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Intermediaries, Business-to-Business, Straight Rebuys, Modified Intermediaries, Business-to-Business, Straight Rebuys, Modified Rebuys, New Task Purchases, Structural Influences, Purchasing Rebuys, New Task Purchases, Structural Influences, Purchasing

Roles, Initiators, Users, influencers, Deciders, Buyers, Roles, Initiators, Users, influencers, Deciders, Buyers, Gatekeepers, Organization-specific Factors, Purchasing Policies Gatekeepers, Organization-specific Factors, Purchasing Policies

and Procedures, Sole Sourcing, Role Perceptions, Vendor and Procedures, Sole Sourcing, Role Perceptions, Vendor AnalysisAnalysis

Business, Government and Business, Government and Institutional BuyingInstitutional Buying

Chapter 4Chapter 4

Key TermsKey Terms

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Organizational Buyer CategoriesOrganizational Buyer Categories

Producers – Businesses that buy goods and Producers – Businesses that buy goods and services in order to produce other goods and services in order to produce other goods and servicesservices

Intermediaries – Purchase products to resell at a Intermediaries – Purchase products to resell at a profitprofit

Government agencies – 86,000 government Government agencies – 86,000 government agencies spend trillions of dollars on machinery, agencies spend trillions of dollars on machinery, equipment, facilities, supplies and servicesequipment, facilities, supplies and services

Other institutions – Such as hospitals, museums, Other institutions – Such as hospitals, museums, universities, nursing homes, and churchesuniversities, nursing homes, and churches

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Organizational Buying ProcessOrganizational Buying Process

A Model of the Organizational Buying ProcessA Model of the Organizational Buying Process

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Purchase-Type InfluencesPurchase-Type Influences

Straight rebuy – Routine reordering from a supplier Straight rebuy – Routine reordering from a supplier used in the pastused in the past Common in organizations using just-in-time inventoryCommon in organizations using just-in-time inventory

Modified rebuy – Purchase involves considering a Modified rebuy – Purchase involves considering a limited number of alternatives before making a limited number of alternatives before making a selectionselection Used when some aspects of the buying situation are Used when some aspects of the buying situation are

unfamiliarunfamiliar New task purchase – Involves an extensive search New task purchase – Involves an extensive search

for information and a formal decision processfor information and a formal decision process Often used for purchase of big-ticket itemsOften used for purchase of big-ticket items

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Purchase-Type InfluencesPurchase-Type Influences

Differences in Types of Organizational PurchasesDifferences in Types of Organizational Purchases

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Key Differences in Marketing to Key Differences in Marketing to Organizational BuyersOrganizational Buyers

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Structural Influences – Structural Influences – Purchasing RolesPurchasing Roles

Structural influences – Design of organizational Structural influences – Design of organizational environment and how it affects the purchasing environment and how it affects the purchasing processprocess Initiators Initiators UsersUsers InfluencersInfluencers BuyersBuyers DecidersDeciders GatekeepersGatekeepers

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Organization-Specific FactorsOrganization-Specific Factors

Orientation – Dominant function in an organization Orientation – Dominant function in an organization controlling purchasing decisionscontrolling purchasing decisions

Size of organization – Larger organizations tend to Size of organization – Larger organizations tend to have higher degree of joint decision; smaller have higher degree of joint decision; smaller organizations tend to use autonomous decision organizations tend to use autonomous decision makingmaking

Degree of centralization – This influences whether Degree of centralization – This influences whether decisions are made individually or jointly with othersdecisions are made individually or jointly with others

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Purchasing Policies and ProceduresPurchasing Policies and Procedures

Sole sourcing – All of a particular type of product is Sole sourcing – All of a particular type of product is purchased from a single supplierpurchased from a single supplier

Direct buying – List of approved vendors for particular Direct buying – List of approved vendors for particular productsproducts

Competitive bidding – For large, one-time purchasesCompetitive bidding – For large, one-time purchases

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Behavioral InfluencesBehavioral Influences

Personal motivations – Factors such as friendship, professional pride, fear and uncertainty/risk, trust and personal ambitionPersonal motivations – Factors such as friendship, professional pride, fear and uncertainty/risk, trust and personal ambition Role perceptions – Organizational buyers’ commitment depends on what they believe isRole perceptions – Organizational buyers’ commitment depends on what they believe is

Expected of their roleExpected of their role The ‘maturity’ of the role typeThe ‘maturity’ of the role type Extent of management commitment to role typeExtent of management commitment to role type

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Behavioral InfluencesBehavioral Influences

Organizations can be divided into three groups based Organizations can be divided into three groups based on commitmenton commitment InnovativeInnovative AdaptiveAdaptive LethargicLethargic

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Purchasing Agent InfluencesPurchasing Agent Influences

One study involving purchasing agents revealed that One study involving purchasing agents revealed that there a greater degree of responsibility and control there a greater degree of responsibility and control over decisions involvingover decisions involving Design of the productDesign of the product Cost of the productCost of the product Determination of performance lifeDetermination of performance life Naming a specific supplierNaming a specific supplier Assessing engineering support from the supplierAssessing engineering support from the supplier Reduction of rejectsReduction of rejects

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Stages in Organizational Stages in Organizational Buying ProcessBuying Process

Organizational NeedOrganizational Need Needs based on survivability and stated objectives of Needs based on survivability and stated objectives of

the organizationthe organization Vendor AnalysisVendor Analysis

Search for, locate and evaluate potential providers of Search for, locate and evaluate potential providers of goods and services goods and services

Rate them based on quality, on-time delivery, price, Rate them based on quality, on-time delivery, price, payment terms, and use of technologypayment terms, and use of technology

Helps in developing a list of approved vendors, Helps in developing a list of approved vendors, comparing competing vendors, and comparing vendor comparing competing vendors, and comparing vendor performance both before and after purchaseperformance both before and after purchase

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Stages in Organizational Stages in Organizational Buying ProcessBuying Process

Sample Vendor Analysis FormSample Vendor Analysis Form

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Stages in Organizational Stages in Organizational Buying ProcessBuying Process

Purchase ActivitiesPurchase Activities Purchases can involve extensive negotiations on price, Purchases can involve extensive negotiations on price,

term of contract – increases with complex goods and term of contract – increases with complex goods and servicesservices

Postpurchase EvaluationPostpurchase Evaluation Does the purchase perform as expected?Does the purchase perform as expected? Should the supplier be used again?Should the supplier be used again? Must be remembered that different functional areas Must be remembered that different functional areas

have different evaluation criteriahave different evaluation criteria

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Stages in Organizational Stages in Organizational Buying ProcessBuying Process

Functional Areas and Their Key Concerns in Organizational BuyingFunctional Areas and Their Key Concerns in Organizational Buying

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Code of Ethics for OrganizationalCode of Ethics for OrganizationalBuyersBuyers