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Buying center

From Wikipedia, the free encyclopedia

A buying center, also called a decision-making unit (DMU),[1] brings together "all those members of an organization who become involved in the buying process for a particular product or service".[2]

The concept of a DMU was developed in 1967 by Robinson, Farris and Wind (1967).[3] A DMU consists of all the people of an organization who are involved in the buying decision.[4] The decision to purchase involves those with purchasing and financial expertise and those with technical expertise, and (in some cases) an organization's top management.[5] McDonald, Rogers and Woodburn (2000) state that identifying and influencing all the people involved in the buying decision is a prerequisite in the process of sales.[4]

Modelling buying centers

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The concept of a buying center (as a focus of business-to-business marketing, and as a core factor in creating customer value and influence in organisational efficiency and effectiveness) formulates the understanding of purchasing decision-making in complex environments.

Some of the key factors influencing a buying center or DMU's activities include:

  • Buy class or situation. The "Buygrid" model developed by Robinson et al. in 1967 classified "buy classes" as "straight rebuy", "modified rebuy" or "new task",[6] also referred to as "new task buying".[7] Michelle Bunn extended this range to six basic buying situations in a 1993 article:[8]
    • Casual purchasing involving no search or analysis
    • Routine low priority purchasing or rebuying
    • Simple modified rebuys where selection options are limited
    • Judgemental new purchasing tasks, e.g. for a special type of equipment
    • Complex modified rebuys requiring more structured processes for establishing and evaluating options, such as through a competitive tendering process
    • Strategic new tasks establishing long-term business partnerships and purchasing plans.
  • Product type (e.g. materials, components, plant and equipment, or maintenance, repair and operations (MRO)
  • Importance of the purchase.[9]

In some cases the buying center is an informal ad hoc group, but in other cases, it is a formally sanctioned group with a specific mandate. American research undertaken by McWilliams in 1992 found out that the mean size of a buying center mainly consisted of four people.[10] The range in this research was between three and five people. The type of purchase that has to be done and the stage of the buying process influence the size. More recent research found that the structure, including the size, of buying centers depends on the organizational structure, with centralization and formalization driving the development of large buying centers.[11]

Decision-making process

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When the DMU wants to purchase a certain product or service the following steps are taken inside the buying center:

  • Need or problem recognition: the recognition can start for two reasons. The first reason can be to solve a specific problem of the company. The other reason can be to improve a company's current operations/performance or to pursue new market opportunities.
  • Determining product specification: the specification includes the characteristics and functionality which the product/service that is going to be purchased must contain.
  • Supplier and product search: this process contains the search for suppliers that can meet a company's product or service needs. First a supplier that matches with the specifications of the company has to be found. The second condition is that the supplier can satisfy the organization's financial and supply requirements.
  • Evaluation of proposals and selection of suppliers: the different possible suppliers will be evaluated by the different departments of the company.
  • Selection of order routine: this stadium starts after the selection of the supplier. It mainly consists of negotiating and agreeing with the supplier about certain details.
  • Performance feedback and evaluation: performance and quality of the purchased goods will be evaluated.

In this process of making decisions different roles can be given to certain members of the center of the unit depending on the importance of the part of the organization.

Robinson et al.'s "Buygrid Framework" saw new task activities, dealing with a problem which has not arisen before, as more complex than the other buy classes, and closer to achieving a general solution applicable in future rebuy activities.[3] McQuiston in 1989 noted mixed empirical findings regarding the framework: "some studies have shown that participation and influence do vary according to the buygrid framework ... but other studies have shown that they do not".[12] Co-author Yoram Wind, looking back at the Buygrid Model 25 years after its publication, held that the model had provided "a very useful framework" whose "underlying dimensions [were] valid", but "its generalizability under a variety of market situations [was] not yet completely understood".[13]

Issues in buying center research

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There are several conceptual and methodological issues concerning buying centers which in 1986 were thought to need additional research.[14] These issues can be divided into:

Buying center boundaries and buying center domain

Distinguishing internal buying center processes from the influence of external environmental factors, also defining and delimiting the activities of a particular buying center. Webster and Wind (1972) list a number of environmental factors including physical, economic, legal and cultural aspects of the external environment, and identify physical, technological, economic and cultural aspects with "the [internal] organisational climate".[15] Johnston and Bonoma used interaction theory in a 1981 paper to help analyse the distinction between internal and external factors.[5]

Buying center structure

Understanding how organizational structures may differ from or may shape the structure of the buying center, and examining how a particular buying strategy may serve to mediate the effects of environmental uncertainty on the structure of the buying center.

Process considerations in buying center

Power and conflict issues within the buying center.

Decision making

One stream of research focuses on the number of decision phases and their timing and the other emphasizes the type of decision-making model (or choice routine) utilized.

