Industrial Marketing
Chapter 4 : Organizational Buying and Buyer Behavior
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+The Procurement Function
Objectives of the Procurement Function
Purchase Policy
+The Buying Decision Process
Need Recognition
Product Characteristics
Searching for and Qualifying Potential Suppliers
Soliciting and Analyzing Proposals
Making the Purchase Decision
Selecting the Order Routine
Evaluating Vendor Performance
+Types of Buying Situations
New Task
Straight Re-buy
Modified Re-buy
Buy-Grid Model
+Profile of Business Buyers
Buying Center
Buying Committee
+Value Analysis
Functions of Value Analysis
Activities of Value Analysis
+Vendor Analysis
Criteria for Evaluating Potential Vendors
Vendor Rating
+Models of Organizational Buying Behavior
Factors Influencing Organizational Buyer Behavior
The Sheth Model
The Webster and Wind Model
The Anderson and Chambers Reward/Measurement Model
Chapter Summary
Procurement is a function that is gaining in importance.
Managements have realized that a good procurement department helps in the growth
of the company and increases the profits considerably. The procurement function
has both task-oriented objectives and non-task objectives, and is usually
governed by a clearly articulated purchase policy.
The buying decision process starts with identifying the buying needs, followed
by identifying the product characteristics. At this point, the buyer takes a
‘make or buy decision’. If the decision is to buy, then the buying process
continues with the search for vendors followed by qualifying them. The vendors
are then requested to send in their proposals and quotations relating to the
purchase requirement.
While evaluating the quotations, the buyer may revisit the ‘make or buy
decision’ if the vendor quotations do not meet requirements. If a particular
vendor’s quotations are up to the buyer’s expectations, then the contract is
awarded to the vendors. Payment and delivery terms are finalized and an order
routine is mutually agreed upon.
The vendors are also regularly monitored for their performance. A firm purchases
goods under three situations. In a new task, the firm buys a totally new product
or an existing product for the first time. This involves extensive information
and supplier search. The second situation is straight re-buy. Here the firm
purchases the same material from the same supplier without any alterations in
the contract.
And the last situation is modified re-buy. It involves modifications in the form
of change in supplier, change in terms of the contract, etc. A buying center
involves people from across the departments of the firm to make the buying
decisions for the firm. The buying center is influenced by the individual and
group factors. Hence the decisions taken by the buying center will bear these
influences.
Value analysis is used in the firm to assess the value of the product to be
purchased and consequently to take ‘make or buy’ decisions. It helps the firm to
reduce unnecessary costs in the purchase of the product or materials. Vendor
evaluation helps in choosing the right vendor. Vendor rating is performed to
appraise vendors from time to time with respect to the products supplied and
services rendered; it is done on the parameters of price, quality, delivery, and
service.
There are different factors that influence organizational buying behavior such
as environmental factors, organizational factors, group factors, and individual
factors. The different models of organizational buying behavior discuss these
factors with differing levels of attention being given to each. They include the
Sheth model, Webster and Wind model, and the Anderson and Chambers
Reward/Measurement Model.
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