CONSUMER ORGANIZATIONAL BUYER BEHAVIOR
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Considers how organizational structure, models of organizational buying behavior and internal politics affect market segmentation.... More...
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Considers how organizational structure, models of organizational buying behavior and internal politics affect market segmentation. The relationship of these factors to communications within the business-to-business context.
Consumer OrganizatioNal Buyer Behavior Introduction Today nearly all successful organizations engage in strategicmarketing that involves market segmentation and target marketing Typically these companies base their segmentation and targeting decisionson how products and services are used This tends to be the caseregardless of whether the company is marketing to consumers or to otherbusinesses However the process of marketing to other companies-the so-called business-to-business marketing-carries with it different challengesthan marketing to individual consumers Often the products and servicesare much more expensive sold in much
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Jack, Peter M. This tends to be the caseregardless of whether the company is marketing to consumers or to otherbusinesses. When this occurs, it is called"unity of command." The number of individuals a manager can directlysupervise effectively is limited; this number is called the "span ofcontrol." There is no absolute minimum or maximum span of control thatleads to an optimum level of efficiency, but vertical specialization tendsto limit the span of control of managers at each level in the organization. If theproduct or service is considered a new task buy, the considerable resourcesmay well be needed in order to successfully market the product. On the other hand, if theindividual is expected to advance within the organization, or is in a keyposition, there may be no way for the marketing organization to avoidworking with him or her and continue to be successful. It can be difficult formarketing organizations to gain access to technical people who might serveas champions, and the buyers may not be aware of all of the benefits that aparticular product can offer. This patternis often used to meet diverse external threats and opportunities. and Caron H. Functional specializationalso provides an excellent training ground for new managers who musttranslate academic training into organizational action. These are expensivepurchases and must last the company for many years. "Organization Design." Management Science 48(Jul 2 2): 852-865.Henricks, Mark. Marketing organizations who confront thistype of individual must make a strategic decision. On the one hand,working with this individual could cost the marketing organization somemeasure of its profitability. For example, Procterand Gamble has successfully promoted competition among product groups(O'Neal 9). Consumer OrganizatioNal Buyer Behavior Introduction Today, nearly all successful organizations engage in strategicmarketing that involves market segmentation and target marketing.Typically, these companies base their segmentation and targeting decisionson how products and services are used. In addition, themarketing organization may not want to cause strife in the relationship byselecting a distributor whose expertise may be more in keeping with the newproduct (Beekman and Robinson 68). Senior level managers maybe directly involved only in the largest purchases, although they mightinfluence purchases at all levels of the organization depending on thepolitical situation at the company; this political component is discussedlater in this analysis. and Richard B. The greater the level of verticalization, the narrower the span ofcontrol; conversely, the more horizontal the structure of the organizationis, the broader the span of control (Henricks 97). The decision process for these aircraft islikely to include the marketing department at the airline as well astechnical personnel who will maintain the aircraft, the pilots who will flythe aircraft, and senior management who may want to form or maintain astrategic alliance with Boeing or Airbus. They arealso the company's final judges for internal disputes, and serve to certifypromotions, reorganizations and similar decisions. The individual may be ambitious to the pointof causing the relationship to deteriorate. Divisional specializationprovides for the integration of specialized personnel deep within thehierarchy, and also can focus and react to the success or failure ofparticular products, services, clients and territories. However,they also sell these products that are used by companies and even retailconsumers. Ronchetto, Jr. 1 (Win 1998): 469.Tellefsen, Thomas and Nermin Eyuboglu. In this way, thetechnical personnel can help "pull" the product into the company ratherthan the marketing organization being forced to rely on being able to"push" the product through the buyer. Failure to understand thebuying process or who the key decision makers are can result in failure forcompanies in this market. When sold to airlines, these may be part of a larger in-flightentertainment system that must meet stringent regulations in order to beacceptable on-board equipment. In narrow spans ofcontrol, marketing organizations can target individual managers who arelikely to exercise considerable control over their immediate areas, andthus are likely to have considerable say