Industrial Buying Behavior

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Organizational Buying:

Organizational Buying Organizational buying is: “the decision-making process by which formal organizations establish the need for purchasing products and services and identify, evaluate, and choose among alternative brands and suppliers.”

Difference between Consumer Markets & Organizational Markets::

Difference between Consumer Markets & Organizational Markets: Compared to Consumer Markets, in Business Markets: There are Fewer buyers There are Larger buyers Time spent in decision is high More number of people are involved Close relationships with their supplier-customers Direct Purchase Reciprocity

Types of Organizational demand::

Types of Organizational demand: Derived demand – Based on demand of organization’s product. Inelastic demand – No reaction to price change. Joint demand – Demand of your product related to demand of related product.

Organizational Markets::

Organizational Markets: Corporate Market: Producers: Buy raw materials, convert them into finished goods. Original Equipment Manufacturers (OEMs) Industrial dealers: Sell material as it is to its customers. Buy products to facilitate production. The Institutional Market: Schools, hospitals, etc. Cost and quality standards drive purchases The Government Market Bidding process awards contracts Cost is of prime importance.

Types of Organizational Buying::

Types of Organizational Buying: New Task: Situation where product purchased for 1 st time. High involvement and time consuming. Modified Rebuy: Goods have been purchased earlier. Changes in specifications etc. Straight Rebuy: Product purchased frequently & regularly. Low involvement, minimal time commitment.

Types of Organizational Buying:

Types of Organizational Buying Systems Buying An organization selects only one supplier for all its raw material requirements. Systems Selling Selling all the raw materials required by an organization.

Participants in Business Buying:

Participants in Business Buying Initiators Influencers Users Deciders Approvers Buyers Buying center members fill one or more roles in the purchase decision process: Gatekeepers

Influences on Business Buyers:

Influences on Business Buyers Environmental factors: Demand level Economic outlook Interest rates Technological change Politics Regulations Competition

Organizational factors::

Organizational factors: Objectives Policies Procedures Organizational Structures Social Factors: Relationship with the decision maker. Informal Tie-ups. Personal factors: Decisonmakers’ attitudes, demographics, etc.

Purchasing/Procurement Process:

Purchasing/Procurement Process Problem recognition General need description Product specification Supplier search Proposal solicitation Supplier selection Order-routine specification Performance review

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Source: http://www.webopedia.com/TERM/O/OEM.html

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