The Interpersonal Dynamics of
Industrial Buying Behavior
CHAPTER 5
Objectives
Understanding the influence of purchasing activities
on organizational buying behavior
Understanding how groups and individuals differ in
their approach to buying decisions
Buying behavior influenced by internal and external forces.
Knowledge regarding how organizational buying behavior
is affected by these forces holds utmost significance.
Purchases are also affected by complex set of decisions
made by buying centers.
Industrial marketer requires clear understanding of:
How organizational groups interact,
The amount of influence of various group members,
How this influence varies throughout the purchasing decision
process
Purchasing’s Influence on Buyer Behavior
Efficient and effective purchasing done through the
use of inventory control systems.
Purchasing is now considered as asset management
through asset utilization and inventory control.
Inventory Control Systems
Material Requirements Planning
Estimate future sales
Application not very easy
Combining various function under one functional are – “material
management”
Use of computers linked to suppliers
Ensuing the effectiveness of MRP systems – Buyer-seller work
closely
Benefits of MRP
Controlled inventory levels
Better cost management
Timely deliveries
Better operations
Just-in-Time Purchasing
Avoiding multiple sourcing
Maintaining minimum inventory levels – one supplier
Facilitating long-term relationship
Reducing the risk of interrupted material flows
Quality considerations
Delivery performance
Time and quality and functional integration of buyer-sellers
firms
Centralized Purchasing
Concentrated efforts by purchasing specialists
Volume buying
Long term focus vs. short term focus of local purchasing
Facilitates buyer-seller relationship as long term focus
Buyer Technology
Economic order quantities
Determining optimal lead times
Tracking deliveries
Monitoring supplier performance
Increased use in repetitive buying
Marketing implications
Challenges for out-suppliers
Joint Decision Making
No. of org. members involved in buying decision depends:
Characteristics of firm – orientation , size
Type of purchasing situation
Perceived importance of product – risk
Resources available
Buying center interaction patterns
Vertical involvement
Lateral involvement
Extensivity
Connectedness
Relationship between Purchase situation, organizational
structure variables and interaction variables.
Marketing implications
Vertical
Lateral
Extensivity and Connectedness
Centralization
Models
Many models have been developed to explain
organizational buying behavior. One of the comprehensive
models is the Sheth model, described below.
The Sheth model of industrial buyer behavior
focuses on (i) Psychological aspects of individual buyers
(Component 1), (ii) Conditions causing joint decision
making (Component 2), (iii) Conflict among those involved
in decision process & resolution of conflict
(Component 3).
Situational factors include economic conditions, labour
disputes, mergers & acquisitions. The model does not
explain their influence on buying process.
Component (1) Component (2) Component (3) Situational Factors
Differences among Variables that Determine Methods used for
individual buyers if buying decision is conflict resolution
caused by factors : autonomous or joint : in joint-decision
Background of A) Product Specific making process :
individuals (Education, Factors :
role & life style). Time Pressure Problem Solving
Their information Perceived Risk Persuasion Supplier or
sources. Type of Purchase Bargaining Brand Choice
Active Search B) Company Specific Politicking
Perceptual Distortion Factors :
Satisfaction with Company Size
past purchases Company Orientation
Degree of
Centralisation
Fig. : THE SHETH MODEL OF INDUSTRIAL BUYER BEHAVIOUR
The Buying Committee
Supplier Choice and Evaluation
Evaluating supplier performance – the weighted point method.
(refer to chap 4 slides)
Assignment
Explain the inventory control systems, the advantages, and
marketing implications for the supplier.
Explain the factors affecting the size of buying center and the
amount of interaction between those involved in the buying
center.
The buying committee is made up of a chief engineer who
wants technical innovation regardless of price, a purchasing
agent committed to driving component cost down, and a
manufacturing manager who insists on the status quo so
manufacturing costs can be stabilized. How can a seller
develop a strategy to handle these contradictory objectives?
