Organisational Buying: Introduction,

Process, Situations and Buying Centre

Roles | Business Marketing
Contents:
1. Introduction to Organisational Buying
2. Organizational Buying Decision Process 
3. Buying Situations
4. Buy Grid Frame Work
5. Buying Centre Roles

1. Introduction to Organisational Buying:

Organisation 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.
Organisations buy in furtherance of organizational objectives, such as to
manufacture and deliver goods and services to members, customers or the
community.
Organizational buying is heavily influenced by derived demand, that is, demand
for an end product or for a product or service sold by the buyer’s customers. The
demand for components by a manufacturer will be dependent on demand coming
from their customers, the retailers and wholesalers, who in turn are reacting to
demand from their customers, the consumers.
Overall consumer demand may in turn be impacted by economic, social, political
and technological factors in the environment.
The organizational buying process is entirely different from the consumer buying
process. While buying decisions are made relatively easily and quickly by
individual customers, organizational buying involves thorough and deep analysis.
Organizations purchase products ranging from highly complex machinery to
small components.

In an organization, the purchase decisions are influenced by several individuals

and are not made in isolation by an individual. Organizational buyers are more
concerned about the price and quality of the product along with the service being
provided by the vendor.
Price plays a major role, since the price of the raw materials is the investment
from which profits are generated. Thus, price is a major factor which affects the
profitability of the firm. Service also plays an important role, because no
organization would like to buy goods from a vendor who cannot provide timely
and efficient service.
Organisations adopt certain methods for buying products such as checking a
sample before the actual purchase. Most organizational purchases involve
purchase of products in large lots. So it is not feasible to individually inspect each
and every item in the lot.
In such situations, a sample is checked assuming that this sample represents the
entire lot. Like the consumer markets, organizational markets also possess
certain demand characteristics. The organizational demand for products or
services may be inelastic, derived, joint or fluctuating in nature.

Organizational markets normally purchase the goods or services for producing

other goods and services, using these as raw materials. There are also resellers,
who purchase the products to sell directly to other customers without any
modifications.
Apart from producers and resellers, there are also government and institutional
customers who buy the goods. Government buys goods for public utility or for use
in their departments or for production purposes.
The buying decisions of organizations are influenced by environmental factors,
organizational factors, social factors and personal factors. Participants in the
organizational buying process play as many as seven different roles, namely those
of initiator, influencer, user, decider, approver, buyer and gatekeeper.
Although organizations differ significantly from each other in their purchasing
process, the various stages of industrial buying comprise problem recognition,
general need recognition, product specification, value analysis, vendor analysis,
order routine specification, multiple sourcing and performance review.

Marketers need relevant information about the characteristics of the industries

for marketing their goods and services effectively. To search for such information,
the prime sources are government and industrial publications. The Standard
Industrial Classification is a process where such characteristics of manufacturing,
financial and service sectors are depicted in a coded format.
Organizational Buying:
Organization 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.
Organizational Buying Behaviour:
Organizational buying behavior is the sum total of an organization’s attitudes,
preferences, intentions and decisions regarding the buying behavior in the
marketplace when purchasing goods for manufacturing or reselling.

2. Organizational Buying Decision Process:

Organizational buying behavior refers to the process of how companies or
organizations buy goods and services. Organizational Buying is not an easy
activity as most people think of it.
Following are the stages in the Organizational Buying process:
Organizational buying behavior is the sum total of an organization’s attitudes,
preferences, intentions and decisions regarding the buying behavior in the
marketplace when purchasing goods for manufacturing or reselling.

2. Organizational Buying Decision Process:

Organizational buying behavior refers to the process of how companies or
organizations buy goods and services. Organizational Buying is not an easy
activity as most people think of it.
Following are the stages in the Organizational Buying process:
Stage-3 – Product Specification:
At this stage of the business buying process buying organization decide on the
product and specifies the best technical product characteristics for a needed item.
Stage-4 – Value Analysis:
An approach to cost reduction, in which components are studied carefully to
determine if they can be redesigned, standardized or made by less costly methods
of production.
Stage-5 – Supplier Search:
At this stage of the business buying process buyer tries to find the best vendors.
Stage-6 – Proposal Solicitation:
The stage of the business buying process in which the buyer invites qualified
suppliers to submit proposals.
Stage-7 – Supplier Selection:
The stage of the business buying process in which the buyer reviews proposal and
selects a supplier or suppliers.
Stage-8 – Order-Routine Specification:
The stage of the business buying process in which the buyer writes the final order
with the chosen suppliers, listing the technical specifications, quantity needed,
expected time of delivery, return policies and warranties.

