CHAPTER FOUR

Organizational Buyer Behavior

THE RATIONALITY OF BUSINESS MARKET BUYING

Business purchasing is more rational than consumer purchasing

Decisions are made for the good of the organization (what will most benefit the company?)

And Decisions are made for the good of individual (what will lead to personal success – promotion) (what will prevent personal loss – firing)

Although, business market purchasing is still done by people who have their own individual motivations. These are not always rational.

Examples?

Chapter 4 - Organizational Buyer Behavior

WHAT MAKES ORGANIZATIONAL BUYERS BUY?(THEORIES OF BUYER MOTIVATION) Reward-measurement theory Motivations: Intrinsic rewards (satisfaction), Extrinsic

rewards (salary, promotion) Benefits are the dominant element

Behavior choice theory Motivations: Let’s complete the process correctly (not

let’s buy the right product) Self orientation vs. Company orientation Situation and process are the dominant elements

Role theory The situational role determines peoples’ actions The way we behave depends on who we are with and

their expectations Norms or expectations dominate

Chapter 4 - Organizational Buyer Behavior

MARKETING TO THE BUYER THEORIES Reward-measurement theory What are the desired features and their importance? What benefits (intrinsic and extrinsic) can we

provide regarding the important features

Behavior choice theory Discuss how your product will improve their specific

work situation (self orientation) and improve the organization (company orientation)

Role theory Often conducted in buying centers, so you have to

communicate different things to different individuals depending on their job roles

Chapter 4 - Organizational Buyer Behavior

BUYING CENTER ROLES

Job Description

• Secretary

• Vice president

• Office manager

• Secretary & office manager

• Office manager

• Vice president of operations

Buying Center Role

• Initiator-reports that fax keeps breaking down

• Controller-sets budget for purchase of new fax

• Gatekeeper-gathers review from vendors.

• Influencers-view demonstrations narrow choices

• Recommender-recommends a particular product to decision maker

• Decision Maker – Selects fax to purchase

Chapter 4 - Organizational Buyer Behavior

BUYING CENTERS STRUCTURESNot all buying centers look alike!!!

TIME DIMENSIONS HIGHLY FRAGMENTED: Many participants for a short time

NOT FRAGMENTED: Same people stay for the entire process

VERTICAL DIMENSIONS How many layers of management are involved

HORIZONTAL DIMENSIONS How many departments are involved

FORMALIZATION DIMENSION Tasks and roles are guided and enforced by written

procedures and policies

Chapter 4 - Organizational Buyer Behavior

RECOGNIZING THE BUYER’S RISK

Buying centers often occur when the risks are high (important decision – high costs)

Financial Risk Potential for lost revenue with bad product choice

Performance Risk Product doesn’t perform as intended

Social Risk The purchase will not meet approval of a reference group

(co-workers, boss, buying center members)

Chapter 4 - Organizational Buyer Behavior

REDUCING RISK

More information from more sources Sellers use promotional tools – Salespeople, trade

shows, telemarketing, e-mail, advertising, sales literature, websites, direct mail, trade publications

Using loyalty — build trust Integrity, honesty, and reliability

Spread the risk More decision makers More suppliers (don’t put all of your eggs in 1

basket)

Chapter 4 - Organizational Buyer Behavior

BUYING DETERMINANTS THEORY

Individual factorsExperience, Education,

Age

Organizational factorsCulture and policies

Market factorsCompetition

Environmental factorsRegulations and technology

Chapter 4 - Organizational Buyer Behavior