Organizational buyer Vs household buyer


To better understand an organizational buyer, let us first explore the differences between such a buyer and the household buyer.


The starting point to understand the difference between a household buyer and an organizational buyer is buying motives and purposes. While the former buys for his/her own consumption the latter buys primarily for adding value to the product which is then sold to another customer .It is in this sense, that organizational buyer demand is a derived demand. For demand of a product is based on organizational buyer’s customers demand Consider , for example, the demand for transmission gears in the automobile industry. For the gear manufacturer ,the demand for his transmission gears is based on the automobile firms’ production plans, which in turn is based on customer’s demand for automobiles and environmental factors like government taxation and fiscal policies .The gear manufacturer’s demand for steel forgings in turn, is dependent on his production plans. At times, the organization buys a product for it’s own use. Consider , for example, the case of office products like typewriters, computers, fax machines franking machines, furniture, copiers, etc. Here, the firm buys these products for using them to improve its own efficiency and work environment .The organizational customer’s motives is buying the product are:

1. to improve its efficiency, and
2. economy

Thus, organizational purchase decisions are primarily rational. However, psychological motives are also important .One of the most critical psychological factor is the past experience of the buyer with the supplier and the extent to which the supplier has taken care of the buyer’s esteem need. When all suppliers are comparable on product specifications, technology and the level of after sales services, the cutting edge between one supplier and another is often when one understands the buyer better and satisfies organizational buyer’s needs.


The organization buyers are few but are much larger and they purchase in bulk .The household buyer is relatively much smaller and his/ her purchase are small .Retail buying is common in the household segment. Generally even in the case of small organizational buyers, the annual purchase budget will run into several lakhs of rupees, but in the case of large household purchase it will never exceed a few thousand of rupees.


As evident from the above, the risks is organizational purchases are much higher than those in the Household purchases .The organizational buyer always looks for alternative that will help him to reduce these risks. Previous experience with the supplier , vendor image, supplier’s standing within the industry, etc are some of the factors that help the organizational buyer reduce his risks in buying decisions

Organizational buyers are generally concentrated in the same geographical area, as opposed to household buyers spread all over the country. Thus, in business –to-business marketing, a more focused marketing strategy with an emphasis on personal selling is used as opposed to consumer marketing, where trade channels and mass communication become important pillars of marketing strategy.


Since the costs and risks involved in organizational purchases are high, these decisions are taken jointly and involve several individuals All these individuals are involved in the decision-making process in the organization. This is different from a household customer where individual decisions are still prevalent ,particularly in the case of consumer non-durables.


Organizational buyers want suppliers to rigidly adhere to specification laid down by them. The reason is that buyer’s efficiency, product quality, after sales service, market share and ROI are greatly dependent on the supplier’s ability to adhere to specifications laid down by him. The organizational customer does not accept deviations from these specifications .The household buyer is not really rigid about his/her specifications. The consumer is willing to accept substitutes .It is for this reason, that in consumer marketing , brand switching and brand substitution is high, while in industrial product marketing vendor loyalty is quite high.