Howard Sheth Model

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A Presentation on- Organizational Buying Behavior and Howard Sheth Model

Transcript of Howard Sheth Model

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A Presentation on- Organizational Buying Behavior and Howard Sheth Model

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Organizational Buying Behavior. The organizational buying behavior process

is well documented with many models depicting the various phases, the members involved, and the decisions made in each phase. The basic five phase model can be extended to eight; purchase initiation; evaluations criteria formation; information search; supplier definition for RFQ; evaluation of quotations; negotiations; suppliers choice; and choice implementation.

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DIFFERENCE BETWEEN ORGANIZATIONAL BUYING AND CONSUMER BUYING ORGANIZATIONAL CONSUMER PURCHASE FOR-1. Further production2. Usage in operating the organization3. Resale to other consumers

• FINAL CONSUMER PURCHASE FOR-1) Personal2) Family3) Household use

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TYPES OF ORGANIZATIONAL PURCHASES STRAIGHT REBUYRoutine purchaseAssociated with frequently purchased items

• MODIFIED REBUYRoutine PurchaseFrequent Purchase, but buyer does review

product specifications or suppliers

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NEW TASK

Not Routine Product needs and specifications researched

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BUYING CENTERThere are often multiple decision makers in

organizational purchases. For exampleUsersInfluencersDecidersBuyersGatekeepers

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Risk and uncertainty - This is concerned with the role of risk or

uncertainty on buying behavior. The level of risk depends upon the characteristics of the buying situation faced. The supplier can influence the degree of perceived uncertainty by the buyer and cause certain desired behavioral reactions by the use of information and the implementation of certain actions. The risks perceived by the customer can result from a combination of the characteristics of various factors: the transaction involved, the relationship with the supplier, and his position vis-a-vis the supply market.

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Factors influencing organizational buying behavior.Three key factors are shown to influence

organizational buying behavior these are,

Types of buying situations Situational factors, geographical and Cultural factors and time factors.

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EXPLANATION OF THE MODELEXPECTATIONExpectation refer to perceived potential of

alternative suppliers and brands to satisfy a number of explicit and implicit objectives in any particular buying decision.

EXPECTATIONS-Purchasing AgentsEngineersUsersOthers

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Background of individuals: The first and probably most significant factor is the backgrounds and task orientation of each individuals involved in the buying process.

They can be classified under following head: Specialized education Role Orientation Life Style

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Information Sources and active search- Type of information each of the decision maker is exposed to and his participation in active search

Various sources of Information searchSalesmanExhibitions and tradeshowsDirect mailsPress releasesJournal advertising

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Perceptual distortion: Each individual strikes to make the objective information consistent with his own prior knowledge and expectations by systematically distorting it, for example; since there is substantial difference in the goals and values of purchasing agents, engineers and production personnel, one should expect different interpretations of the same information among them.

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Satisfaction with past purchase: The factor which creates differential expectation among the various individuals involved in purchasing process is the satisfaction with buying experiences with the supplier or brand. Often it is not possible for a supplier or a brand to provide equal satisfaction to the three parties.

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Industrial buying process

Product Specific Factors: The first product specific variable is what “Bauer” calls perceived risk in buying decision.

Company Specific Factors: There are three organization specific factors they are as follows

Company Orientation Company Size Degree of Centralization

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Product Specific Factors Time PressurePerceive RiskType of purchase

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Decision Making

Joint Decisions-The major thrust of the present model of industrial buying decisions is to investigate the process of joint decision making. This includes

Initiation of decision to buy Gathering of information Evaluating alternative of suppliers Resolving conflict among partiesAutonomous Decisions: It is always not necessary

that there will be always joint decision making sometimes it can be autonomous. Here it is important to know, which party is delegated for decision

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CONFLICT RESOLUTIONProblem Solving: Here the particular supplier

should go for availability of more information, because buyers tend to go for more active search. It gives your company a upper hand than your competitors.

Persuasion: If the conflict among the parties is primarily due to disagreement on some specific criteria with which to evaluate suppliers- although there is an agreement on the buying goals or objectives at a more fundamental level, it is likely to be resolved by persuasion

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Bargaining: In some typical situation specially purchasing related to capital expenditure items, the conflict is resolved by method of bargaining. The fundamental differences among the parties are implicitly conceded by all members and concept of distributive justice is followed. Generally single party decision is dominant.

Politicking: Disagreement may arise due to style of decision making, the conflict tends to be grave and borders on the mutual dislike of personalities among individual decision makers. The conflict is solved by politicking.

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SITUATIONAL FACTORSIndustrial buyer similar to consumer behavior

decides on factors other than rational or realistic criteria. They can be

Price ControlsRecessionForeign TradeInternal StrikesWalk OutsMachine Break down

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