Organizational buyer behaviour - Marketing Strategy

An organization’s purchase decisions are likely to be more complex because of the number of individuals and groups involved in the purchase decision and the possibility of the actual product/service being more expensive and sophisticated. All the individuals that participate in the decision-making process will have interdependent goal sand share common risks although they may face different systems of reward. What emerges is a decision-making unit (DMU) made up of all these individuals and groups. Individuals in the DMU will play one of six main roles:

Acronyms developed from lifestyle groupings

Acronyms developed from lifestyle groupings

  • Initiator :Identifies a problem that can be overcome by the purchase of a product or service. An individual in are tail company may, for instance, identify a problem in the merchandising function of the company that could be resolved by a new piece of software. (The merchandise function develops the buying plan for a retail company, monitors sales and product margins amongst other things.)
  • User : Will be the actual user of the product in the merchandising function of the company in this case. They may well be the initiator, although this role may be someone outside the user group.
  • Buyer : Actually undertakes the negotiation with potential suppliers. The brief for the technical requirements of the software needed, however, is likely to come from one of the other areas of the DMU.
  • Influencer : Does not directly make the product or supplier choice but has a major impact on the decisions made. In this case an individual from the computer services unit in the organization will lay down the technical requirements of the software based on the need for it to integrate with the current hardware system.
  • Decider : This is the individual who actually makes the decision to purchase. This individual may not have direct line management control of the merchandise or IT areas of the business but occupies this role because of the power and influence they have over the area being investigated. This is a crucial position in the DMU and yet it can be the most difficult to identify because several individuals may potentially play this role. In this case it may be the merchandise director, the finance director(many finance directors are responsible for IT functions) or the managing director.
  • Gatekeeper : Determines the flow of information within the DMU without being directly involved in the buying decision. They control whether a potential supplier gains access to other individuals in the DMU. The flow of promotional material and information about supplier sis also under their guidance. Secretaries are very obvious gatekeepers but any individual in the DMU can potentially play this role. A technical person may favor one particular supplier and pass only their promotional material too their members of the DMU. The size of the DMU will depend in part on the type of purchase decision being undertaken. Where a simple low-risk purchase is being made one or two individuals could undertake all the roles in the DMU. A High-risk expensive purchase may involve a large number of people from different functional areas in the company. Organizational purchases can be classified in terms of their level of risk as follows:
  • Routine order products :These are used and ordered on a regular basis. The products or services are unlikely to pose any problems regarding their use or performance and are therefore low risk (e.g. office stationery).
  • Procedural problem products :These products may involve some level of training in order for individuals to adopt them successfully. This will increase the risks associated with the successful introduction of the purchase to the company (e.g. personal computers or word processors).
  • Performance problem products :The risks here lie with the question of whether the product can perform at the necessary level to meet the user’requirements. There may also be concerns about the product’s ability to be compatible with the company’s existing resources and current equipment (e.g. introducing new technology).
  • Political problem products :Political problems could arise where a purchase takes away resources from another area within the organization . A high investment in a product for one area of the business may mean that another area has to forgo investment. Political problems can also take place where it is planned that the same product will be used by several different units, each having their own requirements (e.g. a new information system).

Political pressures also build up in the DMU because individuals look for different attributes from a particular product.This is partly based on the operational needs of their department. Individuals also pursue their own self-interest and are motivated by the formal rewards available to them. Individuals in different areas of the company may be given incentives in different ways. Buyers may be evaluated and/or given incentives to save the organization money.

Production managers may be given quality and output targets. This can lead to strange effects. Bonoma (1982) talks of an organization that reduced its list price to well under its competitors’, but gave only small discounts off this list price. All the competitors charged higher prices but gave larger discounts. Even though the company had lower prices organizations favored the competitors. The main reason for this turned out to be that the buyers were evaluated and given incentives based on the price concessions they were able to obtain during negotiations rather than on the end price paid.

Figure below shows how each unit may have its own set of rewards. These disparate incentives can also lead to conflict within the DMU. Buyers may feel they cannot save money because the production engineers are setting technical specifications on a product that are too high . Alternatively, production engineers may not be able to reach their output targets because the buyer has bought a cheaper product from a supplier who has less dependable delivery times. This demonstrates that organizational buying decisions are more complex than general consumer buyer behavior. Framework shave been developed to give a more comprehensive view of the complex factors involved. These also act as a foundation for developing meaningful segmentation criteria in organizational markets. The Webster– Wind and the Seth frameworks both try to develop logical models of this process.

Rewards/incentives as a source of conflict in organizational decisionmaking units

Rewards/incentives as a source of conflict in organizational decisionmaking units


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