Concept Of Institutional Or Organizational Buying
Buyers' behavior can be divided into two types as consumer buyer behavior and organizational buyer behavior. The ultimate consumers buy goods or services for consumption and different organizations buy goods or services for different purposes. Organizational buying means the activity of buying goods or services by organizations.
An organization may be any industry, which buys raw materials necessary for production of finished goods, machines, machine parts, other supplies etc. Similarly government organizations such as ministry, departments, divisions etc. buy goods or services for their use. Hospitals, schools, campuses, financial institutions etc need to buy necessary materials, fuel, various supplies, construction materials and other goods or services. Wholesalers, retailers, distributors , resellers etc. buy goods or services to produce finished goods, resale, ultimate use etc., this called organizational buying and the buying behavior of organization is called organizational buying behavior
Some of the characteristics of organizational buying behavior are derived demand, geographical concentration, few buyers, large volume of sale, direct channel etc.
The main characteristics of organizational buying behavior can be described as follows:
1. Derived Demand
Organizational buying is based on derived demand. Demand made by the ultimate consumers creates demand for industrial goods or services. For instance, demand of electricity generator is determined according to the demand made by the consumers. Demand of organizational buyer changes in keeping with the changes in consumers' demand.
2. Geographical Concentration
Organizational buyers remain concentrated in certain geographical area whereas consumers' market remains scattered all around. Producers want to establish industry near by supply source. Mostly, industrial market is determined considering transport facilities and cost. Along with this, raw materials, labor supply, climate condition etc. are also considered.
3. Few Buyers And Large Volume
The number of organizational buyers remains small but volume of sale is large. So, organizational marketers focus on their efforts on very small number of main buyers who buy goods or services in large volume paying big amount of price.
4. More Direct Channel Of Distribution
High quantity of consumer goods or services is sold out through complex structure of wholesalers and retailers. This structure keeps producers and consumers separate or it works as the bridge between them. but in organizational selling, direct contact is established between buyers and sellers. The organization, which buys in large volume, buys necessary goods directly goods from producers.
5. Rational Buying
Organizational buyers use rational in buying goods or services compared to the ultimate consumers. They want to take more information about the features, quality, technical use, utility etc of products. Organizational buyers become aware of quality, services, delivery, price etc. of any products.
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6. Professional buying
Compared to consumer buyer, organizational buyers become systematic, rational and professional. Buying agents become skilled professional. They should take frequent trainings on buying process, contract, material management and legal aspects of buying. Professional buyers develop formal methods of buying.
7. Complexity
Complexity is another characteristics of organizational buying. Under organizational buying process, different persons participate in buying decision. So it becomes difficult to take buying decision. While taking decision on buying, it becomes necessary to know the role of users, motivator, decision maker and buyer whose effect goes on buying process.