Communications flow

The informal interactions that emerge during the buying process.

Application to small and medium-sized businesses

Andrews and Rogers noted in 2005 that very little academic discussion had taken place regarding buyer behaviour within small and medium-sized enterprises (SMEs).[16] Thompson and Panayiotopoulos suggest that some purchasing decisions in SMEs, especially in a rebuy context, are made by one person and therefore not really a "group" activity, although in a new-buy situation, "the influence of other people may be greater".[17]

See also

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  • Procurement - formalised organizational procedures for purchasing

References

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  1. ^ Havaldar, Krishna K. (2005). "Buying centre (or decision making unit)". Industrial marketing: text and cases (2nd ed.). New Delhi: Tata McGraw-Hill Education. p. 43. ISBN 9780070588400. OCLC 60574619. The buying center is sometimes referred to as the decision making unit (DMU) or buying group. The buying center or decision making unit is a useful tool which answers the question—Who are involved in buying decision in an industrial organization? It is defined as a body of all the individuals or groups participating in the buying decision process and who have interdependent objectives and share common risks.
  2. ^ Robinson, P. J., C. W. Farris, and Y. Wind (1967), Industrial Buying and Creative Marketing, Boston, MA: Allyn and Bacon, quoted in Wesley J. Johnston and Thomas V. Bonoma, The Buying Center: Structure and Interaction Patterns in Journal of Marketing, Vol. 45, No. 3 (Summer, 1981), pp. 143-156, accessed on 5 October 2024
  3. ^ a b Robinson, P.; Faris, Y.; Wind, C. W. (1967). Industrial buying and creative marketing. United States: Allyn & Bacon. ASIN B0006BRX3A.
  4. ^ a b McDonald, M.; Rogers, B.; Woodburn, D. (2000). Key customers: How to Manage them Profitably. Oxford: Butterworth-Heinemann.
  5. ^ a b Wesley J. Johnston and Thomas V. Bonoma, The Buying Center: Structure and Interaction Patterns, in Journal of Marketing, Vol. 45, No. 3 (Summer, 1981), pp. 143-156, accessed on 5 October 2024
  6. ^ Monash University, Buy classes, accessed 11 May 2023
  7. ^ Roy, S. and Sivakumar, K., The role of information technology adoption in the globalization of business buying behavior: a conceptual model and research propositions, Journal of Business and Industrial Marketing, 22/4, 2007, p. 223, accessed 18 August 2023
  8. ^ Bunn, Michele D. (January 1993). "Taxonomy of Buying Decision Approaches". Journal of Marketing. 57 (1). American Marketing Association: 38–56. doi:10.2307/1252056. JSTOR 1252056.
  9. ^ Jobber, David; Ellis-Chadwick, Fiona (2013). "5". Principles and Practices of Marketing (7th ed.). Maidenhead, UK: McGraw-Hill Higher Education. pp. 162–165. ISBN 9780077140007.
  10. ^ McWilliams, Robert D.; Naumann, Earl; Scott, Stan (1992). "Determining buying center size". Industrial Marketing Management. 21 (1): 43–49. doi:10.1016/0019-8501(92)90032-O. ISSN 0019-8501.
  11. ^ Wood, John "Andy" (October 2005). "Organizational configuration as an antecedent to buying centers' size and structure". Journal of Business & Industrial Marketing. 20 (6): 263–275. doi:10.1108/08858620510618101.
  12. ^ McQuiston, D. H., Novelty, Complexity, and Importance as Causal Determinants of Industrial Buyer Behavior, Journal of Marketing, Vol. 53, April 1989, p. 66, accessed on 20 August 2024
  13. ^ Wind, Y. and Thomas, R. J., The BuyGrid Model: 25 Years Later, published April 1996, accessed 13 September 2023
  14. ^ Spekman, Robert E.; Kjell, Gronhaug (July 1986). "Conceptual and methodological issues in buying centre research". European Journal of Marketing. 20 (7): 50–63. doi:10.1108/EUM0000000004656.
  15. ^ Frederick E. Webster, Jr. and Yoram Wind, "A General Model for Understanding Organizational Buying Behavior", The Journal of Marketing, Vol. 36, No. 2 (April 1972), p. 15, accessed on 15 October 2024
  16. ^ Andrews, T. and Rogers, B. (1967), Buyer behaviour in SMEs: Research sponsored by DocumentGENie, University of Portsmouth Working Paper Series, published on 13 September 2005
  17. ^ Thompson, K.E. and Panayiotopoulos, P. (1999), "Predicting behavioural intention in a small business context", Journal of Marketing Practice: Applied Marketing Science, Vol. 5 No. 3, pp. 89-96, doi:10.1108/EUM0000000004564, accessed on 21 August 2024
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