Page 97 - DMGT408DMGT203_Marketing Management

Marketing Management/Essentials of Marketing

Notes organisation while the negative experiences with supplier organisations lead to the kind of
learning that precipitates avoidance behaviour and leads to discarding of non-effective processes
and procedures.
Emotions and motives tend to be less important in organisational purchase decisions. We must,
however, appreciate that psychological needs and emotions of humans influence these purchase
decisions and this fact cannot be overlooked or underestimated. Those involved in organisational
purchase decision-making often perceive considerable risk to their careers and experience self-
doubt or dissonance. Such personal concerns are likely to influence purchase decisions in
organisations.

4.4.4 Types of Decision Situations

The purchase decision process in organisations is significantly influenced by the complexity and
difficulty of a given purchase situation. At one extreme, individuals or small groups make
routine decisions without much effort because they are perceived as less complex and involve
very little or no risk. At the other extreme end of the continuum are organisational decisions
that are viewed as complex, entail much risk and have important implications for the organisation.
The purchase decision continuum for final consumers includes nominal decision-making, limited
decision-making and extended decision-making. The situation is slightly different in case of
organisations as their purchases involve a larger range of complexity as compared with most
individual or household decisions and involves three categories (Table 4.1).

Table 4.1: Categories of Organizational Buying Decisions
Buying Situation Level of effort Risk Buyers involved
Straight re-buy Nominal decision-making Low Automatic reorder
Modified re-buy Limited decision-making Low to moderate One or a few
New task Extended decision-making High Many

1. Straight Re-buy: It is like making habitual purchase and involves an automatic choice, as
happens when the inventory level reaches a predetermined reorder point. Most
organisations maintain an approved vendor list. These are rather routine purchases to
meet continuing and recurring requirements and are usually under similar terms and
conditions of purchase. The purchases are of minor importance, involving little uncertainty
because satisfaction exists with past products, terms and service.

Example: The buyer is likely to have limited purchase power such as purchase of paper
for printers and photocopiers.
2. Modified Re-buy: These are somewhat important and involve limited decision-making.
There is moderate level of uncertainty as the organisation wants to repurchase a product
or service but with some minor modifications. There might be limited or many choices.

Example: An ice cream producer might seek lower prices, faster delivery and higher
quality of cream from suppliers to meet the changing market conditions.

In case of a modified re-buy, situation competing suppliers may see an opportunity to
obtain the company’s business and regular suppliers might become more aggressive and
competitive to keep a customer’s business. P. Doyle, A. G. Woodside and P. Michell are of
the opinion that new tasks and modified re-buy are rather similar but straight re-buys are
quite different.

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