There are four broad categories of factors that influence organizational buyer behavior: environmental, organizational, interpersonal and individual. Understanding these factors is critical to the marketer in preparing an effective marketing strategy.
Seven environmental factors influence organizational buyers: physical, technological, economic, political, legal, ethical, and cultural.
The physical environment includes factors such as the climate and geographical location of the organization and can affect the behaviour of organizational members and determine the constraints and options for the buying organization. A supplier’s geographical location, for example, is an important consideration in whether it is chosen or not. Many firms prefer local suppliers and in the international sphere, many buyers prefer to use domestic suppliers where ever possible. Climate and geography also determine the availability of raw materials from forests, farms, or mines for the organization, as well as its location. Other decisions based on things such as raw materials, labour availability and transportation matter too.
The level of technological development defines what types of goods and services are available to the organizational buyer. In addition, it influences the quality of the buying process itself through development of improved purchasing technology using more sophisticated equipment such as computers to facilitate complex purchasing and inventory control decisions.
The economic environment for the buying organization is affected by price and wages conditions, money, and credit availability, consumer demand, and levels of inventory in key industry sectors. These sorts of factors will determine the availability of goods and services, ability of buyers to finance purchases, and what prices will be paid. Just as for final consumers the economic environment will influence organizational buyers’ optimism or pessimism and consequently their buying behaviour.
Political influence could include such factors as country trade agreements, tariff barriers, lobbying activities, defense spending, government assistance to certain industries or companies and government attitude towards business generally.
Local, state and regulatory environments have an influence on buying activities which take place. Government regulation sets standards for what must be bought in order to be included on products (i.e. auto and lawnmower safety equipment). Terms of sale and conditions of competition are also enforced by legal means on organizational buyers.
The ethical environment is of major importance in the buyer-salesperson relationship. Buyers and salespeople must exhibit ethical behaviour if they are to be accepted as professionals. Consequently each group needs to know what is considered to be ethical and unethical behaviour. However, when selling activities are perceived as unethical by purchasers they may negatively affect choice of supplier as well as hurt the purchaser’s career.
Cultural values that are shared by members and which influence them in their buying behaviour. Large organizations, too, have developed their own corporate culture which differs in its values, norms, habits, traditions and customs. The nature of these differing values, styles, and behaviours may be evident in the organization’s buying behaviour.
These environmental influences may be exerted through a number of different types of organizations including business firms (suppliers, customers, and competitors), government, labour unions, trade and professional organizations and other social institutions such as religious and educational organizations. They determine the availability of goods and services to the organizational buyer and the general business conditions in which the firm operates.
Because organizational buying occurs within the frame work of a formal organization, the organization’s objectives, policies, procedures, structure and systems of rewards, authority, status and communication will all have an important influence on every part of the buying decision process. The marketer must understand the aspects of the organizational buying process in order to design an effective strategy to influence that process. These four sets of interacting organizational variables have to do with the tasks, structure, technology and people involved with buying.
The buying task is performed by the organization in order to accomplish its objectives. These tasks may be classified in different ways such as by purpose, level of expenditure, type of good or service purchased extent to which the process is routine or not, and extent to which responsibility for purchasing is centralized or decentralized. For example, buying tasks and decisions reflect the type of organization doing the buying or its purpose. Manufacturers and retailers have characteristic buying tasks that differ significantly from each other, and these two differ considerably from a third organization, such as a prison although they all share some types of buying tasks.
The organization’s goals will influence its purchasing objectives and behaviour. For instance, in companies that strive to be technological leaders in their industry, buying tasks will be performed in a more, scientific, high quality, engineering oriented way in order to assure this technological leadership.