in purchasing decisions withinthose areas. Matrixdepartmentation is found throughout the aerospace industry where projectsare technically complex and involve hundreds of subcontractors locatedthroughout the world. If thecredit terms are particularly lenient, even if the price is somewhathigher, the marketing organization may also find that it has an advantage.In marketing to vertical organizations, therefore, knowing who the decisionmakers are and what buying criteria they use is critical to success(Duncan, Ginter and Swayne 11). Whenmarketing to organizations where certain individuals have considerablepower, marketing organizations will recognize the role that theseindividuals play in the purchasing decision and include them in order toimprove their opportunity for success (Tellefsen and Eyuboglu 161). "Implementing Supply Chain Management Lessons Learned at Becton Dickinson." Production & Inventory Management Journal, 41(Spr 2 ): 33-4 .Lichtenthal, J. "Vertical Relationships." Journal of Industrial Economics, 39(Sep 1991): 445-45 . Purchases that have a higher level of importance-calledmodified rebuys-involve more resources in the decision making process andgreater evaluation of individual products and suppliers. As a result,employee turnover may be high as employees seek other challenges in otherorganizations. It is also possible that within productdivisions, there will also be dedicated buyers responsible for negotiatingcontracts over the long-term ("How Buyers" 53). In large vertical organizations, the actual users of a particularproduct or service only make recommendations regarding the purchase; theactual decision is made by a purchasing department with specialized buyers. "Changing the Rules of the Game." Planning Review, 21(Sep- Oct 1993): 9-12.Kanet, John J. This research considers management style andorganizational structure, the usefulness of buying behavioral models andthe internal political structure of business customers and the relationshipof these factors to market segmentation and communications within thebusiness-to-business marketing context. Indeed, it can be to the marketingorganization's advantage to have several champions who favor the marketingorganization. When selling to companies that have a divisional departmentationstructure, the marketing organization must understand the basis of thosedivisions. Over time,organizations that rely on functional specialization may experience anemphasis on quality from a technical standpoint rather than a productstandpoint, a high level of resistance to change, and difficulty incoordinating the actions of different functional areas (Cross 32). and Alan R. John 46 ). Thiscan mean negotiating more favorable terms and conditions, or pressing themarketing organization to make improvements to the product or service at nocost to the buying organization. This does not mean that the buyer should be overlooked;indeed, depending on the politics of the organization, not including thebuyer early or often enough in the decision making process can prove fatalto a company's strategy. Marketing organizations need torecognize that even when there is a formal buyer involved or in charge ofthe process, they can still market to others within the organization whocan influence the buying decision. Facing similar problems and having similar training facilitatecommunication and technical problem solving. "The Effects of Organizational Stability and Leadership Structure on Firm Performance." Journal of Managerial Issues. In this way, it is important that marketingorganizations understand not only how a product is used, but also how-andwhy-it is purchased in the first place. Beyond the strictly illegal, however, are othertypes of irrational behavior that can influence buying behavior withincompanies. In this way, themarketing organization is able to create "champions" within the targetorganization who can campaign for the marketing organization and itsproducts and services. This makes thechallenge of selling to other companies considerably different than sellingto consumers at the retail level. Ginter and Linda E. Large,geographically dispersed organizations which have national andinternational markets often use this departmentation by territory strategyas the basis for their organizations. Works CitedBeekman, Amy V. However, the process of marketing to other companies-the so-called business-to-business marketing-carries with it different challengesthan marketing to individual consumers. "Competitive Advantage and Internal Organizational Assessment." The Academy of Management Executive 12(Aug 1998): 6-16.Greiner, Larry and Virginia Schein. Horizontal specialization refers to the process of grouping similarpeople and resources together. When this is the case, the marketing organization may want to focus lesson the benefits that the product offers and emphasize the financial anddelivery terms. It can,however, be difficult to gain access to these organizations where priorrelationships do not exist, so marketing organizations trying to sell tothese companies for the first time should focus on building relationshipsand on long-term strategies rather than on the quick sell (Reinan 1D). Divisional specialization does not, however, provide a pool of highlytrained individuals with similar expertise who can solve problems and trainnew employees, as functional specialization does. "Span Control." Entrepreneur 29(Jan 2 1): 97-98."How Buyers Choose Suppliers, Measure Performance." Purchasing 134(Mar 17, 