Evolution - Transition & Future of Organizational Buying Behavior

Theory

By Ashish viswanath Prakash

Objectives

Consumer Vs Org. buying behavior ? 2 sides of the same coin?

The evolution and transition of organizational buying behavior theory

Future : Buyer – Seller relationship from Systems perspective ?

Why divide consumer & org. buyer behavior?

Buying and purchasing ? Distinct why?

Demarcation exaggerated ?

inhibiting generic theory development ?

Why separate theory for same individual placed in different

contexts ?

Assumption:Consumers buy as willful individuals; while organizations purchase as rational groups.

Organizations & Individuals

Organization :Group of individuals lending support to loose hierarchy of objectives.

Do they relate to values and objectives of their participants?

Why should we assume that individual behaves fundamentally different when

embedded within the context of one form of org.(professional) as compared to the

other (social) ?

Organizations = consumer ?

Family = small organization ?

Outdated assumptions of OBB Theory

Applicable only to large manufacturing org. ?

SME, not for profit ,family org., charity, service sector ??

Organizational purchasing – Rational & logical activity

Ignores habitual, experiential & intuitive behavior of managers.

Unilateral approach

Buying decision - Rational or Behavioral ?

Org. Buying – protracted,collective and rational

Consumer purchasing – prompt, individual and idiosyncratic

Are these assumptions actually true ? Needs rethinking?

How rational is ‘rational approach’ ?

Socio- Cultural,political influence at work

Eg :Power relation, career aspirations, risk tolerance, cultural &

intellectual prejudice

Corrosive influence on decision making rationality.

DISSONACE AVOIDING BEHAVIOR as in consumer buying

The Myth of DMU – collective decision making?

Is consumer buying influenced by Collective decision? Users Influencers Buyer Decider Gatekeeper

Aren’t they applicable to consumer buyer behavior?

Professionalism Only attributable to organizational purchasing?

Under estimates the degree of professionalism in consumer

buying process??

House wives ??

Consumer buying – casual & leisure overtone Assumption : Consumers unlike professionals buy for social, recreational and therpeutic

reasons

Ok agreed !! But do companies follow same behavior ? Of course

Evidence please !!

Org. indulged in therapeutic buying e.g. Respond to manager’s needs for status through expensive cars & perks Private jets Landscaping staff party Purchasing elaborate IT systems Revamping logos,letter head, websites

US govt investment in star wars project

Consumer buying behaviour

Integrated approach

Evolution of organizational buyer behavior theory

The 3 models of organizational buying behavior

1. RFW (Robinson, Faris, and Wind)

2. Sheth

3. Webster & Wind

published within a six-year period (1967-1973)

Each describe industrial buying behavior in unique ways:

RFW : BUYGRID framework & buying situations (new task, modified rebuy,

straight rebuy).

diagrammatic representation of industrial buying (as Sheth and WW)

Further modifications Choffray and Lilien (1978; 1980) propose a sequential process of individual

decision making, followed by formation of organizational preferences, resulting in

supplier choice.

Anderson and Chambers (1985) offer a model of based on rewards and

measurements of performance.

Bunn (1993) developed a taxonomy that categorizes buying decisions into six

groups from casual purchase to a strategic new task purchase.

Johnston and Lewin (1996) consider the models of RFW, Sheth, and WW to

develop an integrated model.

Old model

purchasing -- not viewed as a value-adding function.

Purchasing performance -measured by levels of price discounts from

suppliers

Goals are in direct competition

Buying at lowest price

Short term

Very little interaction

No feedback

100s of empirical studies to test bits and pieces of the theoretical models.

DRAMATIC SHIFT in research focus --movement from studying buyers and

sellers in isolation to studying the relationship between firms

Reason: changes in the external business environment

Competition

Innovation

Total quality perspective

New Model :

What does this mean ?

Focus on product quality and customer-service quality may induce buyers and

sellers to become more cooperative and view one another as long-term

partners rather than adversaries.

Eg: TATA NANO

Features :Fewer suppliers e.g. : Xerox – 2000 to 300

Win –win situation

Loyalty

increased communication and information sharing

Towards integrative approach Johnston and Bonoma (1981) and Johnston and Spekman (1987)

Buyer and seller as parts of a system.

Importance of feedback

Linear approach

Systems approach

?

Reality is filled with feedback loops and delays

minimizing system delays is the key to increasing system performance.

JIT JIT 2 – Bose corporation – one step ahead.

Global cooperative systems Cooperation between firms – several dimensions:

resource/information sharing, joint working, and flexibility

Continuity of the relationship is dependent on :

shared vision

goal compatibility

Reference: Elizabeth J. Wilson; Theory transitions in organizational buying behavior research:

JOURNAL OF BUSINESS & INDUSTRIAL MARKETING VOL. 11 NO. 6 1996, pp. 7-19

Wilson F Dominic ; Why divide consumer and organizational buyer behavior?; European journal of marketing volume 34 ,2000,pp780-796