Types of buying decision behavior

Types of Buying Decision Behavior

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Buying-Decision Behavior

Buying behavior differs greatly form a tube of toothpaste, a tennis racket, a digital camera, and a new car.

This means the buying decision behavior of employee can range form a habitual buying to a complex buying.

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1. Complex Buying Behavior:

Customers undertake complex buyingdecision when they are highly involved in apurchase and perceive significant differencesamong brands.

Consumers may be highly involved when theproduct is expensive, risky, purchasedinfrequently, and highly self expensive.

Typically, the consumer has much to learnabout the product category.

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1. Complex Buying Behavior: cont…

For example, a laptop or a mobile, buyer maynot know that attributes to consider.

This buyer will pass through a learningprocess, first developing beliefs about theproduct, then attitudes, and then making athoughtful purchase choice.

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2. Dissonance Reducing Buying Behavior:

In dissonance reducing buying behavior consumerinvolvement is very high due to high price andinfrequent purchase with less significancedifferences among brands.

In this case buyer purchases the product which iseasily available.

After the product purchase, consumer may facedissonance post purchase behavior.

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3. Habitual buying behavior:

In habitual buying behavior consumer involvementis low as well as there is no significance amongbrands names.

The good example is a lighter or match box.

They just go for it and purchase it, there is no brandloyalty. Consumers do not need informationregarding brand purchase, characteristics.

For such brands TV commercials, news papers andmagazines build positive attitude of consumerstowards.

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4. Variety seeking buying behavior:

In variety seeking buying behavior situationconsumer involvement is vey low but there aresignificance differences among brands.

In this situation consumers perceive brandswitching.

A good example is purchase of chips.

In such case consumer purchase chips andconsumes. Next time they purchase another brandjust to change the taste.

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Business Buying Behavior

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Business Buying Behavior

Organizational buying refers to the buying behavior of

organizations that they purchase the products for

production, reproduction, resale and intuitional usages, such

as educational organizations, government, producers

wholesalers, retailers, and private organization.

Organization consists of business, retailing, government and

non-government organization.

Business organization buy product to business use or

produce other product and retailer buy products to resell at

profitable prices. Similarly Government bodies buy

products for office use and non-government organization

buy product to provide service to their customers.

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Business Buying Behavior cont…

Users, influencers, buyers, deciders and gatekeepers are

major participants in the organizational buying process.

Organizational buying behavior is influenced by

marketing stimuli and other stimuli. Marketing stimuli

includes products, prices, place and promotion and

other stimuli includes economic, technological,

political, cultural and competition.

According to Pride and Ferrel Organizational buying

behavior refers to the purchase behavior of producer,

government units, institutions and resellers.

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Business vs Consumer Markets

For marketers, the selling environment of businessmarkets present uniquely different circumstanceswhen compared to selling to consumers. There aretwo ways in which consumer and business marketsdiffer:i. Business markets are more likely to be price driven than

brand driven, and

ii. Demand in business markets tends to be more volatilethan consumer markets.

However, the two markets are dissimilar in otherways requiring marketers to take a different approachwhen selling to business customers than toconsumers.

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Business and consumer markets differ in followingcircumstances.

i. How Decisions Are Made

ii. Existence of Experienced Purchasers

iii. Time Needed to Make Buying Decision

iv. Size of Purchases

v. Number of Buyers

vi. Type of Promotional Effort Needed to Reach Buyer

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Buying Differences: Buying Center Decisions

• In the consumer market a very large percentage of purchase decisions aremade by a single person. There are situations in which multiple people maybe involved in a consumer purchase decision, such as a child influencing aparent to choose a certain brand of cereal or a husband and wife decidingtogether to buy a house, but most of the time purchases are individualdecisions.

• The business market is significantly different. While single personpurchasing is not unusual, especially within a small company, a significantpercentage of business buying, especially within larger organizations,requires the input of many. In the marketing literature those associatedwith the purchase decision are known to be part of a Buying Center, whichconsists of individuals within an organization that perform one or more ofthe following roles:

Buyer Decider

Influencer User Initiator Gatekeeper

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Buyer – responsible for dealing with suppliers andplacing orders (e.g., purchasing agent)

Decider – has the power to make the final purchasedecision (e.g., CEO)

Influencer – has the ability to affect what is orderedsuch as setting order specifications (e.g., engineers,researchers, product managers)

User – those who will actually use the product whenit is received (e.g., office staff)

Initiator – any Buying Center member who is thefirst to determine that a need exists

Gatekeeper – anyone who controls access to otherBuying Center members (e.g., administrativeassistant)

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Buying Differences: Experienced Purchasers

As noted in the discussion of the Buying Center, organizationsoften employ purchasing agents or professional buyerswhose job is to negotiate the best deals for theircompany. Unlike consumers, who often lack informationwhen making purchase decisions, professional buyers aregenerally as knowledgeable about the product and theindustry as the marketer who is selling to them.

Buying Differences: Decision Making Time

Depending on the product, business purchase decisions candrag on for an extensive period. Unlike consumer marketswhere impulse purchasing is rampant, the number of peopleinvolved in business purchase decisions results in decisionstaking weeks, months or even years.