2 5): 53-54.Iverson, F. Highly vertical buying organizations are likely to have buyers thatserve as "gatekeepers" for the buying process. These buyers are likely to be knowledgeable about the variousproducts to which they are assigned, but they can also be expected to keepthe project's profitability in mind as they make purchasing decisions. When marketing to vertical organizations, the marketing organizationmust understand to which level of the organization the product or serviceis targeted. Individuals within adepartment can easily build on one another's knowledge, training andexperience. Commercial passenger airlines offer examples for each of these typesof purchases. That is, once an organization makes a decisionregarding a particular supplier, it is difficult for the organization tochange that supplier in the future due to the many constraints that may bein place. Power and Organization Development. Understanding how a particular product or service is perceived by thebuying organization is critical to the marketing company's success. Lines of communication across theorganization can become very complex. Internal Political Influences and Marketing Management Chain of command refers to the hierarchical connections that areformed among executives, managers, supervisors and line employees.Individuals are expected to follow the decisions of their supervisors inthe areas of responsibility as outlined in the organizational chart.Traditional management theory suggests that each individual is to have oneboss, and each unit is to have one leader. "The Horizontal Organization." The McKinsey Quarterly (Win 1992): 148-167.Reed, Michael I. Even within a single industry orproduct line, different customers may have different internal environmentsthat require vastly different approaches from the marketing organization.This requires that the marketing organization engage in activities thatbring to light the internal structure of the buying organization. The solutionwas to integrate both the functional and divisional forms simultaneously.Functional departments are one side and project efforts on the other.Workers and supervisors in the middle of the matrix have two supervisors:the functional supervisor and the project supervisor (Iverson 11). This departmentation by client was commonly used bycompanies that did business with both the military and also producedcommercial applications, such as aerospace companies. Invertical organizations, as managers move up the hierarchy, the scope ofresponsibility expands. Divisional goals may also be givenpriority over the overall organization's goals and objectives. Top managers and senior executives plan the overallstrategy of the organization and determine its long-term future. This makes these products a new task buy.When sold to large companies to augment their videoconferencing, theproducts may qualify as a modified rebuy. Power can be formal or informal,and a buyer who has close relationship with key suppliers may enjoy acertain level of power if that buyer is able to expedite shipments orobtain more favorable financing as a result of those relationships. St. Cannon. Employees can easilyunderstand the role of each unit, even though each employee may not knowwhat each individual in every unit actually does (Ostroff & Smith 152). The distribution offormal authority can most easily be seen in descriptions of typicalmanagerial duties. Precise integration and control is needed acrossmany sophisticated functional specialties and corporations. Hillier maintained that when organizations use a formal purchasinggroup, that buying group is often surrounded by other participants invarious layers within the organization. Thus the marketingorganization needs to determine if this individual is a future ally, or aroadblock, and how to market the product or service accordingly (Nye 16). "Toward a Theory of Business Buyer-Seller Similarity." Journal of Personal Selling & Sales Management. Asa result, these buyers can be targeted with both product features but alsofinancial and delivery benefits, as well. This routine offersopportunities to marketing organizations. Since there are alimited number of suppliers, the negotiations are likely to focus not onlyon the features of a particular aircraft, but also the financing anddelivery availability, as well. Organizations that rely on a few major customers may organize theiremployees and resources by client. Robinson. Problems may also arisewhen divisions attempt to develop join projects, exchange resources, shareindividuals or charge one another for goods and services. Functional organizations typically make their ownpurchasing decisions and typically do not use buyers in a separatepurchasing decision. Knowing whether a company is organized along vertical or horizontallines, and who the decision makers are well as the decision making processwill influence the marketing strategy. "The Impact of a Salesperson's In- House Conflicts and Influence Attempts on Buyer Commitment." Journal of Personal Selling & Sales Management 22(Sum 2 2): 157-183.Vickers, J. The savings in time, effort andtravel can be substantial when compared to functional departmentation, andeach territory can adjust to regional differences in the market. Robinson, Faris and Wind suggested that the decision making processfor companies varies depending on the importance of the purchase.Purchases that are considered small and relatively unimportant-such asoffice supplies-may be made routinely and without