Stage-9 – Performance Review:

The stage of the business buying process in which the buyer rates its satisfaction
with suppliers, deciding whether to continue, modifies or drops them.

3. Buying Situations:
A buying situation relates to the circumstances surrounding a purchase that can
be defined by the quality of information and experience that the buyer has
concerning the products and vendors available, as well as the effort it will take to
make the purchase decision.
Straight rebuy is the situation under which the buyers are engaging in the routine
purchase of standard products from a familiar supplier where you don’t make any
modifications from the most recent order.
A perfect example is ordering some boxes of copier paper, pens and pencils from
your office supplier. It doesn’t take much effort except to confirm the sales order
has been satisfied.

Modified rebuy is the situation where the purchaser is going to buy a similar
product but there is a significant difference in the purchase from the previous
purchase. The difference may include a change in the product specifications or a
new supplier.
An example may be switching to a different type of software provided by a
different vendor. This buying situation involves more effort because you are going
to have to research product specifications and evaluate vendors, as well as
possibly negotiate new contracts.

4. Buy Grid Frame Work:

In 1967, the Canadian, American and Israeli marketing researchers, Robinson,
Faris and Wind, introduced the buy grid framework as a generic conceptual
model for buying processes of organisations.
They saw industrial buying not as single events, but as organizational decision
making processes where multiple individuals decide on a purchase. Their
framework consists of a matrix of buyclasses and buyphases.
The buyclasses are:

1. New Tasks:
The first-time buyer seeks a wide variety of information to explore alternative
purchasing solutions to his organizational problem. The greater the cost or
perceived risks related to the purchase, the greater the need for information and
the larger the number of participants in the buying centre.
2. Modified Rebuy:
The buyer wants to replace a product the organisation uses. The decision making
may involve plans to modify the product specifications, prices, terms or suppliers
as when managers of the company believe that such a change will enhance quality
or reduce cost.
In such circumstances, the buying centre proved to require fewer participants and
allow for a quicker decision process than in a new task buyclass.
3. Straight Rebuy:
The buyer routinely reorders a product with no modifications. The buyer retains
the supplier as long as the level of satisfaction with the delivery, quality and price
is maintained. New suppliers are considered only when these conditions change.
The challenge for the new supplier is to offer better conditions or draw the buyer’s
attention to greater benefits than in the current offering.
The buyphases are:
Based on field research, Robinson, Faris and Wind divided the buyer
purchase process into eight sequential, distinct but interrelated
buyphases:
(i) Recognition of the organizational problem or need.
(ii) Determination of the characteristics of the item and the quantity needed.
(iii) Description of the characteristics of the item and the quantity needed.
(iv) Search for and qualification of potential sources.
(v) Acquisition and analysis of proposals.
(vi) Evaluation of the proposals and selection of suppliers.
(vii) Selection of an order routine.
(viii) Performance feedback and evaluation.
The most complex buying situations occur in the upper left quadrant of the buy
grid matrix where the largest number of decision makers and buying influences
are involved. A new task that occurs in the problem recognition phase (1) is
generally the most difficult for management.
The buying process can vary from highly formalized to an approximation
depending on the nature of the buying organisation, the size of the deal and the
buying situation.
The relationship between the buyer and seller is initiated in phases 1 and 2.
Assessing the buyer’s needs and determining gaps between the current and
desired situation is important. Buyers need assistance in forming realistic
perceptions of both the current and the desired situation.
The relationship needs to be developed during phases 3 to 7. A sales person must
be aware that a buyer not only has functional needs, but psychological, social,
knowledge and situational needs as well.
These components should be addressed in meetings in order to obtain
commitment. The purchase can be a one-time transaction of a repetitive nature.
When there are multiple deliveries, the supplier and buyer must agree on an
order routine.
As buyphases are completed, the process of ‘creeping commitment’ occurs and
reduces the likelihood of new suppliers gaining access to the buying situation.
During the performance feedback and evaluation phase, the relationship between
the seller and buyer can develop into a longer term engagement. Buyer loyalty
and customer satisfaction are primarily determined by the sales activities during
this last phase.
Pros of Buy Grid Model:
The major implication of Robinson, Faris and Wind’s research is that industrial
buying behaviour depends more on the buying situation than on the type of
product.
The model explains the likely interaction between buyer and seller activities given
the purchase needs of an organisation. It helps sales personnel deliver the correct
message at the right time.
Suppliers need to fill out this matrix for their firm’s specific situation.
For each cell in the matrix (buy situation and buy phase), the
following questions must be answered:
1. Is this combination of situation and phase relevant?
2. Which organisation members influence this purchase decision?
3. What are the used performance indicators?
4. What are the information sources?
The buying side of the model can be used for both consumer and business related
buying processes. It applies to all purchase situations.
The model is based on the observation that buyer’s expectations and behaviour
change according to whether the purchase is new, a modified rebuy or a straight
rebuy.
The model can provide the basis for a formal selection process (e.g. request for
information and request for proposal).
The buy grid framework proved its worth to the scientific community as one of
the few industrial marketing models.
Cons of Buy Grid Model:
The organizational buying model focuses mainly on products and not on services.
A shortcoming of the organizational buying approach is the negligence the
supplier’s side and the influence this party wields on the customer’s
organizational decision process.
The model neglects the importance of acquisition in sales processes.