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Buying Differences: Size of Purchases

For products that are regularly used and frequentlypurchased, businesses will often buy a larger volume at onetime compared to consumer purchases. Because of thisbusiness purchasers often demand price breaks (e.g.,discounts) for higher order levels.

Buying Differences: Number of Buyers

While there are several million companies worldwide thatoperate in the overall business market, within a particularmarket the number is much smaller. For example, while inthe United States there are over 95 million households whomay shop at a grocery store, there are only a few thousandgrocery stores with many of these centrally controlled as partof a chain of stores?

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• Buying Differences: Type of Promotions

Companies who primarily target consumers oftenuse mass advertising methods to reach an oftenwidely dispersed market.

For business-to-business marketers the size ofindividual orders, along with a smaller number ofbuyers, makes person-to-person contact by salesrepresentatives a more effective means ofpromotion.

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Types of Business Purchase Decisions

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Straight Re-Purchase -

These purchase situations involve routine ordering.

In most cases buyers simply reorder the same products orservices that were previously purchased. In fact, many largercompanies have programmed re-purchases into anautomated ordering system that initiates electronic orderswhen inventory falls below a certain pre-determined level.

For the supplier benefiting from the re-purchase thissituation is ideal since the purchaser is not looking toevaluate other products.

For competitors who are not getting the order it may requireextensive marketing efforts to persuade the buyer to considerother product or service options.

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Modified Re-Purchase –

These purchases occur when products or services previouslyconsidered a straight re-purchase are for some reason now under are-evaluation process.

There are many reasons why a product is moved to the status of amodified re-purchase. Some of these reasons include: end ofpurchase contract period, change in who is involved in making thepurchase, supplier is removed from an approved suppliers list,mandate from top level of organization to re-evaluate allpurchasing, or strong marketing effort by competitors.

In this circumstance the incumbent supplier faces the samechallenges they may have faced when they initially convinced thebuyer to make the purchase. For competitors the door is now openand they must work hard to make sure their message is heard bythose in charge of the purchase decision.

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New Task Purchase – As the name suggests, these purchases are ones the

buyer has never or rarely made before.

In some ways new task purchases can be consideredas either minor or major depending on the total costor overall importance of the purchase. In either casethe buyer will spend considerably more timeevaluating alternatives.

For example, if faced with a major new taskpurchase, which often involves complex items, suchas computer systems, buildings, robotic assemblylines, etc., the purchase cycle from first recognizingthe need to placement of the order may be monthsor even years.

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Organizational Buying process

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Organizational Buying Process1. Need Recognition:-

First step of organizational buying process is needrecognition in which someone in the companyrecognizes a need that can be met by acquiring agood or a service.

When the need or problem arises, the organizationhas to take the decision whether to make orpurchase the product.

Needs are recognized through internal stimuli andexternal stimuli.

For example if the organization recognizes the needfor the purpose of expansion of office, function, newbranches are open or new product are developed.

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Organizational Buying Process2 General need description:-

Needs description is second step of organizationalbuying process. In this step of organizational buyingprocess, organization, organization describes thegeneral characteristics and quantity of a neededitems.

Helps of engineers, users and consultants should betaken to prepare need description of complex goods.

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Organizational Buying Process3 Product speciation:-

At this stage of organizational buying process,organization decides on the product and specifies thebest technical product characteristics for neededitems.

If organization thinks to purchase externally then theproduct features, outlook and its requirement aredetermined. The product or items characteristicssuch as the product quantity, quality, price, method ofpayment, mode of payment, delivery date, and placedesign of the product.

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Organizational Buying Process4 Suppliers Search:-

At this stage of organizational buying process, thebuyer searches or identify possible potentialsuppliers who can supply goods and servicesaccording to their committed product specifications.

Buyer prepare a list of suppliers to select good andproper suppliers. This list is prepared by looking attrade directory, searching in internet, asking othercompanies for suggestions etc.

Regular products are purchase from regular suppliersbut if the goods to be bought are new, complicated,and costly, it needs long time to search suppliers.

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Organizational Buying Process5 Proposal solicitation:-

Proposal solicitation is the fifth step of organizationalbuying process. In this stage the buyer invitesqualified suppliers to submit proposal from publicmedia.

If the product is costly and complicated, the buyerdemands detailed proposal and if the product istechnical, business organization calls for presentingthe product itself. It should meet all the requiredtechnical specification

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Organizational Buying Process6 Supplier selection:-

The organizational buyer evaluates the proposal andselects the most reliable and capable supplier whocan supply products to the organization according tothe requirement.

While evaluating process they can adopt severalcriteria such as the past performance of the suppliers,regularity, punctuality, product quality and quantity,goodwill, price, terms and conditions of delivery ofgoods, relationship with the buyers, businessefficiency and services etc.

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Organizational Buying Process7 Purchase decision:-

After selecting suppliers, they make purchasedecision.

While make purchase decision, the buyers should beclear or they take specific details about the terms ofsales/ credit arrangement, technical and additionalservices.