significantconsideration. Matrix organizations may well have buyers who are assigned to specificproducts and with whom the marketing organization's personnel willinteract. "Looking Before You Leap." Business Horizons 43(Sep 2 ): 29- 37.Duncan, W. Themarketing organization must also recognize that its customers may havedifferent opinions of its products and services depending on how they usethe products. Marketing organizations need to recognize the span of control andunderstand who controls the decision making process. Functional specialization can yield very clear task assignments thatare consistent with an individual's training. "Supplier Partnerships and the Small, High-Growth Firm." Journal of Small Business Management 42(Jan 2 4): 59-77.Buckles, Tom A., and John R. It also allows forspotting external changes as they are emerging. In addition, global companies mayseek local suppliers in order to improve their political capital withintheir own environment. Complex communication channels canlead to too much information being forwarded to top management. Management Style & Structure and Marketing Segmentation Policies Organizations have unique structures based on common forms such asvertical or horizontal. If theproduct or service is perceived as a routine buy, then the marketing effortfocuses on maintaining the relationship that already exists with aparticular customer. "It's What's Up Front That Counts." Marketing News, 25(Mar 4, 1991): 9-1 .Ostroff, Frank and Douglas Smith. In these situations, the marketingorganization might want to participate in trade shows and ensure that itsproducts and services are covered in trade journals through articles andadvertisements in order to reach technical personnel. Divisional departmentation groups individuals and resources byproducts, services, clients, territories and legal entities. and M. Waterson. Although many analysts consider organizational buying behavior to bemore rational than consumer buying behavior, there are certainly politicalfactors within organizations that can work against a purely rationalapproach. Such conflictsarise as the divisions seek to maximize their own standing withoutnecessarily realizing or reconciling the needs of the organization as awhole (Kanet & Cannon 27). These individuals are interested in selectingvendors that help the individual look successful to their superiors. Communication across technical areas can be difficult andconflict between units may arise. According to Greiner andSchein, a horizontal organization is one which is more open to change thana vertical organization; this is due to the greater autonomy that employeesgenerally have in a horizontal organization, and less tendency amongindividuals to seek to preserve the status quo (Greiner and Schein 173). "Examining an Industrial Buyer's Purchasing Linkages." Journal of Business & Industrial Marketing 11(Win 1996): 74-92.Cross, Rob. Swayne. Reading, MA: Addison-Wesley, 1989.Harris, Milton and Artur Raviv. An airline's office supplies used by personnel are likely tobe purchased routinely and probably locally by airline personnel. At one extreme is the fraudulent practice of using suppliers whohave tendered bribes or kickbacks, or who are relatives of key owners ofthe buying organization. Some managers and buyers will use their positions as decision makersin order to further their power within the organization. For example, when a marketingorganization introduces a new product, they may use the same distributornetwork even when the new product is substantially different from previousproducts. These organizations are unlikelyto favor changing suppliers, so marketing organizations should provide verylittle reason to change if they are already a selected vendor. A combination of personal sellingand promotional activities may be the most successful strategy in thissituation. Divisionalorganizations may also have difficulty responding to corporate threatsbecause of their regional or territorial nature. It is critical that companiesunderstand how each customer approaches their particular product or serviceif the marketing organization is to be successful in the selling process. Thisoften happens when a functional structure is in place. Lower level managers supervise the actions of subordinates toensure implementation of the strategies authorized by top management, andcompliance with the related policies established by middle management. This is because there is already a relationship with thosedistributors who may purchase the product out of routine. Conclusion Successful business-to-business marketing requires that the marketingorganization understand the structure, culture, buying models and politicalsituation that exists at its customers. David and Thomas Tellefsen. To the extent thatthis departmentation yields separate business units, top management cancompare the performance of one group with another. Individuals may also lookup the organizational hierarchy for direction and reinforcement rather thanfocusing attention on products, services or clients. When selling to a company with a functional organization, themarketing organization can focus on the benefits that a particular productor service offers. Low-level supervisors may have discretionary spending forsmall purchases, with the level of discretion expanding as one moves up inthe organization (Sridharan and St. Matrix departmentation evolved from very complex projects whereneither functional nor divisional forms were working. Personal