Organizational buying is the
decision-making process by which formal organizations establish the need for
purchased products and services and identify, evaluate, and choose among
alternative brands and suppliers. It
occurs within the business market. The
business market includes of all the organizations that acquire goods and
services used in the production of other products or services that are sold,
rented, or supplied to others. Institutional
and government organizations and profit-seeking companies make up the business
market. Characteristics of business
markets include fewer, larger buyers; close supplier-customer relationship;
professional purchasing; multiple buying influences; multiple sales calls;
derived demand; inelastic demand; fluctuating demand; geographically
concentrated buyers; and direct purchasing.
When a business buyer makes
a purchase, they face many decisions.
The number of decisions depends on the complexity of the problem being
solved, the newness of the buying requirement, the number of people involved,
and the time required. The three types
of buying situations include the straight rebuy, modified rebuy, and new
task. The straight rebuy requires the fewest
decisions to be made and the new-task situation requires the most decisions to
be made.
Purchasing agents and other
department personal are usually the participants in the business buying
process. The buying center is the
decision-making unit of a buying organization.
It consists of those individuals and groups who participate in the
purchasing decision-making process, who share some common goals and the risks
arising from the decisions. It usually
includes many participants with differing interests, authority, status, and
persuasiveness, and sometimes very different decision criteria. Most, if not all, buyers exhibit different
buying styles.
Business marketers must know
which types of companies to focus on in their selling efforts and who to
concentrate on within the buying centers in those organizations. They should figure out who the major decision
participants are, what decisions they influence, what their level of influence
is, and what evaluation criteria they use.
Communication is most important for companies to reach hidden buying
influences and keep current customers informed.
The buying-decision process
has eight stages called buyphases.
Problem recognition is when someone in the company recognizes a problem
or need that can be met by attaining a good or service. The buyer then determines the needed item’s
general characteristics and required quantity and the technical specifications
are developed. Next the buyer tries to
identify the most appropriate suppliers through trade directories, contacts
with other companies, trade advertisements, trade shows, and the Internet. The supplier’s goal is to ensure it is
considered when customers are in the market and searching for a supplier. Once potential suppliers are discovered the
buyer invites them to submit proposals.
The buyer will then evaluate the proposals and applicable suppliers will
be invited to make formal presentations.
The buying center will specify and rank desired supplier attributes
before making a selection. After a
supplier is selected, the buyer negotiates the final order. The buyer will periodically review the
performance of the chosen supplier and this may lead the buyer to continue,
modify, or end a supplier relationship.
Businesses must form strong
relationships with customers. Building
trust is the foundation to a healthy long-term relationship. Knowledge that is specific and relevant
between businesses and customers is also an important factor. Forces that influence the development of a
relationship between business partners are availability of alternatives,
importance of supply, complexity of supply, and supply market dynamism.
Risks and opportunism also
affect business relationships. Tension
between safeguarding and adaptation is created when customer-supplier
relationship are formed. Also, specific investments
can cause considerable risk to both sides.
Opportunism is considered some form of cheating or undersupply relative
to a contract. It is another concern
because firms must devote resources to control and monitor it that they could
otherwise allocate to more productive purposes.
Example:
Apple started out selling
computers many years ago. As technology
advanced so did the company. They
analyze their market over and over to produce bigger and better products for
them. They are always going above and
beyond and creating the newest product before the one created before it has
worn off. By continuous analyzing they
are giving customers a wide variety of products and services and will continue
to grow and prosper.
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