Organizational Buying


How is it different?

Why is it different?

Structure of markets


    Fewer buyers
    larger buyers
    geographically concentrated

Characteristics of organizational buyers:

  • Tend to be experts in the field for which they are buying.
  • Are more likely than consumers to follow a rational buying model.
  • Are very concerned with the use functions of the products being purchased.
    • performance specifications
    • compatibility with existing systems
    • total life-cycle costs

Demand for Goods and Services by Organizations

  • The concept of derived demand (as opposed to primary demand)
  • The relatively inelastic nature of industrial demand

    The Buying Center


    The buying center is a conceptual center, not a physical one and consists of all people involved in any of the following roles for any given purchase. Different people may fill more than one role, and may fill different roles for different purchases.

    Roles in the buying center

    • Initiator
    • Decider
    • Influencer
    • Purchaser (Buyer)
    • Gatekeeper
    • User


    Quirks of Buying centers
    • Hidden Agenda
    • Real motives vs. legitimate motives
    • Unequal power of members

    Types of organizational purchases


    Straight Rebuy -- Routine

    Modified Rebuy -- important but small changes

    New Task -- greatest opportunity for new vendors to develop new customers
    • RFP -- Request for proposal -- general problem specified to vendors
    • RFQ -- Request for quotation -- careful specifications given to vendors

    Resellers - - wholesalers and retailers

    • Agents for their customers
    • Assortment is crucial

    Types of Purchase decisions for resellers: Must buy vs. might buy
    Might buy
    New item --- fit with existing lines and customers
    Old item --- look at terms
    Must buy
    Best Vendor --- reliability
    Better terms --- pricing issues


    Marketing Mix items peculiar to Resellers

    • Co-op Advertising
    • Pre-ticketing
    • Stockless purchasing (often on blanket contract)
    • Automatic reordering systems
    • Point of purchase advertising
    • Special prices
    • Return and exchange priveledges (for reseller)
    • Allowances for markdowns
    • Provision of in store Demos or samples (Costco on Saturdays)

    Government as special case organizational buyer
    Red tape
    Supposed to insure accountability to public
    Non-economic criteria
          e.g. small business
          minority business

    Government procedures
    Open Bid
      Specifications are set
      Low bidder gets deal
    Negotiated contract
      cost plus
      fixed price
      fixed price plus incentive

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