Organizational Buying Process
- Pages: 6
- Word count: 1378
- Category: Marketing
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1. Explain all elements of the organizational buying process including the influences and stages
J Paul (Chapter 4) have stated that the need for an understanding of the organizational buying process has grown in recent years due to the many competitive challenges presented in business-to-business markets. Since 1980 there have been a number of key changes in this area, including the growth of outsourcing, the increasing power enjoyed by purchasing departments and the importance given to developing partnerships with suppliers.
Organization Buying Process
There are eight phases in the buying and these are purchase initiation; evaluations criteria formation; information search; supplier definition for RFQ; evaluation of quotations; negotiations; suppliers choice; and choice implementation The first phase of purchase initiation requires an initiator to begin or start the process of buying and the requirements are given to the purchase department. In the second phase, the evaluations criteria are formed and boundaries are set in which parameters for evaluation of the product is set. The next stage is the information search where the purchaser begins searching for suitable vendors from either the existing suppliers or from external suppliers who are not registered with the company. Once the information is searched then comes the stage of supplier definition for the request for quotation and in this stage, qualified vendors are asked to respond to a request for quotation. Once the suppliers respond with the quotations, then the quotations are reviewed and based on the best choice between quality and price, the selected suppliers are called in for a negotiation. At this stage, the organization can decide which supplier can be given the contract. Factors such as previous track records, adherence to deadlines and quality aspects and the price factor and other commercial aspects may influence the decision to award the contract to a specific buyer. Once the choice is made, then the vendor is informed and details such as the purchase order, delivery schedule, payment terms, etc. are informed to the buyer.
Influences in Purchase
Paul (Chapter 4) mentions different types of producers and they can be grouped into categories such as Producers, Intermediaries, Government Agencies and Other Institutions. The author has suggested that there are different types of influences on the buying process and they are: Purchase Type Influences; Situational Influences and Behavioral Influences. Purchase Type influence includes Straight Rebuy, Modified Rebuy and New Task Purchase. In Straight Rebuy, involves routinely reordering from an existing supplier and Modified Rebuy considering a limited number of alternatives before making a selection while New Task Purchase involves an extensive search for information and a formal decision process. Situational Influences include a number of players such as Purchasing roles; Initiators the people that recognizes a need or problem and starts the purchasing process; Users people who actually use the product; Influencers are people who affect the buying process;
Buyers The people who have the authority and responsibility to select the suppler and negotiate the terms of the contract; Deciders The person who has the power to select the supplier and receives the contract and Gatekeepers who control the flow of information in the buying center. In addition, there are Organization- Specific Factors and Purchasing Policies and Procedures that are part of the situational influence. Behavioral Influences include Personal Motivations where Buyers are often influenced by personal factors such as friendship, professional price, fear and uncertainty, trust and personal ambitions and Role Perceptions where Individuals behavior depends on their perception of their role, their commitment to what they believe is their expected role and what it is to be perceived as.
Stages in Purchase
Paul (Chapter 4) has mentioned four stages in organizational buying and these are Organizational Need, Vendor Analysis, Purchase Activities and Post purchase Evaluation. organizational Need the organizations need to recognize their needs and have a willingness and ability to meet them while in Vendor Analysis, Buyers must search for, locate and evaluate potential providers of goods and services and Suppliers are rated on product quality, on-time delivery, price, payment terms and use of modern technology. Purchase Activities can involve long time periods of negotiations on price and terms and formal contracts stating quality, delivery and service criteria while in the Post purchase Evaluation, evaluations need to be done on whether the products are acceptable for future purchase or should a new supplier be found.
2. Compare the organizational buying process to the consumer buying process
This section provides a comparison between consumer and organizational buying.
How are the buying processes different?
Paul (Chapter 3) has pointed out that there are many unique influences in consumer buying and these tend to make the buying process for consumers different from organizational buyers.
Consumer buyers are subjected to influences such as Social Influences, Cultural Influences, Culture and Subculture, Social Class, Reference Groups and Families and in addition there are a number of Marketing Influences, Situation Influences and Psychological Influences. Consumer buying is influenced by many factors that have been researched extensively. Social influences have both direct and indirect effect on the buying process. Cultural influence are defined by a number of values such as Achievement and success activity, Efficiency and practicality, Material comfort, Individualism, Freedom, External conformity, Humanitarianism, Youthfulness and Fitness and health. In addition, consumer buying is influenced by social classes such as upper class, middle class, working class and the lower class. The drivers, needs and aspirations for these classes are very different from each other.
Marketing Influences have a great impact on consumer buying and these include· Product Influences, Price Influences, Promotion Influences and place influences. Product Influences are formed by marketers which differentiate their products from their competitor and create the perception of a worthwhile product purchase and includes features such as Brand name, quality, newness and complexity. Price Influences have an impact and conscious consumers may buy products more on the basis of price than other attributes. Promotion Influences include Marketing communications that can influence consumers to think about products, what emotions they experience in purchasing and using them and what behavior they perform including shopping in particular stores and purchasing specific brands while Place influences can include Products that are convenient to buy in a variety of stores increases the chance that consumers finding and buying the product, products sold in exclusive stores may be perceived by consumers as having a higher quality and that products offered by non-store methods create consumer perception that the products are innovative and exclusive.
Organizational buyers (Paul, Chapter 4) are relatively free from such influences and the buyers are professional buyers who have to operate with a set of organization policies and rules. For such buyers, time, quality, deadlines and price are the most important factors. Since organizations buyers buy in bulk, they can negotiate for lower costs and they can also demand certain redesigns or customization and can demand that goods be door delivered. They also have the power to reject substandard products and can withhold payment if the supplier does not satisfy the requirements. The organization buying process is more structured and rationale and is dependant on quality requirements of the user. Cultural, social and group influences have little effect on such buying. There is lesser involvement of middlemen, computer systems are used for buying and there is a derived demand.
How are the buying processes similar?
Paul (Chapter 3, Chapter 4) has suggested that the overall buying process for consumers and organizations are similar. Similarities are consumer/ organization need; vendor analysis, Purchase Activities and Post purchase Evaluation. Both evaluate a product and rate it as per the quality, price and performance and both types of buyers may evaluate multiple vendors before asking for rates or reduction in rates. This is especially true for large value purchases such as house and car for consumers and plant and machinery for organization buyers. Both consumers may take up extensive search for information and in addition, there is the buying activity on both buyers and a post evaluation where the product that is bought is evaluated on the real and the perceived value.
J.Paul Peter James H. Donnelly, Jr.”A Preface to Marketing Management”; 10th Edition