2. 2. Institutional Customers:
-Institutional customers consist of individuals or groups who purchase a
specific kind of product for three purposes:-resale, direct use in producing
other product, or use in general daily operations.
-In other words, customers who purchase goods for sales to final consumers
for orgnizational utilization, or for processing purposes are known as
institutional customers.
-The institutional customers are also known as organizational customers or
buyers. So they do organizational buying.
-Organizational buying refers to the buying behavior of organizations that
they purchase the products for re-production, re-sale and institutional
usage, such as educational organization, government, producers,
wholesalers, retailers and private organizations.
-Prodcucers buy primary goods and capital goods for producing various kinds
of commodities. Wholesale firm buy from manufacturers or producers for
sale to retail outlets. Government deparment and agencies make purchases
for official use. Non-government organizations also make purchases for
their own use. They are all institutional customers.
3. Features/ Characteristics of Institutional
Customers:
There are various characteristics of institutional buyers.
Principal characteristics are the following:
Numbers of buyers:
Few buyers purchase high volume of quantity in
geographically concerntrated area.
Demand:
The demand is derived from the demand of consumer
products. In this way, it has derived demand. The total
demand is inelastic. It is not affected by the changes in
price. But there is change in price of organizational product,
it directly affect the consumer product price and national
economy.
Relationship:
The relationship between supplier and organizational
customer is close. Due to few numbers of customers they
can develop good relationship for future.
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Rationality:
Buyers are well informed about competitors, price,
quality, quantity, buying criteria and services.
Professionalism:
Purchase policy and documentations process is
necessary to the organizational buying. Professional
and trained people are involved in purchase decision
and purchase process.
Channel:
The channel structure of the organizational buying may
be direct from manufacturer to users and sometimes it
may be manufacturers to sales agent to users.
Buying influences:
Organizational buying decision involved in different
parties at the buying process. Different participants and
decision maker influence to the buying decision.
5. Buying Process of
Institutional/Organizational Customers:
There are seven steps in the institutional or
organizational buying process. Organizational
buying process varies on the nature of organization
volume and aomout of the purchase. The most
commonly used buying process are:
Step 1: Need/Problem Identification
Step2: Determining product specification
Step3: Identification of suppliers
Step 4: Inviting proposals
Step 5: Evaluation of proposals
Step 6: Purchase decision
Step 7: Performance Evaluation
6. 1. Need/Problem Identification:
Institutional buying starts with the identification of
a need or a problem in the organization. The need
may result when the inventory level decreases,new
product are being introduced, existing products are
being modified, or the organization is planning the
introduction of a new technology. The buying
group decides on the specific details of the nature
of the need, product requirements and quality
levels and so on.
7. 2. Determining product specifications:
The buyers determine the need item’s
characteristics such as the product quantity, quality,
price, method of payment, mode of payment,
delivery date, place, design of the product etc.
3. Identification of Suppliers:
One the need is identified and product
specifications are determined, the buying group
identifies the potential sources of the supply of
products and potential suppliers. In case of
regularly purchased supplies institutions buy from
the established suppliers. In this step, the buyer
tries to identify pre-qualification of suppliers.
8. 4. Inviting proposals:
The fourth step in the institutional buying process is to
invite poposals from reliable suppliers. Business
organizations directly contact the possible suppliers
and ask for simple but detailed proposals, while
governement and social institutions invite formal bids.
The proposals and bids contain information on price,
quantity,quality, delivery schedule and other terms and
conditions of sale.
5. Evaluation of proposal:
The buying group evaluates all the proposals received
from the suppliers on their true merits. The buying
group uses reputation of the supplier, past experience,
size of operation, finanical and technical capablilities to
arrive at a decision regarding the selection of the
supplier.
9. 6. Purchase decision:
After selecting supplies, they make purchase decision.
While making purchase decision, the buyers should be
clear or they take specific details about the terms of
sales, credit arrangement, technical and additional
services.
The purchase decision is taken only after long and
serious negotiation over the terms and condition of
sale. Institutions may place an order for one time supply
and enter into a contract for regular supply.
7. Performance evaluation:
The performance evaluation process takes three types
of action. These actions are: to continue to the current
supplier, modify and end the relationship with the
supplier. The buyer may rate the supplier on several
criteria to increase the firm performance. The buying
steps involved in a way task buying situation, in modigy
re-buy process and straight re-buy condition, some
steps can be compressed or by passed.
10. Factors afefcting of Institutional Buying
decisions :
Organizational buying decisions are influence by several
factors. It helps to identify and implement new strategy to
the marketer.
