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How Are Buying Decisions by a Company Different from Buying Decisions by Individual Consumers or Households?

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1) How are buying decisions by a company different from buying decisions by individual consumers or households?

There are various characteristics of buying decisions that causes organisational and individual buying decisions to differ. Firstly, a company may derive its demand from consumers hence, the decisions made may be based on the consumer demand. However, an individual’s demand is based on his own willingness and ability to pay for the goods/services. Next, a company usually would purchase much more quantity or products and services as compared to the individual. Hence, it is important to take a longer time to do the research on the product/service, require more people involved to ensure that the decision is satisfying. Thirdly, the buying objective of a company might be different from the individual. The company may be buying for own use, produce other products or resell in order to make a profit, however an individual usually purchase a good to satisfy his needs and wants. Fourthly, the criteria for purchase in companies are usually far more complex than the individual. It includes Price, Ability to meet quality specifications, ability to meet delivery schedule, technical capabilities, Warranties and claim policies in the event of poor performance, past performance records, production facilities. Fifth, buyer and seller relationships is stronger between companies as compared to individuals. In companies, buyer and seller may adopt a mutually beneficial policy to lower cost and provide better consumer value. Lastly, there are multiple influences in the buying decisions of a company which can be seen from its buying center as compared to the individual who usually makes his own decisions.

How are these differences illustrated by a company making a decision on which event companies to use?

Need recognition starts when a company realise it needs to carry out an event. They carry out a make-buy decision and realise that they don’t have the resources to organise an event, so they seek information to find event companies that can assist them. They list down 3-5 suppliers under their consideration set. They will send a quotation request describing the specific of the event they wish to launch. Their researchers will analyse which event company fits their main buying criteria before deciding on the optimal one. They will ensure that that particular company is reliable by observing its historical records and past working experience. Unlike the short purchase stage in the consumer purchase, the period from the selection of supplier (event company) to order placement (confirm purchase and contract issuance) and event preparation will take weeks or even months to prepare. The purchase decision process in organisational business is far more formalised and sophisticated as compared to the individual purchase. The performance of the events company is monitored and recorded. Performance on past contracts determines any future business with the company.

2) Explain the concepts of the buying center, buying motives and buying roles.

Buying Center means formal or informal group of people in an organisation who are involved in the buying decisions. They share common risks, goals and knowledge important to the purchase decision.

There is an increasing need for a Buying Center especially when it comes to dealing with huge expenses. A single person cannot possibly be equipped with the necessary information and purchasing power to make the decision for a major purchase in an organisation. Hence, we need to gather experts to research and advice and influence decisions made before a purchase. This is done by pooling these group of people into a buying centre for these purchasing decisions.

The composition of the Buying Center can vary in terms of size, involving different departments or even different positions in a certain department. All these depends on the complexity of the purchase.

Buying motives means the combination of facts and the emotional state of a person that generates a feeling within them that they need to purchase an item. It is the driving force to purchase the goods or services.

Buying roles are basically 6 of them, initiator, users, influencers, buyers, deciders and gatekeepers. It is important to define their roles to know how their presence affect the decisions made by the company. Suppliers usually look for these people who have the authorities to make decisions.

  1. Initiators identifies the need to buy a product or service.
  2. Users are people in the organisation who actually use the product or service.
  3. Influencers are the ones that recommend the purchase due to their technical expertise or management level in the organisation.
  4. Buyers have the authority and responsibility to select the supplier and negotiate the terms of the contract. They usually come from the purchasing department.
  5. Deciders have the formal or informal power to select or approve the supplier that receives the contract. They basically have the final decision in a purchase.
  6. Gatekeepers control the flow of information in the buying centre.

What is the Buying Center for a firm’s decision to engage an event company like Pivot Marketing?

For a firm to engage an event company like Pivot Marketing, they must be looking at events that they are likely to organise for their company. Below are the list of roles in the Buying Center of the company. It is possible for departments or positions to have more than 1 role in the Buying Center.

Buying Center

Departments/Positions Involved

Initiators

Corporate Planning.

Users

Corporate planning. Administration. Operating management. Public Relations department. Relations management – company branding. Product/Services division.

Buyers

Purchasing department

Influencer

Senior management level or Board of directors. Public Relations department. Products and Services division.

Deciders

Board of directors. President.

Gatekeepers

Secretaries and Technical Personnel.

What are the buying motives of different members of such a buying center?

Initiators would want to satisfy the need that is lacking in the organisation, hence try to push the deciders to purchase it. Users might want to push for high sales in the event, hence they will look at quality of delivery of the event. Buyers may want to complete and finalise the transaction in the shortest time. Influencer might want to exercise their position or present their findings of analysis to the users/deciders/buyers to influence their decision to make the purchase. Deciders may be motivated to promote their products to the market to spread their brand awareness and attract more consumers. They would want to buy the service at the lowest cost possible. Gatekeepers on the other hand may strive to make sure information is kept within the buying center. Their challenge is to prevent any information leak.

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