Page 92 - DMGT408DMGT203_Marketing Management

Unit 4: Business Markets and Business Buyer Behaviour

4.3 Purchase and Demand Patterns Notes

4.3.1 Decision Approach and Purchase Patterns

Organisational approach to making purchases and their buying patterns are different compared
to final consumers in many ways.
1. Formality: Since many organisational purchases are likely to be complex and technical and
financial risks are considerably high, buying behaviour is much more complicated as
compared to final consumers. Due to these reasons, there is greater formality in
decision-making and often proposals, quotation requests and purchase contracts are involved.
2. Negotiations: In most cases of organisational buying, there are extensive negotiations
between buyers and suppliers over a longer period of time. Some of the important reasons
for lengthy negotiations include (1) the product complexity requires that specifications
must be carefully spelled and agreed upon (2) the order size tends to be large and purchase
price is important and (3) usually many people are involved in reaching a final purchase
decision. According to Paul A. Dion and Peter M. Banting, negotiations tend to be a
cooperative process between buyers and suppliers.
3. Less Frequent Purchases: Organisations generally make purchases less frequently than do
final consumers. Firms might buy capital equipment that will be used directly in the
production process for a number of years. Similarly, computers, photocopying machines,
printers etc., are infrequently purchased. Even office supplies consumed everyday are
purchased at intervals of a month or more. Raw materials and component parts are used
continuously in production and replaced frequently but contracts for the sale and supply
of these items are likely to be long-term agreements that are negotiated every few years.

4. Reciprocity: Sometimes organisational buying transactions involve an arrangement in
which two organisations agree to buy from each other. For instance, a computer software
manufacturer might agree to buy computer hardware from a company that is buying its
software and computer supplies.
5. Service: In many instances, organisational products must be customised for a specific
organisational buyer. Product support activities, such as service, installation, technical
assistance and spare parts are critical.

4.3.2 Market Structure and Pattern of Demand

Business-to-business marketers should appreciate several distinguishing features related to
market structure and demand of organisational buyers.

Geographical Concentration

Compared to individual consumers, organisational buyers are generally more concentrated in
certain geographic locations.

Example: Most IT-related companies are located in the southern states of India. Similarly,
there is generally concentration of specific industries in different industrial areas specified by
almost all the states in India.

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