By: Agung Utama
What is organizational buying?
Organizational buying: decision making
process by which formal organizations
The characteristics of business
market
• The business market consists of all the
organizations that acquire goods and
services used in the production of other products or services that are sold, rented, supplied to others.
• The major industries making up business
markets are: agriculture, transportation, manufacturing, mining, construction,
communication, banking, finance,
Several characteristics of business markets:
Fewer buyer: the business markets normally
deals with far fewer buyers than the consumer marketer does.
Larger buyer : a few large buyers do most of the
purchasing in such industries as aircraft engines and defense weapons.
Close supplier-customer relationship : because
of the smaller customer base and importance of and the power of the larger customers, supplier are frequently expected to customize their
Geographically concentrated buyers: the
geographical concentration of producers helps to reduce selling cost.
Derived demand : the demand for business goods is ultimately derived from the demand for consumer goods. For this reason, the
business marketer must closely monitor the buying patterns of ultimate consumer.
In elastic demand : the total demand for many business goods and services is in elastic
demand, that is not much affected by price
changes. Demand is especially in elastic in the short run because producers can not make
Fluctuating demand : the demand for many
business goods and services tends to be more volatile than the demand for consumer goods and services. A given percentage increase in consumer demand can lead to a much larger percentage increase in the demand for plant and equipment necessary to produce the
Professional purchasing : business goods are
purchased by trained purchasing agents, who must follow their organization’s purchasing policies, constraints, and requirements.
Several buying influences: more people
typically influence business buying decisions. Buying committees consisting of technical
experts and even senior management are common in the purchase of major goods.
Multiple sale calls: because more people are
involved in the selling process, it takes
Direct purchasing: business buyers often buy
directly from manufacturers rather than
through intermediaries, especially items that are technically complex or expensive (such as mainframes or aircraft).
Reciprocity: business buyers often select
suppliers who also buy from them.
Leasing: many industrial buyers lease instead
of buy heavy equipment like machinery and trucks. The lessee gain a number of
Buying situations
• There are three types of buying situations (Patrick
Robinson and others):
– Straight rebuy: a buying situation in which the
purchasing department reorders on a routine basis (eg., office supplies).
– Modified rebuy: a buying situation in which the buyer
wants to modify product specifications, prices, delivery requirements or other terms.
– New task: a buying situation in which purchaser buys
a product or service for the first time (eg., office
Systems buying and selling
Many business buyers prefer to buy a total
solution to their problem from one seller. Called system buying.
This practice originated with government
Participants in the business
buying process
Who does the buying of goods and services
needed by business organizations?
Webster and Wind call the Buying Centre,
• Seven roles which playing by the all members in the
buying center:
– Initiator: those who request that something to be
purchased
– Users: those who will use the product or service
– Influencers: people who influence the buying decisions. – Deciders: people who decide on product requirements
or on suppliers.
– Approvers: people who authorize the proposed actions
of deciders or buyers
– Buyers: people who have formal authority to select the
supplier and arrange the purchase terms.
– Gatekeepers: people who have power to prevent sellers
Major influences on industrial
•Interest rate
•Rate of technological
change
•Political and regulatory development
•Competitive developments
•Organizational structures
•Job position
Environmental factors
Business buyers pay close attention to current
and expected economic factors: level of
production, investment, consumer spending, and the interest rate.
In a recession, business reduce their investment
in plant, equipment, and inventories.
Business buyers actively monitor technological,
political regulatory, and competitive developments.
Organizational factors
Every organization has specific purchasing
Interpersonal and individual factors
Buying centers usually include several
participants with differing interest, authority, status, empathy, and persuasiveness.
Each buyer caries personal motivations,
perceptions, and preferences, which are influenced by the buyers age, income,
Cultural factors
Here are some rules of social and business etiquette
that marketers should understand when doing business in other countries:
France: if you do not speak french, apologize for your lack of
knowledge. The french are quite proud of their language and believe that everyone should feel privileged to speak it.
Germany: Germans are sticklers for titles. Try to introduce
people using their full, correct title, no matter how long it is.
Japan: Most Japanese businesspeople know what will be
discussed at a meeting, how everyone feels about it, and how it will affect their business before they even get there
Korea: Korean do not like foreigners to assume that their
Types of Purchasing Process
Peter Krajic distinguished four product related purchasing
process:
1. Routine product: these product have low value and cost to the customer and involve little risk (office supplies) 2. Leverage product: these products have high value and
cost to the customer but involve little risk of supply
because many companies make them (engines pistons) 3. Strategic products : these products have high value and
cost to the customer, and also involve high risk (main frame computers)
The purchasing/procurement
process
• Stages in the buying process
– Problem recognition
– General needs description and product
specification
– Supplier search
– Proposal solicitations – Supplier selection
