What is Organizational Buying Behavior?
Organizational buying behavior is also called business buying behavior or organizational buying decision, is the behavior of organizations while buying products or services that may buy such things for resale, reproduction, or to conduct organization’s operations.
Organizational buying behavior is the decision-making process through which an organization establishes the need for products or services and identify, evaluates, and chooses among alternative brands, and suppliers – Webster and Wind
In the market, the individual buyer is not the only entity that purchases products or services there are also organizations involved in purchasing such things. The major organizational buyers may include, producers, resellers, institutions, and government.
Where producers are the organization that purchases products for further production or reproduction. Resellers are the organization that purchases products for reselling purposes such as wholesalers, retailers, agents. etc. Institutions are the various private institutions such as INGOs, schools, colleges, etc. And, government organizations may include ministries, departments, public enterprises, etc.
The basic features of organizational buying are listed as follows:
- The organizational market has few buyers who buy their required products in a large quantity.
- Organizations maintain very close relationships with their suppliers and customers.
- Organizations often adapt their products, services, and other elements of the marketing mix to meet the requirement of buyers.
- Organizations buy goods and services by complying with the government and organization’s laws, rules, and regulations.
- The organizational buying is mostly technical and based mostly on some logical reasons.
- Organizational buying involves infrequent purchases i.e. organizations do not tend to buy goods frequently as an individual buyer usually does.
Types of Organizational Buying
There are mainly three types of organizational buying behavior or decision, they are:
Straight Repurchase Decision. The buying organization will carefully evaluate the past purchasing by following criteria:
- Quality of products
- Terms and conditions of the supplier
- Regularity in the supply of goods
- Relation of the organization
- The personnel with the supplier
- Buying convenience, etc.
If the organization or the purchasing department is satisfied with these criteria, it makes a direct repurchase decision with the same supplier without going through the preceding steps. This type of buying decision is called a straight repurchase decision.
Modified Purchase Decision. Sometimes the buying organization or the purchasing department may be satisfied with the supplier however wants to alter certain products specifications or purchase terms is called a modified purchase decision. In this situation, the organization may not need to change the organizational buying process again. The purchasing department may change certain buying or product specifications if needed for further repurchase with the same supplier or other.
New Purchase Decision. If the organization wants to make a purchase of new products due to the changed situation of the organization, it can opt for a new buying process. In this situation, the purchasing department needs to identify the needs of the organization and follow the succeeding procedure of the organizational buying.
Organizational Buying Process
Like a consumer buying behavior process, the organization also follows a series of steps in buying its requirements. The organizational buying process may differ from organization to organization depending upon the nature of the organization, the volume of purchase, the money involved in the purchase, etc.
There are also no must-follow steps for organizations to buy their requirements. However, commonly used steps in the organizational buying process are:
1. Recognizing a Need or a Problem
Recognizing the need or requirement of the organization; such as stationeries, furniture, flooring and furnishing, raw materials, component parts, computers, etc. is the first step of an organizational buying process.
2. Determining the Product & Buying Specification
It is the second step of the organizational buying process. This step involves determining the product and buying specifications such as product quality, quantity price, mode of payment, delivery date, place, design of the product, etc.
3. Listing and Identifying the Suppliers
In this third step, the organization identifies the potential suppliers that can supply goods and services according to the accepted product specifications and mutually agreed on terms and conditions.
4. Evaluation and Selecting Most Reliable and Competent Supplier
Here the organization evaluates and chooses the most reliable supplier who can definitely supply products to the organization according to its requirements. While evaluating the supplier various criteria may be concerned such as past performance of the supplier, regularity, punctuality, product price, quality, delivery time, firm’s relations with supplier, reliability, etc.
5. Purchase Decision
At this stage of organization buying, the organization makes an actual purchase of required goods or services.
6. Evaluation of Performace of Supplier
This is the post-purchase step of the organizational buying process. It involves evaluating the supplier’s sales performance. The evaluation may be done on the basis of the quality of the supplier’s service, business efficiency, punctuality, etc. If the organization is satisfied with the past purchase behavior, the decision may be done to make a repurchase from the same supplier or a similar product from any supplier. An if not, maybe the organization again repeat all the steps.
Factors Influencing Organizational Buying Behavior
Organizational buying behavior is influenced and affected by several factors which a marketer needs to study carefully. The factors are:
Environmental Factors: Environmental factors of organization buying generally involve the factors that are external to the organization and the manager has the least control over it. A thorough study of those factors can help the manager to understand their effects on the serving of its customers. Such environmental factors include the level of demand, economic outlook, changes in technology, legal & political change, competitive environment, availability of natural resources, etc.
Organizational Factors: Organizational matters also influence its buying behavior. It includes organizational policy, objectives, purchasing policy, buying procedure, organizational structure, production system, etc. It may determine the way of buying one industrial buyer differ from another and how a purchase decision is likely to make.
Interpersonal Factors: Within the organization different levels of employees, managers, and other authorities have different viewpoints on the purchase, use, and taste of products, which also affect the purchasing decision. Such factors may include interest & income of the buyer, education status, job position, authority to buy and make other decisions, etc.
Individual Factors: In any organization, there is also a single individual who is involved in the activities of purchasing goods and services for the organization. Such individuals also affect the buying decision of the organization. Such individual factors may include the age of the buyer, income, education status, job position, personality, culture, risk attitude, etc.