Lesson Note

Subject: Marketing

Topic: Types of market

Lesson Objective: by the end of the lesson, the learners should be able to:

  1. Explain organisational buying behaviour;
  2. State the characteristics of organisational buyers;
  3. List and explain the various factors affecting organisational buying behaviour.

Lesson Summary/Discussion


Organization buying is the decision- making process by which formal
organizations establish the need for
purchased products and services and
identify, evaluate, and choose among
alternative brands and suppliers.
Some of the characteristics of
organizational buyers are:

  • Consumer market is a huge market in millions of consumers where organizational buyers are limited in number for most of the products.
  • The purchases are in large quantities.
  • Close relationships and service are required.
  • Demand is derived from the production and sales of buyers.
  • Demand fluctuations are high as purchases from business buyers magnify fluctuation in demand for their products.
  • The organizational buyers are trained professionals in purchasing.
  • Several persons in organization influence purchase.
  • Lot of buying occurs in direct dealing with manufacturer.


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 is not limited to these; there are many more important ones such as:

External Environmental

As a major constraint under
which a business operates, the external environment impacts nearly every aspect of a business, including its buying decisions. Here is a list of the external elements that affect
organizational buying.

a) 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.

b). 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.

c. 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.

d. 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.

e. 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
it they get to enjoy a competitive
edge because of their suppliers, it is
very likely for the organization to
change its trends too and thus its
buying pattern will change accordingly.

2. Internal Organizational Factors:
More than the external factors, it is the internal organizational factors that influence organizational buying. These internal factors are the:

a. Organization’s Goals and Objectives: The goals and objectives of an organization are major determinants of 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.

(b) 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 and by which management
level. The internal setup and how
authority and responsibility flow
through it, play an important role in
the organizational purchasing.

(c). Policies and Procedures: How thepurchase 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.

(d) Technological Levels: Whenever
new purchases are made made
organizations take into consideration their 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.

3. 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 play a vital role in this type of buying.

(a) 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.

(b) 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.

(c) 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

(d) 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 suppners. 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.

(e) Individual Factors: Individual factors such as age, cultural background and social status, of the members on the buying team, also influence the buying decisions.

See previous lessons in Marketing

Lesson Evaluation/Test

  1. What is organisational buying behaviour?
  2. What are the characteristics of organisational buying behaviour?
  3. List and explain the various factors affecting organisational buying behaviour.

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