5. Buying Centre Roles:

A buying centre is comprised of all those individuals and groups who participate
in the buying decision-making process, who share some common goals and the
risks arising from these decisions.
Before identifying the individuals and groups involved in the buying decision
process, a marketer must understand the roles of buying centre members.
Understanding the buying centre roles helps industrial marketers to develop an
effective promotion strategy.
When a buying centre includes many participants, the industrial/ business
marketer will not have the time or resources to reach all of them. Small sellers
could concentrate on reaching the key buying influences. Large sellers on the
other hand go for multi-level in-depth selling to reach as many buying
participants as possible.
It is important to note, that functional responsibilities and job titles are often not
true indicators of the relative influence of buying center members in a purchase
decision task.
The buying center is defined as members of the organization having face-to-face
contact with others with respect to the purchase decision and who realize or
perceive both an influence and a responsibility to a purchase decision.
In the tradition of formal organizational theory, the responsibility and authority
of the member’s organizational position creates a formal stake for him/her in
purchase decisions involving his domain.
Also, an individual can become a buying center member by possessing
information critical to the decision. The main role participants are purchasing
agents, scientists and managers.
Key Members of Buying Centre:
Within any organization, the buying centre will vary in the number and type of
participants for different classes of products.
But on an average a buying center of an organization has the following
seven members or a group of members who play these roles:
1. Initiators:
Usually the need for a product/item and in turn a supplier arises from the users.
But there can be occasions when the top management, maintenance or the
engineering department or any such recognize or feel the need. These people who
“initiate” or start the buying process are called initiators.
2. Users:
Under this category come users of various products. If they are technically sound
like the R&D, engineering who can also communicate well. They play a vital role
in the buying process. They also act as initiators.
3. Buyers
They are people who have formal authority to select the supplier and arrange the
purchase terms. They play a very important role in selecting vendors and
negotiating and sometimes help to shape the product specifications.
The major roles or responsibilities of buyers are obtaining proposals or quotes,
evaluating them and selecting the supplier, negotiating the terms and conditions,
issuing of purchase orders, follow up and keeping track of deliveries. Many of
these processes are automated now with the use of computers to save time and
money.
4. Influencers
Technical personnel, experts and consultants and qualified engineers play the
role of influencers by drawing specifications of products. They are, simply put,
people in the organisation who influence the buying decision.
It can also be the top management when the cost involved is high and benefits
long term. Influencers provide information for strategically evaluating
alternatives.
5. Deciders:
Among the members, the marketing person must be aware of the deciders in the
organisation and try to reach them and maintain contacts with them. The
organisational formal structure might be deceptive and the decision might not
even be taken in the purchasing department.
Generally, for routine purchases, the purchase executive may be the decider. But
for high value and technically complex products, senior executives are the
deciders. People who decide on product requirements/specifications and the
suppliers are deciders.
6. Approvers:
People who authorize the proposed actions of deciders or buyers are approvers.
They could also be personnel from top management or finance department or the
users.
7. Gate Keeper:
A gatekeeper is like a filter of information. He is the one the marketer has to pass
through before he reaches the decision makers. Understanding the role of the
gatekeeper is critical in the development of industrial marketing strategies and
the salesperson’s approach. They allow only that information favourable to their
opinion to flow to the decision makers.
By being closest to the action, purchasing managers or those persons involved in
a buying centre may act as gatekeepers. They are the people whom our industrial
marketer would first get in touch with.
Hence, it happens that information is usually routed through them. They have the
power to prevent the sellers or information from reaching members of the buying
centre. They could be at any level and even be the receptionists and telephone
operators.