CHAPTER THREE

INDUSTRIAL BUYER
BEHAVIOR
 
 Chapter outline

01 Meaning of Buyer Behavior

02 Factors affecting industrial buying decisions

03 Business buying process and roles

04 Marketing strategies in different phases of buying

situations
05 Motivations of the business buyer
 INTRODUCTION
 Industrial marketing effectiveness can be achieved by
marketers by not only understanding the nature of
industrial buying but also by understanding the industrial
buying behavior.

 Industrial buying behavior however is a complex

process which cannot be explained by single explanatory
variable such as price, total cost, reciprocity, or ego
enhancement.

Some researchers have contributed to describe the whole

area of industrial buying behavior with different models
that they have developed
 Meaning of Buyer Behavior

 Buying Behavior is the decision processes and acts of

people involved in buying and using products.
 Consumer buying behavior is the sum total of a
consumer's attitudes, preferences, intentions, and decisions
regarding the consumer's behavior in the marketplace
when purchasing a product or service.
INDUSTRIAL BUYER BEHAVIOR
 According to Organizational Buying is the decision
making process by which formal organizations establishes
the need for purchased products and services and
identifies, evaluate and choose among alternative brands
and suppliers.
 Con…….
 According to Webster (1965), while understanding the industrial
buying process, it is essential to study both industrial and individual
aspect of decision making. This is because in the end, it is the
individual in an organization which will make decision in buying
process.

All the activities performed by the individuals in an organization

in a buying situation are included in industrial buying behavior.
Generally the buying situations are created when someone in an
organization come across a problem.

This occurs when a difference between the wanted outcome and

the actual situation can be solved through some buying action the
procedure of solving the problem is regarded as a buying process.
 Factors Affecting Buying Decisions
 No buying decision is ever taken in isolation. Each decision is
influenced by factors having to do with the buying company and
the individuals who are involved. In this section we examine these
factors using an analysis model developed by Webster and Wind in
1972.

 Typically in an industrial setting, one finds that there

are at least three departments whose members are
continuously involved in different phases of the buying
process.

The most common are the personnel from the purchasing,

quality control, and manufacturing departments.
 Con…….

Webster and Wind model considers that industrial buying behavior

is influenced by few variables. These variables are divided into four
fundamental classes that are- environmental, organizational,
interpersonal & buying center and individual.
ENVIRONMENTAL:
Physical, Economic,
Technological, Legal, Political,
and Cultural

ORGANIZATIONAL:
Technologies, Goals and tasks,
Actors, and Structure.
INDUSTRIAL
BUYER BUYING CENTER :
BEHAVIOR Roles (Initiator, user, decider,
influencer, buyer, and gatekeeper)

INDIVIDUAL:
Buyer’s status, Organizational
politics and Ethics of buying
 A) Environmental Factors
The Webster and Wind model divides environmental factors
affecting the buying decision into six categories: physical,
economic, technological, legal, political, and cultural.
This factor will affect the firm's costs and the extent of the
logistical problems it may face in actually getting the products it
has bought.
B) Economic Environment
The economic environment consists of the general situation of
economic growth or recession, interest rates, and corporate
profitability, within which all firms operate.
C) Legal and Political Environment
The legal and political environment within which business buying takes
place refers to the ways in which government legislation affects
purchasing, directly or indirectly.
 D) Cultural Environment
 The cultural environment of a buying company includes all those
national attitudes and beliefs that affect the way business people
operate.
Organizational factors
 Organizational factors affecting business buying behavior relate to
the buying organization itself: its technology, its goals and tasks, the
actors involved in buying and the organization's structure.
Technology
To a large extent a customer company is not simply buying products
from a supplier, but buying the technologies on which that product is
based. These include the suppliers' skills and knowledge in developing
designing, and manufacturing the product.
Goals and Tasks
long-term commitment to suppliers to achieve value and quality
improvement and short-term price advantage
 Actors
Individuals involved in making purchase decisions in such companies
will tend to emphasize product reliability and performance rather than
price.
Decentralized and centralized

Buying Center Factors

The buying center consists of those people in the organizations who are
involved either consciously or unconsciously in the buying process.
Roles - Buying center roles are those of initiator, user, decider,
influencer, buyer, and gatekeeper.
initiator is the person who recognizes that the company has a problem
or requirement.
potential users of a product may also initiate the purchase process or
may act to constrain the process by ruling out certain types of products,
problem solutions, or manufacturers on the grounds of unsatisfactory
previous purchases or poor reputation.
Buyers
Resources - A second aspect of the buying center influencing
buying decisions is the resources including information and
expertise.
Individual Factors
Business purchases are not made by companies but by individuals
within those companies.
Three factors relating to these individuals influence buying
decisions: the buyer's status organizational politics, and the ethics of
buying.
 Buyer's Status
The business buyer's status in the buying organization may play a
role in the buying decision. Business buyers are often paid less than
marketing people of similar seniority, and some buyers occupy a
relatively low-status position in the organizational hierarchy.
Organizational Politics - Buying can often be part of organizational
politics, and buyers may use a number of tactics to increase their
influence in the company.
 Many companies prohibit even the smallest gifts from
suppliers, and there is strong legislation against corrupt practices
in business buying. Nevertheless, some business buyers will seek
or be offered a personal inducement to favor one particular
supplier.

