Individual buying differs from organizational buying in many ways, for instance, organizational buying is usually a business-to-business transaction while individual buying is a purchase made by a single person. Organizational buying is made for purposes of further production or resale while individual buying is primarily done by individual consumers to satisfy needs. Organizational buying and individual buying also differ in buying decision-making process, the purpose of buying and the factors influencing buying. Consumer buying behavior is the decision-making process to determine why, how, when and what products and services to buy while organizational buying behavior is a decision-making process used by organization to determine the need for the goods and services as well as identify and select among a group of brands and suppliers which is the best (Kotler & Armstrong 1993:93).
. Buying a product and service is a process that involves decision-making. Therefore the difference in individual and organizational buying is brought about by how they make decisions in the process of buying a product or service and the factors influencing their purchases. Consumers either individuals or groups make decisions before they make purchases. Examples of organizational buying are purchases made by manufacturers, wholesalers, retailers and government agencies: they either use them or resale them. If the product and services bought are for resale they are reprocessed before being sold to another buyer. Wholesalers and retailers normally do not reprocess but sell the physical product and services directly to the next buyer. Individual buyers mainly purchase goods for the satisfaction of their needs; the idea of resale does not arise.
The market characterization of organizational buying is basically that demand is mainly for industrial goods and services. The demand for industrial goods arises as a result of consumer demand, hence organizational purchase is sometimes triggered by individual purchases. Products and services are obtained directly from the point of manufacturing and direct from the firm offering the services. Organizational buying involves few customers but the amounts of purchases are typically high because they are made for further resale or large consumption. Individual buying involves many customers in one market who make few purchases. Individual buyers get products and services from an agent in a distribution channel rather than getting the product right from the source of manufacturing. In the case of purchasing a computer, the organizational buyer will order large volumes of different kinds of computers, unlike the ultimate individual buyer who will go for a single computer unit from a nearby shop. As I noted earlier organizational buying involves business-to-business buying then, organizational buyers will buy many computers with intention of reselling whiles, individual buyers will acquire one computer to help them run their daily activities such as typing minutes, letters and assignments in case of a student.
The product and services characteristic between organizational buying and individual buying is very different. Organization products and services are usually “technical in nature and are purchased on the basis of specification” ((Kotler & Armstrong 1993:43).
In this I mean, products for an organization are usually acquired to assist the organization in attaining its goals and objective, hence they are acquired depending on the requirement of their use in the organization. They require people with technical knowledge to work with them so as to achieve the intended goals. Their purchase arises due to arising needs in the organization and they are usually complex and designed for specific use in the organization. Organizations’ purchase is such that they increase profits by minimizing costs while an individual’s objective is to satisfy needs. Individual products are simple and their purchase may not be of major significance to the individual consumer. Hence a firm buying a computer will purchase large computers with high speed and memory because the purpose of the computer is complex and huge but individuals will acquire computers that are small simple and portable.
Organizational purchases need not be finished products, unlike individual purchases. Products may be in form of raw materials and spare parts. An organization makes purchases of raw materials and semi-processed goods which are further processed and sold to the next customer. Individual purchases are targeted at satisfying immediate needs hence are acquired at their final stage, that is, as finished goods. Computers are bought either as compact or their components one by one. An organization may be formed as an assembly industry for computers. Therefore it will be acquiring computer parts from different places, assembling them and selling them as finished computers to individual buyers. An individual buyer may not have the necessary skills to assemble computer parts into a computer hence he or she has no alternative other than buying fully assembled computers.
Products and services purchased by organizations as I stated are technical in nature and require some technical assistance and post-purchase services from the sellers. In addition, the organization puts more emphasis on the timely delivery of the purchased item, unlike individual buyers. Because organizational purchases are large they involve a lot of cash hence the firm may seek financial assistance from financial institutions such as banks. Individuals’ purchase does not necessarily require technical assistance, after-sale services and warranties may be guaranteed. Computers are expensive and require a huge sum of money to buy especially if one is buying many units. Organizations that deal with buying computers usually seek financial assistance from banks but individuals who buy a single unit may not get a loan to pursue a unit of a computer. Buying process decision-making between organizational buyers is different from the individual buyer. Organizations’ operations are complex and follow certain laid procedures and policies, unlike individuals who do not need to make consultations before acting.
