If your organization is a B to B organization, you must consider the factors that influence organizational buying decisions, when developing your marketing plans and sales strategies. To know more about these factors, keep reading.
·
Organizational
buying is much more complex than consumer buying, and thus deserves to be
studied separately. The entwined interpersonal relationships and the multiple
communication processes between the organizational members, involved in the
buying decision process, are some of the major contributors to this complexity.
The list of affecting factors isn’t limited to these; there are many more
important determinants. Let’s take a look at what factors influence
organizational buyers and their buying behavior. But before that we’d just like
to divert your attention to why organizational buying is so different.
·
Unique
Features of Organizational Buying
1. Organizational buying is mostly
a multi-person activity, and that’s true for more than 90% of the
organizational buying. Decisions for some of the bigger purchases may have
participants from a range of departments and from different management levels.
Think about the purchase of new software – it may require a collective decision
made by end users and people from the IT, finance and administration
departments.
2. When organizations make
purchases there is always a meticulous formal process that precedes the actual
purchasing.
3. Organizational buying decisions
are never made at the spur of a moment. The buying decision making is stretched
and this drag can even be a year long, when it comes to critical purchases.
·
External
Environmental Factors
As a major constraint
under which a business operates, the external environment impacts nearly every
aspect of a business, including its buying decisions. Here’s a list of the
external elements that affect organizational buying.
Economic
Conditions: The
fluctuations in the money markets and the interest rates
have a major impact on the buying strategies. The interest rates and
organizational buying have an inverse relation; in most cases, an increase in
the interest rates may bring about a drop in the buying.
Regulatory
Changes:
Any changes in the corporate laws, rules and regulations will also influence
how, when and what the organizations buy. There are also regulatory changes
that may affect only a particular industry and accordingly the related
organizations will change their buying patterns to stay in-line with the new
regulations.
Political
Environment: A
change of the government or policy has a direct impact on the economic
scenario, and this ultimately translates into a shift in the organizational
buying patterns as well.
Social
Environment:
Societies and cultures are ever evolving, and every business has to change its
practices and procedures to meet up with the societal changes. For instance
with the rise in the number of animal lovers, pure leather suppliers have seen
a slump in their business. The clothing and footwear manufacturers have shifted
to artificial leather suppliers. This points out how the social environment can
affect the buying patterns of organizations.
Competition: Today’s business is all about
beating competition and staying ahead. So when an organization's competitors
move on to a newer product or service, or if they get to enjoy a competitive
edge because of their suppliers, it's very likely for the organization to
change its trends too and thus its buying pattern will change accordingly.
The external
environment is the first of the four major factors that influence
organizational behavior as shown in this diagram which you can click on to
enlarge.
·
Internal
Organizational Factors
More than the external
factors, it’s the internal organizational factors that influence organizational
buying. These internal factors are the:
Organization's
Goals and Objectives:
The goals and objectives of an organization are major determinants as to how
and what the organization will purchase. An organization that wants to capture
a bigger chunk of the market by selling cheaper stuff is more likely to look
for suppliers who can supply larger quantities at a low price. However, a
company whose goal is to deliver quality products may have a very contrasting
buying pattern, and they will focus more on the quality issues than on the
price advantage.
Organizational
Structure:
Hierarchical and management structures vary from one organization to another.
While some organizations have a well established purchase department, others
may assign this job to the HR or Administration department. There are also
organizations where the purchase decisions must be taken collectively by all
concerned departments. The organizations also have well-defined guidelines as
to which purchase decisions can be made by which management level. The internal
setup and how authority and responsibility flow through it, play an important
role in the organizational purchasing.
Policies and
Procedures:
How the purchase order is routed, depends on the organization's policies. How
does the buying procedure begin, who will participate and who has the ultimate
authority to decide on the purchase are all dependent on the policies and
procedures of the organization. Some organizations prefer to invite public bids, while others may contact only the few
suppliers on their list. There are also budgetary policies that have a say in
the purchase decisions, for instance while some organizations may have a
flexible policy to make purchases as and when the need arises, others may have
to wait till the allocation of the annual or biannual budget.
Technological
Levels:
Whenever making new purchases, organizations take into consideration their
current technology. Some purchases are meant to replace the current technology
with a newer version, so their buying decision will be influenced by what level
of technology they currently own. Also, organizations try to ensure that all
new purchases being made are technologically compatible with their existing
technology. So, one way or the other – an organization's existing technology
has a major influence on its future purchases.
Manpower
Skills:
Whether the organization has the skilled manpower to make proper and optimum
use of the new purchases being made, especially equipment and machinery, is
another issue that influences organizational buying.
·
Interpersonal
and Individual Factors
Since organizational
buying decisions are never a one person affair, interpersonal relationships
among the decision makers plays a vital role in this type of buying.
Participation
and Authority:
In organizational buying situations, there are always re-defined rules as to
who can participate in the purchase decision and who is the ultimate deciding
authority.
Interpersonal
Conflict:
Interpersonal conflicts and conflicts of interest amongst
the decision makers often results in delays and changes. Thus, the kind of
thinking and the kind of relationship the decision makers share have a major
role to play in corporate buying.
Education and
Awareness:
The educational background of the decision makers and their level of awareness
have a major bearing on what type of purchases they will make.
Risk Taking
Ability: If
the buying committee constitutes high risk takers, they will not be averse to
the idea of choosing the latest technology or new suppliers. While on the other
hand, decision makers with a low risk taking tolerance are more likely to stick
to proven and tested technology or to well known and well established
suppliers.
Individual
Factors:
Individual factors such as age, cultural background and social status, of the
members on the buying team, also influence the buying decisions.
·
Situational
Factors
In this final section
we’ll take a look at some of the situational factors that can influence
organizational buyers.
Time Factor: Sometimes, organizations don’t
have all the time to follow the detailed buying procedure. If the organization
needs a replacement for equipment that broke down suddenly, it may decide to
place its order with some existing supplier or a supplier that is at close
proximity.
Current
Financial Situation:
If the organization is crunched for cash, it may decide to place its order with
one of its existing supplier who offers extended credit. Also, if the
organization cannot spare out enough money for a certain purchase, it may opt
for a readily available cheaper version that fits into its budget.
Availability: Some buying decisions can wait
while others cannot, thus if the supplier cannot make available the exact
product by the desired date, the organizational buyers may shift to a new
supplier or to a more readily available alternative.
Special
Offers:
Special offers being given by a supplier may also be one of the situational
factors affecting the buying decision.
As a supplier, now
that you know what factors influence organizational buyers, you can work up
your business to business sales strategies to manipulate organizational buying
activities and thus procure more orders for your supply business.