BUYING BEHAVIOR

CONSUMER vs ORGANIZATION

Organisational / CorporationOrganisational / Corporation Consumer / RetailConsumer / Retail

Fewer Much more

Close, Long-term relationship Far, Short-term relationship

More rational More emotional

Specific Requirement General Requirement

Reciprocal buying One Way Buying

More risky Not risky

More Complex Simple

Negotiation (professional) Bargain

Differences Between Organizational & Consumer Buying Behavior

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 multi-level 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 CONSUMER BUYER BEHAVIORBEHAVIOR

Who Buys ?Who Buys ?

User

Initiator

Influencer

Decider

Buyer

Information Gathering

Evaluation of alternative solution (product)

Selection of an appropriate solution

Need Identification / Problem Identification

Post Purchase Evaluation of Decision

Decision Making ProcessDecision Making Process

Evaluative Criteria

Beliefs

Attitudes

CONSUMER BUYER CONSUMER BUYER BEHAVIORBEHAVIOR

Affecting factors on Decision Affecting factors on Decision MakingMaking

1. Buying situation

2. Personal Influences

3. Life Style4. Social Influences

Lev

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f In

volv

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Automatic Limited 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 - Users– Deciders - Influencers– Buyers - Gatekeepers

• Content(Which criterion to use at different stages)

• Price - Delivery• Life cycle cost - Reliability• Durability - Safety• etc

Search potential sources

Acquisition & analysis Proposal

Evaluation proposal & selection suplier

Recognition of a problem

Selection of an order routine

Determine Specification

Performance feedback & Evaluation

Decision Making ProcessDecision Making Process

BUY CLASS :

- Straight re-buy

- Modified re buy

- New task

PRODUCT TYPE :

- Product Constituents

- Product Facilities

- MROs

IMPORTANCE OF PURCHASE

Affecting Factorson Organisational Buyer

BuyerSupplier

Reserve marketing

Traditional marketing

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

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