Consumer Buyer Behavior Helps Us Very Little in Understanding Organizational Buyer Behavior - Essay Example

Consumer Buyer Behavior helps us very little in understanding Organizational Buyer Behavior The term ‘consumer’ is mainly used to describe two types of consuming entities. The two entities include the personal consumer and the organizational consumer. Personal consumers buy goods and services for their own use while the organizational consumer buys products, services or equipment so as to run their organizations effectively. The consumer buyer behavior is entirely different from the organization buyer behavior. Understanding the processes of consumer buyer behavior, it helps us very little, or none at all, in understanding organizational buyer behavior. This paper will discuss the two buyer behavior process and how the two are not directly connected. Consumer buyer behavior can be defined as the physical and mental activities undertaken by both household and business customers, which result in actions and decisions to purchase, pay for and use products and services. The crucial part of the marketing process is to know or understand why buyers make a purchase. A failure to understand why buyers purchase makes businesses unable to respond to the customers’ needs and wants. The challenge that lies with most marketing managers understands how customers may respond to the marketing mix presented to them. When management understands the customer responses better, it is a source of a competitive advantage. Consumer buying behavior is seen as the buying behavior of an ultimate consumer. In this context, a customer is an individual in either an organizational unit or household who plays a role in the completion of a given transaction with a marketer or an entity (Cant,  Strydom & Jooste p. 2009, 91-190). The marketing theory splits the analysis of the customer behavior into two broad categories. These categories are consumer buyers and organizational buyers. Consumer buyers purchase items for personal consumption while organizational buyers purchase items on behalf of their organizations or businesses. In contrast to the consumers, most organizational buyers represent individuals buying goods or services on behalf of their organizations for the aim of furtherance of their organizational objectives. One of the most obvious differences between organizational buying and consumer buying is that the motivation is different. Motivation behind personal consumption and business usage is different. For consumers, buying unit lies within the household unlike in the organizational buyer where the buying unit is within the firm. For example, an industrial marketer targeting an organizational buyer must put into consideration various factors such as the buying procedure and the level of authority in the organization. The other thing involved in the organizational buying is the technical or commercial knowledge. In many organizations, the organizational purchaser is a trained professional. The trained professional possesses more knowledge than an average consumer purchaser. Even if one understands the consumer buying process, it happens that an organizational purchaser may have more knowledge about buying as compared to a consumer purchaser. This calls for a completely different sales approach for the two. The contact with buyers and distribution channels is different between a consumer buyer and an organizational buyer. Most organizational markets are more geographically concentrated in comparison to consumer markets (Cant,  Strydom & Jooste 2009, p.91-190). Some factors like the proximity to raw materials, labor and transport tends to dictate an industry’s location. For the case of consumer markets, few potential customers may be available. An industrial marketer has to maintain a personal and direct contact with the potential clients. This is different from the consumer market whereby the marketer does not always establish a personal and direct contact with the consumer since the two markets are different. In the organizational buying process, the number of decision makers is high as compared to consumer buying process. In consumer purchasing, individuals involved in decision making process can be small, maybe an individual, family or a couple. For the case of organizational buying, many individuals can be involved in the purchasing process. There are different decisions that need to be made in an organization and the differences may emerge as a result of group dynamics. Many organizational buyers adjust their buying decisions depending on the projected sales figures. They may buy more units if the forecasted sales are higher. They may also reduce the units when the forecasted sales are low. These results are a sort of ‘pendulum effect’ with a knock-on effect in the buying chain since each chain member adjusts the buying pattern accordingly. There is the presence of reciprocal demand in the organizational buying process. In some cases, the buyer can be the seller at the same time. For instance, a software company that produces packages for insurance companies may purchase an insurance service from the customer (insurance company). The two companies will want to sell to each other the services hence affect each other’s buying decisions to a certain degree. As noted, there exist subtle differences between the organizational and consumer forms of buying. The reasons for purchasing products in an organization are different from the reasons for purchasing among consumers. Organizational buyers may purchase products for further production or for usage in operating the organization. Consumers normally purchase for personal, family or household use. This makes the two buying processes different. The organizational market There are various participants in the organizational or industrial markets. These participants are producers, resellers, government and other institutions such as the community. Taking an example of the telephone, there are very many components used in producing it. These parts had to be sold to the manufacturer of the telephone. These parts have to be designed in a way that they meet the needs of the purchasers. The products have to be advertised or promoted in a way that the buyer is aware of the availability. Distribution has to be done at the right time and quantity as required by the buyer. Many parts, wires, paints, screws