O.B. is a multi-person activity: it is done by a team consisting of some important people in the organization. These people come from many backgrounds and have different view points and notions which have to be integrated. They have different qualifications and hold different positions in the organizational hierarchy. They can be referred to as the buying center, and play different roles.

The person who actually uses the product, like the person using the typewriter, computer, or the production department.

The people who influence the buying like the purchase officer, the production manager, the design engineer, etc.

The committee appointed for purchases who decides what product and what quantity is to be purchased.

Gate Keeper
Those who control the flow of information within the organization.

These are the consultants or design people who develop the specifications of the product, or of the services required.

  1. It is a formal activity: Unlike consumer behaviour, organizational buying is a formal activity, where rules and procedures are laid down. There is also a formal contract between buyer and a seller. The terms and conditions of payment are also laid down. The time of supplies are also specified.
    There is a larger time lag as compared to consumer buying:
    As all procedures are to be followed, it takes much longer. The deciding of the purchase,quality, quantity and adherence to rules and regulations, the delivery of product, etc. may take quite some time.
  2. It is a formal activity: The purchases are made according to certain procedures, rules and regulations. Sometimes quotations are asked for, and for higher amounts of purchases,tenders may be floated. These have to be given proper importance by advertising in news papers or by proper publicity. These are formally opened before a committee constituted for the purpose. Many aspects are looked into, but an important consideration is also the money or, the cost that is quoted for the product. All the activities are carried out in a judicial manner and with the consent of the committee.
  3. It is a rational but emotional activity: By this we mean that we are dealing with people who are human beings and those who are dealing are also human beings. This gives rise to emotions and no matter how rational we tend to become, it is the human element that also comes into play, and many a time the order goes not to the most deserving candidate, but could tilt in the favour of somebody who may have connections, which may be political, or on the basis of friendships and relationships.
  4. There is a longer time lag between efforts and results: In individual buying, the sales and the purchase may not last more than a dew minutes, but in industrial buying, a lot of procedures have to be followed. These procedures lead to time delays. It takes long to ask for quotations and tenders once all the tenders have been submitted, a date is fixed for opening the tenders, which is intimated to the parties concerned. Later the order is placed. The order takes a long time to complete as it is mostly a bulk order. Once the order is supplied, many times in installments, the payment also takes time, and may get held up for may reasons. Thus,there is a time lag between the effort and the results.
  5. Uniqueness of the organization: Every organization is unique in some way or the other. Some are partnership firms, others could be private limited and public limited companies.
    They have their own structure and their distinct culture. Their objectives, resources and nature of buying is different.
    Some firms like to pay cash, some always ask for credit. Others also pay in advance,some have limited resources, some have abundant resources. These influence the nature of buying as well. The objectives of a company could be to keep in tune with the modern times.
    Others may stick to traditional methods, some are willing to change and welcome it, others resist change. These and other differences of the company influence organizational buying in abig way.
  6. There are fewer industrial buyers than individual buyers: For example, a firm produces medicine which is bought by many individuals, or a firm making cosmetics is used by thousands of individuals.
  7. The industries buy in bulk in huge amounts, whereas, individual consumers buy in lesser and in smaller quantities.
  8. Most industrial buyers are geographically concentrated in an area. We have industrial estates of industrial houses, where most industries are concentrated.
  9. Reciprocal buying: In this we follow the principle of “you buy from me, I buy from you”. The manufacturer buys raw material from the suppliers who sell his products as well.
  10. Middlemen role is reduced: In organizational buying, the manufacturer mostly sells directly to the user or, the channel path is very small as compared to consumer buying.
  11. Demand of industrial goods is dependent on the demand of the consumer. It could be called derived demand. When there is a baby boon (more children are born) the demand for baby products increases.
  12. Inelastic demand: Price changes do not make much difference in the demand. If the cost of cigarettes increase, smokers will buy cigarettes any way. Similarly, people need to fulfill their genuine requirements irrespective of the change of price.

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Consumer Behaviour Topics