A Presentation on-
Organizational Buying Behavior and
Howard Sheth Model
Organizational Buying Behavior
. The organizational buying behavior process is well
documented with many models depicting the various
phases, the members involved, and the decisions
made in each phase. The basic five phase model can
be extended to eight; purchase initiation; evaluations
criteria formation; information search; supplier
definition for RFQ; evaluation of quotations;
negotiations; suppliers choice; and choice
implementation.
DIFFERENCE BETWEEN ORGANIZATIONAL
BUYING AND CONSUMER BUYING
ORGANIZATIONAL CONSUMER PURCHASE FOR-
1. Further production
2. Usage in operating the organization
3. Resale to other consumers
• FINAL CONSUMER PURCHASE FOR-
1) Personal
2) Family
3) Household use
TYPES OF ORGANIZATIONAL PURCHASES
STRAIGHT REBUY
Routine purchase
Associated with frequently purchased items
• MODIFIED REBUY
Routine Purchase
Frequent Purchase, but buyer does review product
specifications or suppliers
NEW TASK
Not Routine
Product needs and specifications researched
BUYING CENTER
There are often multiple decision makers in
organizational purchases. For example
Users
Influencers
Deciders
Buyers
Gatekeepers
Risk and uncertainty
- This is concerned with the role of risk or uncertainty
on buying behavior. The level of risk depends upon
the characteristics of the buying situation faced. The
supplier can influence the degree of perceived
uncertainty by the buyer and cause certain desired
behavioral reactions by the use of information and the
implementation of certain actions. The risks perceived
by the customer can result from a combination of the
characteristics of various factors: the transaction
involved, the relationship with the supplier, and his
position vis-a-vis the supply market.
Factors influencing organizational buying
behavior.
Three key factors are shown to influence
organizational buying behavior these are,
Types of buying situations
Situational factors, geographical and
Cultural factors and time factors.
EXPLANATION OF THE MODEL
EXPECTATION
Expectation refer to perceived potential of alternative
suppliers and brands to satisfy a number of explicit and
implicit objectives in any particular buying decision.
EXPECTATIONS-
Purchasing Agents
Engineers
Users
Others
Background of individuals: The first and probably
most significant factor is the backgrounds and task
orientation of each individuals involved in the buying
process.
They can be classified under following head:
Specialized education
Role Orientation
Life Style
Information Sources and active search- Type of
information each of the decision maker is exposed to
and his participation in active search
Various sources of Information search
Salesman
Exhibitions and tradeshows
Direct mails
Press releases
Journal advertising
Perceptual distortion: Each individual strikes to make
the objective information consistent with his own prior
knowledge and expectations by systematically distorting
it, for example; since there is substantial difference in the
goals and values of purchasing agents, engineers and
production personnel, one should expect different
interpretations of the same information among them.
Satisfaction with past purchase: The factor which
creates differential expectation among the various
individuals involved in purchasing process is the
satisfaction with buying experiences with the supplier or
brand. Often it is not possible for a supplier or a brand to
provide equal satisfaction to the three parties.
Industrial buying process
Product Specific Factors: The first product specific
variable is what “Bauer” calls perceived risk in buying
decision.
Company Specific Factors: There are three
organization specific factors they are as follows
Company Orientation
Company Size
Degree of Centralization
Product Specific Factors
Time Pressure
Perceive Risk
Type of purchase
Decision Making
Joint Decisions-The major thrust of the present model of
industrial buying decisions is to investigate the process of
joint decision making. This includes
Initiation of decision to buy
Gathering of information
Evaluating alternative of suppliers
Resolving conflict among parties
Autonomous Decisions: It is always not necessary that there
will be always joint decision making sometimes it can be
autonomous. Here it is important to know, which party is
delegated for decision
CONFLICT RESOLUTION
Problem Solving: Here the particular supplier should
go for availability of more information, because buyers
tend to go for more active search. It gives your
company a upper hand than your competitors.
Persuasion: If the conflict among the parties is
primarily due to disagreement on some specific criteria
with which to evaluate suppliers- although there is an
agreement on the buying goals or objectives at a more
fundamental level, it is likely to be resolved by
persuasion
Bargaining: In some typical situation specially purchasing
related to capital expenditure items, the conflict is
resolved by method of bargaining. The fundamental
differences among the parties are implicitly conceded by
all members and concept of distributive justice is followed.
Generally single party decision is dominant.
Politicking: Disagreement may arise due to style of
decision making, the conflict tends to be grave and
borders on the mutual dislike of personalities among
individual decision makers. The conflict is solved by
politicking.
SITUATIONAL FACTORS
Industrial buyer similar to consumer behavior
decides on factors other than rational or realistic
criteria. They can be
Price Controls
Recession
Foreign Trade
Internal Strikes
Walk Outs
Machine Break down