and other parts are marketed before producing the telephone and selling it to the final household consumer. The manufacturer has to purchase other supplies which are not part of the product such as computers, photocopier papers, printers, desks and chairs among others. In short, this shows that the manufacturer cannot make buying decisions that are similar to a household buyer. There are several ways in which the organizational market differs from the household consumer market. For the case of an organization, the goods purchased are used to further their production and operations of the organization. Household consumers purchase goods and services for personal consumption. Organizational buyers purchase equipment, semi-finished goods or raw materials, while a consumer buyer always purchase finished goods for own consumption. Demand in the organizational market is derived from the final consumers. For example, if an organization deals with the manufacture of bushing used in washing machine motors, the demand for these bushing will depend on the final consumers’ demand for washing machine. When the economy is poor and demand of washing machines is down, then the demand for the bushings will automatically fall. The organizational transactions While making organizational transactions, buying specialists are involved. Professional purchasing agents are often employed by organizations. Just like sales agents are professional in locating organizations that require their products, purchasing specialists are also specialists in locating the needs of their employers. In organizational transactions, organizations tend to use multiple buying responsibilities. Household purchasers are sole decision makers. Before making any sale to an organization, the seller is required to make selling to different entities at the buying center. For example, a worker in the organization may be using a computer whose specifications were determined by the computer department while the actual decision to buy was made by the manager in the department. The bid to buy the same computer might have been made by somebody in the purchasing department while the final authorization might have been made by the president of the company. Before any actual purchase is made in the organization, many departments might be involved to justify the purchase (Cant, Strydom & Jooste 2009, p.91-190). There is the presence of multiple suppliers in any organization who supply different products and services to the organization. It is advisable for an organization to have a long-term relationship with various suppliers. Even if a second supplier offers a high price for similar terms and conditions, a long-lasting relationship can be established. When quality or delivery problems are experienced, production can still continue by contacting the second supplier. Ideal cozy that entails trusting relationship promised with strategic alliance in the business literature does not work if one party is left as a sole buyer or supplier. An organizational transaction is likely to require exact specifications. On the contrary, a household purchaser may purchase a product due to personal preferences. For example, a consumer purchaser may purchase a certain model of a desktop computer for the reason that it has a pleasing color. Organizational purchasers are likely to set certain specifications for the desktop computer to be purchased such as the processor speed, hard drive size and memory among other specifications. Before taking bids on such organizational products, the specifications have to be put into consideration. Organizational purchaser may lease equipment and space. Many household consumers prefer having their own items such as cars, homes or even furniture. These are some of the things, which represent personal status, expression and wealth. As a business manager, the objectives are very different (Hill 1972, p. 21-101). The manager may lease a public warehouse space so as to provide the flexibility to change places when the markets demand. The organization may also prefer to lease its tracks so as to avoid the problems of disposition to somebody else and maintenance among others. Organizational buying frequently involves negotiation and competitive bidding. For household consumers especially those located at the urban centers are likely to accept the final price that is placed on the product they wish to purchase. They are also likely to accept the price given to them by their service provider. Organizations are likely to have a bargaining and negotiating power when it comes to purchasing of goods and services. For example, as a manger, the employer may require that you take three bids for a given service and even negotiate the terms and conditions of a product specification, price and delivery among others. Organizational buying process behavior is different from the consumer buying behavior in that the emotional and psychological considerations are not considered in the latter. Although organizational buyers are also human, some emotions may be involved. Generally, commercial considerations during organizational buying are of great significance especially when arriving at various purchasing decisions. One similarity that exist between organizational and consumer purchasing is that they represent need satisfying processes. The need reflects the buying behavior hence; it is advisable that marketers recognize the purchasing motives so as to target the marketing effort effectively. As seen above, organizational purchasers work under more stringent purchasing constraints since they have both budgetary and commercial interests in their respective organizations. The organizational buyers have logistical factors such as delivery schedules which they are supposed to maintain. The opportunity for impulse buying in an organization is limited unlike in the case of a consumer buyer. The purchasing professionals have a great deal of commercial and technical knowledge regarding their prospective purchases. There is a developed model of organizational buying. The model starts with problem recognition just like the consumer buying model. After problem recognition, the other process involves needs description. The organizational buyer has to identify the various needs in the organization. The third stage involves product specification whereby the specification of products to be purchased is