Organizational Buyer

The buying structure of the organization has an effect on the purchasing process. Organizations have a formal and an informal structure. The organizational chart illustrates the formal relationships between people in the organization. Informal relationships and communication patterns may be quite different, however, from the formal structure. Marketers must understand both the formal and informal organization in order to effectively sell to a buyer.

Several dimensions of the organizational structure are influential in its buying processes. The degree of centralization is a significant factor. A centralized organization will retain purchasing authority in the hands of a relative few who are typically highly placed in the organization. For instance, it may be a small centralized purchasing department headed by a vice-president. When power is concentrated in this fashion there may be only a few individuals who must be contacted as either influencers or decision makers. However, they may be difficult to gain direct access to because of their high position.

The organization’s formalization is a second factor. A formalized organization means that stated policies and procedures are strictly adhered to. This greater formality generally results in more people in more organizational units participating in the buying decision. The decision process is also likely to be quite structured and to follow written guidelines.  For example, the purchasing manual of IBM lists over seventy items under the topic of purchasing regulations, and provides strict guidelines for purchasing managers to follow in any corporate purchases. When organizations are highly formal, marketers may find them difficult to sell to because the inertia of established patterns may inhibit new ideas and approaches from gaining a foothold.

An organization’s specialization is also influential in its buying structure. Where the organization is divided into numerous departments according to functional specialization more people are likely to be involved in the purchasing decision. The marketer’s challenge is to determine which influential people must be reached with the sales messages.

Technology may influence not only what is bought but the buying decision process itself. For instance, some organizations have implemented sophisticated management science techniques in the buying process including models for inventory control, and price forecasting, purchase scheduling charts, and computer routines for determining optimum order quantities and for the company buying alternatives. While manual systems for directing and controlling the buying process are widespread in industry, computerization is rapidly taking over. Marketing success requires an understanding of the organization’s technology so that any new product or service fits into that system which is already in place.

The people in the organization who are involved in the purchasing situation will be a major determinant of the organizational buying process. These people are interdependent and interact with each other to influence members’ buying behaviour. The marketer’s task is to identify those within the organization with responsibility and authority for buying decisions in order to persuade them to purchase. Therefore, it is important to know which people are involved with the decision. Their interaction is an important topic which should also be understood.

Interpersonal factors

The interaction between only two people or a larger number is a significant influence on organizational buying decisions. As people involved in a purchasing decision interact they may provide information to each other as well as attempt to influence the purchasing outcome for their benefit. This influence of one person on another is what we mean by interpersonal influence and commonly occurs in organizational purchasing within the context of a group known as the buying centre.

The buying centre is comprised of those people in the organization who interact during the buying decision process. This decision making unit may vary in size based on 1) how novel, complex and important the purchase decision is; and 2) how centralized, formalized and specialized the organization is. Rather few organizational buying decisions are made by only one person. Most are made through the interaction of a buying centre. Frequently, purchases entail much lateral and vertical communication and involvement. For example the purchase of intensive care monitoring, engineers and purchasing people. Consequently, marketers must understand who is participating in a decision, and what their function, interest and degree of influence is likely to be. For instance, in the hospital equipment purchase just mentioned not all members of the buying centres are likely to be highly involved or to be involved equally throughout the buying process. Their levels of involvement would vary across buying centre participants and over the course of the purchase decision.

Some have criticized the buying centre approach to research as being based on concepts of a group which may not be appropriate in the buying centre context. Consequently another less widely used research  approach has focused on the buying system as the unit of analysis and examined the streams of behaviour that characterize on-going organizational buying activities in the firm. The buying system includes organizational members drawn from diverse functional areas representing different levels in the organizational hierarchy who participate in one or more of the purchasing related flows. These members are connected by a workflow and communication network reflecting formal and informal properties.

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