Note on Factors affecting Institutional Buyers Decision

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Factors affecting institutional buying decision are as follows:

  • Environmental factors
  • Organizational factors
  • Interpersonal factors
  • Personal factors

Environmental factors

The institutional factors of buying decisions are directly or indirectly affected by the environmental factors. This includes economic, technological, political and legal social responsibilities etc.

  1. Economic Factors:
    It includes the level of demand, economic condition, competition, change in technology, trade cycle, etc. The change in the general economic conditions of a market affects the demand for organizational products which is related to the demand for consumer products. So, any change in the economic condition of a country affecting consumer demand is likely to influence the demand for organizational products.

  2. Technological factors:
    Technological factors such as the development of e-commerce, development of information, development of the internet have brought changes in institutional buying and inventory management, production process, distribution management, etc.

  3. Political and legal factors:
    Institutions may be affected by political and legal factors. Every organization has to operate their activities according to the rules and regulation of the nation so while buying goods and services organization should study about the political system, political situation, political ideology, government policies etc.

  4. Social responsibilities:
    Social responsibility also affects the organizational buying behavior . Institutions have to consider the things like protect the environment and meet community needs. While buying goods and services, the organization has to consider about the social well-being.

Organizational Factors

Organizational factors also affect the institutional buying behavior. This includes the buying objective, policies, process, and organization have major influences on the organizational buying.

  1. Buying objective:
    The different organization has different buying objectives. Some organizations give priority to the low price than high quality and some organization gives priority to the high quality than the low price.

  2. Buying policies:
    Some organizations have adopted centralized purchase policy and other organizations have adopted decentralized purchase policy. Organization"s buying policies favoring reciprocity principle will narrow down the range of suppliers.

  3. Buying process:
    Buying process in the organizational market varies across organizations. The government market requires sealed bids and tenders for every large purchase. Most business buying is based on past relationships with the suppliers.

  4. Buying organizations:
    Due to centralized buying and decentralized buying systems, the organizational buying can differ to a large extent .If large purchase committees are involved then the buying will become complex.

Source: blog.marksweep.com

Source: blog.marksweep.com

Interpersonal factors

Different people are involved in the organizational buying process. They affect the buying process as the different persons are involved in the buying process. An interpersonal factor includes authority, interest, and status.

  1. Authority:
    The staffs of the organization have different authority. Due to style and process of using authority by the staff involved in the organization, it affects the buying process and makes easy, quick or slow and complicated.

  2. Interest:
    There are differences between the interest of the people involved in the organizational buying process .The production manager may be interested in quality and consistency of the supply of the production input while the finance manager may be interested in lower price.

  3. Status:
    The buying group may be represented by personnel working at different levels of organizational hierarchy. The person who gives order and the person who purchases goods may not be same in the organization. Due to this, the selection of goods and services can be affected.

Personal factors

An individual factor such as age, education, job position, risk-taking, and personality also affect the organizational buying behavior.

  1. Age:
    Age of an individual directly affects organization's buying. Young buyers tend to favor building a relationship with new suppliers whereas older buyers tend to maintain a relationship with established suppliers.

  2. Education:
    The educated buyer is able to evaluate the existing options and give continuity to the buying. But the uneducated buyer is not able to select the supplier carefully. Therefore, the education of buyer also affects the organizational buying.

  3. Job position:
    The position of the individual in the organizational hierarchy determines to what extent the individual is likely to influence the selection of suppliers. Buyers involved in the purchase may have a high-level or low-level position.

  4. Risk-taking:
    Every person has different risk attitudes. In this case, low-risk takers tend to favor doing business with established suppliers while high-risk takers constantly search new sources supply.

  5. Personality:
    The personality of the buyers determines the level of influence in buying decisions. The one having tough personality are expected to change their brand according to the time. And some of the buyers have much brand loyalty.

References:

Koirala, Dr. Kundan Dutta. Elementary Marketing. Kathmandu: Buddha Academic Publishers and Distributors Pvt. Ltd, 2014.

Thapa, Gopal, Dipendra K. Neupane and Dilli Raj Mishra. Introduction to Marketing. Kathmandu: Asmita Books Publishers and Distributors (P) Ltd., 2014.

  1. Environmental factors include economic, technological, political , legal , social responsibilities etc. 
  2. Organizational factors include the buying objective, policies, process, and organization have major influences on the organizational buying.
  3. An interpersonal factor includes authority, interest, and status.
  4. An individual factor includes age, education, job position, risk-taking, and personality .
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