Organization writes the final order with the chosensupplier, listing, the technical specifications, quantityneeded, expected time of delivery, return policies andwarranties.

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Organizational Buying Process8 Performance evaluation:-

Performance review or evaluation is the final step oforganizational buying process. At this step of thebusiness buying process, the organization reviewssupplier performance.

The organization rates its satisfaction with suppliersdeciding whether to continue, modifies or drop them.

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Major factors influencing Business Buyers’ Behavior

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Factors determining organizational buying decision

• There are various factors that determine buyingbehavior of business buyers. The major ones are asfollows.

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1 Environmental Factors:-

• Environmental factors affects organizational buyingbehavior. This includes

i. Economic Factors

ii. Technological factors:-

iii. Political and legal factors:-

iv. Social Responsibility:-

v. Competition:-

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1 Environmental Factors:-i. Economic Factors:- Economic factors affects organizational buying behavior. The economic

condition of country determines several factors such as level of demand, production facility,consumption pattern, investment, economic health, saving. The economic conditiondetermines the purchasing power of industrial users. The prosperity is economically goodcondition and recession is economically bad condition for marketing.

ii. Technological factors:-The level of technology, pace of technological change, innovationcapacity, technology transfer directly affects to the organizational buying decision.Technological change affects the production process, packaging, communication andtransportation. Fast growing new technology creates a revolution in purchasing and sellingpattern of, information search, and material management.

iii.Political and legal factors:- Political system, political situation, political philosophy,government policies, laws rules and regulation also affects organizational buying decision.The political stability and favorable climate affects the organization buying decisionpositively. It provide the environment of good investment.

iv.Social Responsibility:- The investor's benefits increase socially accepted goods andservices. The environmental pollution issues, consumer health issues, child labor issues,social responsibility issues influences the product production. These are the serious risingissues in the business field which influences the organizational buying decision.

v. Competition:- Competition of market also affects the buying decision of organizationalusers. This competition includes pure competition, monopolistic competition, and oligopolycompetition.

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2 Organizational factors:-i. Objective:- Goods are purchase to meet organizational objective. Buying objective

should match with organizational objective. If organization's objective is to producequality products purchase objective also should be to purchase quality rawmaterials. Thus organizational buying decision is also affective by objective.

ii.Policies:- Buying policy also affects organizational buying behavior. Goods shouldbe purchased according to buying policy of the organization. If the raw materialpurchasing policy is to buy from national supplier, they must follow it. Similarly, ifthe producer want to implement Nepalese technology. They should be aware ofimplementation of this policy.

iii.Procedure:- Procedure is the methods and process adopted by an organization tobuy goods and services. Goods or services are can be purchased directly throughagreement, or through tender, or through catalogue, and so on. Whicheverprocedure organization has adopted the buyer should follow it.

iv.Organizational Structure:- The organizational buying should depend on theboundary of authority, responsibility and relationship. In these complexities, big orreputed authorized companies specialize purchasing department for their convenience.Purchasing structure may be centralized, decentralized, and committee purchase.

v. System:- Purchasing system also directly affects organizational buying behavior. Anorganization can adopt any one or more such as concentrated system, decentralizedsystem, huge quantity purchase system, small quantity purchase system and otherpurchasing system. 36

3. Interpersonal Factors:-• The organizational buying decision involves in the individual personnel or

staffs with different interest, status, authority and influence. Theseinterpersonal factors affects the organizational buying decision.

i. Authority:- Organizational buying is based on authority. The organizationhas a different members and it has long hierarchy of authority. Theorganizational buying is influenced by the authorized people who haveauthority of final decision.

ii. Interest:- Users influencers, buyers, decider, and gatekeepers are involvedin organizational buying process. Their own interest affects organizationalbuying decision. As their interest becomes different, buying process may becomplicated.

iii. Status:- The status determines the job position and role performed in theorganization. The buyer status influences product and suppliers selectionprocess.

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4 Personal factors:-i. Age:- Age of person involve in purchase decision affects organizational buying

behaviors. Youngsters make quick buying decision in comparison of older agedpersons but older aged person tend to rational decision in comparison ofyoungsters. Similarly young people try to find new suppliers whereas olderperson try to give continuation to the existing suppliers.

ii. Education:- Organizational buying is rational. Educational buyers carefullysearch and evaluate different product and suppliers. They use differentimportant information and compare brand, quality, competitors and deliverysystem while buying process. Thus, buyer's education affects organizationalbuying decision.

iii.Job position :- A job position represent the hierarchy of the organization.Hierarchy is based on the authority and decision power. The authority andpower level of the buyer's influence on the process of buying decision.

iv.Personality:- The personality factors differ from buyers to buyers. It is aninternal structure, traits, appearance and confidence which helps to influencebuying responses. Buyer's personality represents on selection of brand,quality, purchase behavior and traits with the product and sellers.

v. Risk attitudes :- People can be risk takers or risk averters. Risk takers are aggressivetowards buying whereas risk averters are pessimistic towards buying. Such attitudes ofbuyers towards risk directly affect the organizational buying behaviors. 38