1. Environmental Factors:
-Economic
-Technological
-Political and Legal
-Social Resposibility
2. Organizational Factors:
-Buying obectives
-Buying Policies
-Buying Procedures
-Organizational structure
12. 1. Environmental Factors
Environmental factors includes economic factors, technological
fator, political legal factors and social responsibility factors:
a. Economic factors:
The economic condition of the country determined several factors
such as level of demand, production facility, consumption pattern,
investment, economic health, competition and saving. The
economic condition determines the consumer purchasing power.
The demand of organizational products are directly related to the
demand of the consumer products. Therefore, change in the
economic condition of a country affect the total demand of
buyers, production facility to the manufacturers, consumption
pattern to the people, investment capacity to the investors and
competition power to the manufacturers for organizational
product.
b. Technological factors:
The level of technology, pace of technological changes and
innovation capacity directly affect the organizational buying
decision. Technological changes affects the production process,
packaging, communication and transportation. Fast growing new
technology creates a revolution in purchasing and selling pattern ,
information search, and material management.
13. 1. Environmental Factors
c. Political factor:
The political stability and favorable climate affects the
organizational buying. The favorable political climate creates
investment and production opportunity, increase in business
transactions and increases demand of the products and services.
d. Legal factors:
The organizational buying is also influenced by the regulatory
provisions imposed by the governement. Governement rules and
regulations directly affects.
e. Social responsibility factors:
The investor’s benefit increases socially accepted goods and
services. The environmental pollution issues, consumer health
issues child labor issues, social responsibility issues influences the
product production. These are the serious rising issues in the
business field. These factors influence the organizational buying.
14. 2. Organizational Factors:
Organizational factors such as the buying objectives,
policies, procedures and organization structure have major
influences on the organization buying.
a. Buying objective:
Different organization have different buying objectives. Every
organization sets its buying objectives. The buying objectives
should match the organizational objectives. If organization
has followed a quality leadership objective. The buying
actions should be directed by quality oriented as well as their
purchase decision of raw materials should be qualitative not
cheaper.
b. Buying Policies:
The organizational policies provide guidelines for buying
decisions. If the raw materials purchasing policy is to buy
from national supplier, they must follow it. Similarly, if the
producers want to implement Nepalese technology, they
should be aware to implement about this policy.
15. 2. Organizational Factors:
c. Buying procedures:
The buying procedure represents buying
documentation. The organizational buying varies in
different organizational market. In the orgnizational
buying various documentation process and procedures is
required for purchasing and they must follow it.
Government requires sealed bid and tender for every
large purchase.
d. Organizational structure:
Structure of the orgnization also affects to the
organizational buying decision. The organizational
buying should depend on the boudary of authority,
responsibility and relationship.
16. 3. Interpersonal Factors
The organizational buying decision involves in the individual
personnel or staffs with different interest, status, authority and
persuasiveness. These interpersonal factors affect the
organizational buying decision.
a. Authority:- Organizational buying is based on authority. The
organization has a different members and it has a long hierarchy
of authority. The organizational buying is influenced by the
authorized people, who have athority of final decision.
b. Interest:- Organizational buying process involves in different
participants they are, initiator, users, influencer, deciders,
approvers, buyers and gatekeepeers. All these participants have
their own interesst on buying process. They influence buying
decision.
c. Status:- The status determine the job position and role
performed in the organization. The buyer’s status influences
producer and supplier selection process.
d. Persuasiveness:- Persuasiveness is the power and experience of
the buyers who can decide own capabiity. It includes experience,
technical capacity, and product and supplier selection capacity of
individual or group of buyers. It affects the buying decision.
17. 4. Personal factors:
The buyers’ personal motivation, perception and preferences differ in different
people, which are influence by the buyer’s age, income education, job position
and personality.
Age: At the buying process young people want new branded product and they
want building new relationship with the different suppliers. An old person
wants to continue exsisting product and they want to establish good
relationship with suppliers. Age factor affect the perception of buyers.
Income : An Income level of buyers affects the buying decision. Personal
motivation and interest becomes buying decisions on the base of income.
Organizational buying depends on people ‘s interest.
Education:
In organizatinal buying rational and educational buyers carefully search and
evaluate different products and suppliers. They use different important
information and compare brand, quality,competitors and delevery system while
buying process. The buyer’s eduational level represents on the buying decision
process.
Job Position: . A job position represents the hierarchy of the organization.
Hierarchy is based on the authority and decision power. The authority and
power level of the buyer’s influence on the process of buying decision.
Personality: .
The personality factors differ from buyers to buyers. It is an internal
structure, traits, appearance and confidence which help to influence buying
responses. Buyer’s personality represents on selection of brand, quality,
purchase behavior and traits with the product and sellers.
18. Thank you !
Hope to see you as an
Enthusiastic, Motivated and
Successful Professional
Manageer and Leader of the
organization!