selling is often used inindustrial marketing, but the level of resources that are committed to aparticular customer are likely to vary based on the buying behavior thatcustomer has exhibited in the past as well as how the product is perceivedwithin that customer. Those productsand services that have the highest level of importance to the firm aretreated as new task buying regardless of whether similar products have beenpurchased previously (Lichtenthal and Tellefsen 7). Divisions that are based on geography, for example, are likelyto make their selections independent of the company as a whole in order totake advantage of using local suppliers who can keep costs down in order toimprove the division's productivity. The resultof this is that top management may spend an excessive amount of time andeffort dealing with cross-functional problems. Theuniforms that are worn by airline personnel are likely to be part of amodified rebuy-having importance because they are not purchased on aregular basis, but not necessarily of strategic importance to theorganization. Managers become accountable for more individualseven though they do not directly supervise their activities. There can also be aduplication of effort throughout the organization as geographically diversegroups seek to solve the same problems. "Words of Wisdom?" CommunicationsWeek International (Aug 16, 1999): 16.O'Neal, C. "Organization, Trust and Control." Organization Studies, 22(Mar 2 1): 2 1-224.Reinan, John. 21(Win 2 1): 1.Nye, Sheridan. Companies that use a product divisional structureare also likely to make purchasing decisions at the divisional level, buthere, the emphasis will be on the benefit that the product or serviceprovides the organization. The actual aircraft that are used within the fleet, however,are likely to follow the new task buying process. As managersmove up the hierarchy, they also generally have more discretion, and oftenhave more power in decision making processes, including purchasingdecisions (Reed 212). Vertical specialization is a hierarchical divisionof labor that distributes formal authority and establishes where and howcritical decisions are made (Vickers & Waterson 445). Middle managers guidethe daily operations of the organization, help to formulate policy andtranslate top management decisions into more specific guidelines foraction. This approach means instead that the buyer shouldnot be the only focus of the marketing organization's approach (Buckles andRonchetto 83). The political environment in some organizations may reinforce thenarrow training of individuals and lead to boring and routine jobs. In addition,functional specialization is easy to explain. In companies with broad spans of control, the marketingorganization may want to form relationships with managers in severaldifferent areas in order to benefit from the greater spans of control andthe lack of a centralized decision making process. Other individuals involved in the decision making process may beparticularly ambitious. Instead of many levels of management on anorganizational chart and many vertical lines, horizontal organizations arecharacterized by few levels of management. K. Models of Organizational Buying as Tools for Targeting Customers Webster and Wind suggested in 1972 that organizational buying is oftena matter of routine. If the organization is willing to participate in a just-in-time manufacturing program, for example, the purchasing organization maygive that supplier preferential consideration over other companies. Often, the products and servicesare much more expensive, sold in much larger quantities, and may bepurchased by someone who does not actually use the product. If the product or service is a modified rebuy, thenmore resources will be needed to succeed in the marketing process. This gives the functional organization greaterautonomy and makes it easier to target market goods and services based ontheir intrinsic features and the benefits that they can offer theorganization (Harris and Raviv 855). In this way, suppliers may be able to raise their prices, oreven deliver goods or services that fail to measure up to the buyer'sexpectations without necessarily losing the business. To the extent that customer needsare unique, departmentation by client can also cut costs, reduce confusionand increase synergy. Consistencyand respecting long-standing relationships are key, and focusing ontechnical quality of supplied products and services rather than on deliveryor financial terms can also be important. In addition to the different buyingprocesses that might be in place, there are other considerations, includingthe culture, buying behavior and internal politics, that can affect thebuying decision for organizations, as well. Divisional specialization provides adaptability and flexibility inmeeting the demands of important external groups. John. Here, the idea is to focus attention onthe needs of the individual customer. "Companies Start at Lowest Levels to Build Up Brand Image." Star Tribune (Sep 28, 2 3): 1D.Sridharan, Uma V. Using the example of commercial passenger aircraft, companies such asPanasonic sell audio/video equipment that is used on aircraft. This can be toattain a position of higher power, or simply to exercise power in theircurrent position within the organization. When marketing to these organizations, it is critical to remember thatroutine can work to the favor of the marketing organization.
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