts items up for sale and would-be-buyers are invited to bid in

competition with each other. As more would-be buyers become involved, competition with each other. As more would-be buyers become involved, there is an upward pressure on bid prices. Why? Bidding is sequential. there is an upward pressure on bid prices. Why? Bidding is sequential. Prospective buyers observe the bids of other and decide whether or not to Prospective buyers observe the bids of other and decide whether or not to increase the bid price.increase the bid price.

+ Reverse AuctionReverse AuctionA buyer communicates a need for a product or service and would-be A buyer communicates a need for a product or service and would-be

suppliers are invited to bid in competition with each other. suppliers are invited to bid in competition with each other.

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Lecturer , Moeung Phanny (MBA )

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Thank You for your attention!