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BUYING BEHAVIOR
CONSUMER vs ORGANIZATION
Differences Between
Organizational & Consumer Buying Behavior
Organisational / Corporation
Fewer
Close, Long-term relationship
More rational
Specific Requirement
Reciprocal buying
More risky
More Complex
Negotiation (professional)
Consumer / Retail
Much more
Far, Short-term relationship
More emotional
General Requirement
One Way Buying
Not risky
Simple
Bargain
Fewer organisational buyers
• Generally, a company marketing industrial
products will have fewer potential buyers than a
marketing in consumer markets.
• This means that one customer in the industrial
marketer is far importance than the consumer
buyer.
Close, long-term relationships between organisational
buyers and sellers
• Because of the importance of large customers it
makes sense for suppliers to invest in long-term
relationships with them.
• The nature of relationships is:
– customers and manufacturers rarely meet,
– and brand switching is common.
Organisational buyers are more rational
• Although the people on organisational buyers are
affected by emotional factors, e.g. like or dislike, the
colour of office equipment, etc., it is true that on the
whole organisational buying is more rational.
• Often decisions will be made on economic criteria,
because industrial buyers have to justify their decisions
to other members of their organisation.
• Base on that, Caterpillar tractor salespeople design their
sales presentation on the fact that, although the initial
purchase price of their tractors was higher than the
competition, over the life of the tractor costs were
significantly lower.
Organisational buying may be to specific requirements
• It is common in industrial marketing for buyers
to determine product specifications and for
sellers to tailor their product offerings to meet
them.
• This is feasible because of the large potential
revenue of such products, e.g. railway engines.
Reciprocal buying is important in organisational buying
• An industrial buyer have a powerful negotiating
position with a seller, it may be possible to
demand concessions in return for placing the
order.
• In some situations the buyer may demand that
the seller buys some of the buyer's products in
return for securing the order.
• For example :
– A buyer of tyres for a car manufacturer may demand
that, in return for the contract, the tyre producer buys
its company cars from the car manufacturer.
Organisational selling/buying may be more risky
• Industrial markets are sometimes characterised
by a contract being agreed before the product is
made.
• The product itself may be highly technical and
the seller may be faced with unforeseen
problems once work has started.
• For example :
– Monetary Crisis
Organisational buying is more complex
• Many industrial purchases, notably those which
involve large sums of money and which are new
to the company, involve many people at
different levels of the organisation.
• The managing director, product engineers,
production managers, purchasing manager and
operatives may influence the decision of which
expensive machine to purchase.
• The sales task may be to influence as many of
these people as possible and may involve multilevel selling by means of a sales team, rather
than an individual salesperson.
Negotiation is often important in organisational buying
• Negotiation is often important in organisational
buying because of the presence of professional
buyers and sellers, and the size and complexity
of organisational buying.
• The supplier's list price may be regarded as the
starting point for negotiation, but the price
actually paid will depend on the negotiation
skills and power bases of buyers and sellers.
Decision Making Unit
CONSUMER BUYER BEHAVIOR
Who Buys ?
Initiator
Influencer
Decider
Buyer
User
CONSUMER BUYER BEHAVIOR
Decision Making Process
Need Identification /
Problem Identification
Information Gathering
Evaluative Criteria
Attitudes
Evaluation of alternative
solution (product)
Beliefs
Selection of an appropriate
solution
Post Purchase Evaluation of
Decision
Affecting factors on Decision Making
Level of Involvement
1. Buying situation
Automatic
Limited
2. Personal Influences
3. Life Style
4. Social Influences
Extensive
Organisational Buyer Behavior
• Structure
– (Who participate in the decision making)
• Process
– (How to process the decision making)
• Content
– (Which criterion to use at different stages)
Organisational Buyer Behavior
• Structure (Who participate in the decision
making)
– Initiator
– Deciders
– Buyers
- Users
- Influencers
- Gatekeepers
• Content
(Which criterion to use at different stages)
• Price
• Life cycle cost
• Durability
• etc
- Delivery
- Reliability
- Safety
Decision Making Process
Recognition of a problem
Determine Specification
Search potential sources
Acquisition & analysis Proposal
Evaluation proposal &
selection suplier
Selection of an order routine
Performance feedback & Evaluation
Affecting Factors
on Organisational Buyer
BUY CLASS :
PRODUCT TYPE :
- Straight re-buy
- Product Constituents
- Modified re buy
- Product Facilities
- New task
- MROs
IMPORTANCE
OF PURCHASE
Development in Purchasing Practice
• Just in time Purchase
– Minimalise stock by organising a supply material
– Increasing Efficiency / cost reduction
• Centralised Purchasing
– Huge organisation
– Bulk buying of common requirement
– Negosiation power of cost
• Reserve Marketing
– Initiative come from the buyer
Traditional marketing
Buyer
Supplier
Reserve marketing
Development In Purchasing Practice (cont’d)
• Leasing
– Adalah semacam kontrak sewa shg tidak perlu bisa membeli
produk /jasa, terlindung dr keusangan produk, terhindar dari
urusan ganti spare parts, terkadang ada keuntungan pajak,
terkadang bisa juga terhindar dari biaya perawatan (tergantung
type leasing)
• Financial Lease / full payment
– Long term, fully amortised, total biaya lease biasanya > harga
produk, perjanjian tergantung konvensi dan situasi kompetisi,
terkadang leaser setuju membiayai perawatan selama leasing.
Contoh : photocopy.
• Operating Lease / rental agreement
– Short term (dipilih agar terhindar dari “idle time” dibandingkan jk
membeli), cancellable, not completely amortised, biayanya >
dari financial lease (krn short time). Misal : buldozer, tractor, dll
Relationship Management (organizational customer)
• Merupakan pengembangan dari close & long
term relationship yang reciprocal.
• How to build the Relationship ?
– Technical Support : research & development
cooperation, etc
– Expertise : design and engineering consultancies, etc
– Resources Support : extending credit facilities, low
interest loans, etc
– Service Level : offering service level improvement;
set up, complaint handling
– Risk Reduction : free new demo product, product &
delivery guarantee, etc