done. The next step involves supplier search. The organization identifies a supplier who can be able to supply the specified product. After supplier search, supplier selection is carried out. Out of the many suppliers who deal with the specified product or service, one has to be identified. The last step involves purchasing routine specification. This is the last step in the organizational buying model. The organizational buyer issues the purchasing routine that the supplier will follow (Hill 1972, p.21-101). Since organizational buying is more specific compared to consumer buying, an individual organizational buyer is subjected to various marketing actions of their potential and current suppliers. In an organizational situation, there is the existence of reference groups which affects the organizational buying behavior. Other influences may arise outside the purchasing department. Individual buyers possess a discrete psychological attitude that influences decision making process. A refined model of organizational buying process was developed in 1978 by Yoram Wind. He indicated that it is crucial for marketers to locate powerful buyers since they have a direct say in the purchasing decisions especially at the negotiation stage. Low status buyers are able to impede purchases for various reasons. The model identified five power bases in this respect. The first power base is reward. This is the ability to give monetary, psychological, social or political rewards to other individuals for compliance. Coerciveness is the second power base that the ability to hold punishments such as monetary payments for non-compliance. The fourth power base is expert. The last power base is the status of the buyer. In Yoram Wind model, the first step in organizational buying process is the identification of needs. It is then followed by the establishment of specifications. The third step is establishing contact with the supplier. The next step involves setting of purchase and usage criteria. There is the evaluation of the various available alternatives by the organization. The next step involves evaluation of specific alternatives. The organizational buyer then starts to negotiate after evaluating specific alternatives. The next step is buying the suitable product then using it. The last step in this model is post-purchase evaluation whereby the organization gives feedback regarding the purchased product. Characteristics of organizational purchasing There are many differences between consumers buyers and organizational buyers in the buying decision making process. There is the presence of rationality in the purchasing motives among organizational buyers as compared to consumer buyers. The demand in organizational buyers is derived depending on the supply chain. There is a small number of organizational buyers compared to consumer buyers. Distribution of products is direct in the organizational purchasing process. In many cases, there is a geographical concentration of organizational buyers. Most of them are concentrated in a given geographical area. Industrial customers possess a lot of purchasing power as compared to consumer buyers. There are multi-person decision-making units in various organizations. There is a long-term relationship between sellers and buyers since organizational buyers do not depend on one supplier (Hill 1972, p.21-101). Organizational purchasing has a structured nature. When a consumer makes a purchase, a derived demand is established for components and materials that constitute the final product. There is an elaborate chain of supply from organizations that sell and buy ancillary products such as packaging materials and maintenance equipment among others. In order to ensure a steady flow of products and services, organizations have to organize their purchasing activities. The purchasing activities ensure that there is a constant supply of products in the right quality and at the right time. The purchasing activities must also monitor the performance of the supplier in terms of quality of goods and services and time of supply. Lastly, the purchasing activities in any organization should ensure there is the review of potential and existing suppliers. If the organization is large, methods of buying are more structured. In flow production situations, purchasing tends to be more critical than in jobbing works (Hill 1972, p.21-101). A minor quality or delivery problem could lead to a loss in terms of production or customer goodwill. Most organizational purchasers are more demanding than household or consumer purchasers since the implications of their decisions are highly accounted for. The roles and scope of an organizational buyer depends on the commodity or service being purchased and whether the purchasing is a decentralized or centralized function in the organization. Most large organizations are now centralizing their purchasing so as to employ specialists purchasers who are able to negotiate various terms and conditions. Other organizations employ purchasers who have superficial knowledge regarding the products offered hence are able to handle any aspect of sales. In any buying structure, the organizational salesperson knows that the purchaser is not the final decision maker. In conclusion, from the description of the organizational buying process and behavior, it is evident that understanding the processes of consumer buyer behavior helps us very little in understanding Organizational Buyer Behavior. Although there are some common factors in the organizational and consumer buying behavior, the two markets should be tackled differently. Organizational buyers work so as to obtain satisfaction of their organization’s needs. There is a psychological foundation in the consumer behavior. Even though the organizational purchasers possess explicit rationale for the actions, it does not mean that they cannot receive a psychological influence. Marketers should understand well the concept of organizational and consumer buying processes. Organizational marketers should modify their marketing strategies in order to serve the idiosyncratic requirements and needs of various organizations. List of References Cant, M.C., Strydom, J. W., Jooste, C. J 2009, Marketing management, Juta and Company Ltd, London Hill, R.W 1972, Organizational Buying Behavior: the key to more effective selling to industrial markets MacMillan, London. Read More