The Process of Business Buying

 Industrial buying activities consist of various phases of
buying decision making process. The type of buying
situation will be a parameter to give importance to various
phases. Therefore, the industrial marketer should
understand both the various phases of industrial buying
process and the type of buying situation.
Robinson, Faris, and Wind (1967) developed eight phases
of industrial buying decision process.
 Buy Classes
Purchases may be categorized into three buy classes according to the
newness of the buying situation:
1.new-task,
2.straight-re buy, and
3.modified-re-buy.
New-Task - In new-task purchases the company is buying a product or
service for the first time or, more properly, facing a problem for the
first time.
Straight-Re buy - Straight-re buy purchases are repeat purchases of
products or services, many of which are triggered automatically when
existing stocks reach a certain level, as in the case of office supplies,
such as paper, pens, or envelopes.
Modified-Re buy- Modified rebuy purchases are purchases in which the
buyer is re-evaluating a product or service that has been bought before.
 The Process of Business Buying by Classes
Buy Phases Buy Classes

New-Task
Straight- Modified-
Rebuy Rebuy
 Identification of need √
 Establishment of specification √

 Identification of alternatives √ √
 Evaluation of alternatives √ √
 Selection of suppliers √ √ √
 Performance feedback √ √
 Buy Phases
The process of business buying is not carried out in isolation
by the buying company alone. Instead, it is a process of
interaction between the buying company and potential suppliers,
which will be seeking to influence the process to their advantage.

1. identification of need,
2. establishment of specification,
3. identification and evaluation of alternatives,
4. selection of suppliers, and
5. performance feedback.
 

 
1. Identification of Need - The in-supplier is in a stronger position
than other suppliers to show the seeds of need recognition in the
buyer's mind. A business can often carry on for years with an
unrecognized problem or inefficiency.
2. Establishment of Specification- Trade directories and suppliers'
catalogs are very important to both the buyer and the marketer
during the specification phase because for many design
problems and engineer may simply refer to a general directory
or to catalog of a specific supplier's products for a problem
solution.
3. Identification and Evaluation of Alternatives - We have already
noted that buying companies tend to buy from the same source
of supply as before unless there is some positive reason to
change. This may mean that there is little evaluation of
alternatives.
4. Selection of Suppliers - The actual selection of a supplier is the
direct outcome of the evaluation in the previous buy phase.
 
5. Performance Feedback -
In this final phase, a formal or informal interview regarding the
performance of each supplier takes place. The user department gives a
feedback on whether the purchased item solved the problem or not. If
not, the members of decision making unit review their earlier discussion
and decide to give a chance to the previously rejected suppliers.

The buying company will seek to evaluate performance

of the product in use, the cost of the product over its life,
and the quality of the supplier's back-up service.
 jagdish N. Sheth Model of Industrial Buyer Behavior
In 1973, Professor Jagdish N Sheth developed the Sheth model of
Organizational Buying.
This model highlights the decision-making by two or more
individuals jointly, and the  psychological aspects of the decision-
making individuals in the industrial buying behavior  It includes
three components and situational factors.

While the model appears complicated, it is quite useful for

examining organizational buying behavior from the perspective of:
1. The conditions that precipitate joint decision making,
2. The psychological world of the individuals involved, and
3. The inevitable conflict among those involved in the decision
process and resolution of this conflict.
The differences among the individual buyers expectations
(Component 1) are caused by the factors: background of
individuals; information sources; active search;
perceptual distortion; and satisfaction with past purchases. The
background of individuals depends upon their education, role
in the organization, and life style.
The factor perceptual distortion means the extent to which
each individual participant modifies information to make it
consistent with his existing beliefs and previous experiences.
The methods used for conflict resolution in joint-decision
making process are indicated by the Component (3) in the
model. Problem-solving and persuasion methods are used
when there is an agreement about the
organizational objectives. If there is no such agreement,
bargaining takes place.
 JAGDISH N. SHETH MODEL OF INDUSTRIAL BUYER BEHAVIOR
focuses on Complex relationship involved in joint decision
making 

THE FACTORS
a. The conditions that swift joint decision-making
b. The psychology of the individuals involved
c. The conflict among those involved and its resolution.

The number of organization members involved in a buying

decision depends on:
 The size and organization characteristics of the firm
 Type of purchasing situation
 Perceived importance of the product

 Available resources for handling the purchase