Organizational buyers are professional buyers who follow certain laid purchasing procedures and policies. Buying of any product is done after intensive consultations and verifications by the buyers. The objectives and purses of acquiring such a product are first spelled out and the supplier of the product is selected through a laid down process. Usually, the process of selecting the seller of that goods and provider of services is done through a tendering process and competitive bids. The buying process is influenced by numerous decision-makers involved in the buying process and purchase decision-making. Organizational buying involves a series of negations between the buyer and seller or within the organization’s departments. Organizational buying is not done instantly but it involves lengthy discussion and negotiation between the parties involved.
Many products purchased by organizations may not be found within their country due to the country’s production capacity and ability. As a result organization imports such goods and product. International purchasing by organizations is made online hence there is widespread use of the internet. The purchasing central unit in an organization is usually referred to as buying center. Individuals in buying center unit share common goals, risks and have the necessary information on the purchase. The center consists of users of the purchased product and must have the skills to use it. Users of computers in an organization include software developers, computer engineers and computer users. Buyers in the unit have the authority to make the actual purchase after negotiations and agreements. Organizations’ buying may be in three forms namely straight re-buy, modified re-buy and new buy. Straight re-buy is where the repurchase of an existing product from the suppliers under contract is done. Modified re-buy is where the members of the buying center may want to change the product or services price, delivery model and supplier. Deciders approve the person to supply the required item. The individual buying process is not as complex as that of an organization. Individual buying involves mainly one person and the decision on either to buy or not is made individually.
Individual buyers may not follow any procedure in acquiring such a product unless the general procedure is established by the general public. He or she does not need to consult anybody before making any step of acquiring the product thus there is no influencing factor gearing individuals to buy or not to buy. Most individual buying is done locally and a lot of internet buying may not be used. Just an individual goes to the nearby mall and buys his product. In the computer buying process, the problem recognition between an organization and an individual is different.
An individual will feel that he or she does not like the computer he or she has already hence; he or she goes for a new computer. An organization will learn that its competitors are using a new and improved set of computers that are more reliable. As result, the organization will go ahead and buy such new and more efficient computers. In order to get information about the new set of computers, individuals will rely on adverts, information from friends and the internet. Organizations will establish an information-gathering center that collects information on the changes in the business environment. Then after all information is gathered the purchasing department searches and identifies a viable supplier of the new computers.
Individual’s selection of computers is based on the attributes of the computer as perceived by the individual buyer and in the process he or she moves from one mall to another in search of the best computers. The organization evaluates the supplier of the computer on basis of financial status, facilities and capacity to supply the necessary computers. If the supplier does not meet the required criteria he or she is dropped. The decision to buy a computer-primarily depends on the individual buyer’s decision. He or she selects a brand of computer pays the agreed price and leaves the mall with his computer. To the organization, the purchase decision to buy the computer will be negotiated and the right supplier awarded the contract to supply computers. The decision is based on the quality and price of that computer, the delivery mode and the technical capability of the supplier.
In case the computer bought is unreliable, individuals may return the computer to the store but an organization will evaluate the supplier using the set supply standards and make it known to the supplier the quality of the computer. If the supplier does not change the computer, the firm may fail to consider the supplier for future transactions. In some cases, organization buying is done directly from the seller rather than middlemen. Prices, quantities are negotiated and discounts are given. The buyer-seller relationship in organizational buying may encourage long-term partnership between the two parties. The relationship may also encourage reciprocal arrangements such that each organization becomes a buyer of and seller to the other organization. These arrangements might increase value and improve products delivered to the consumer. In individual buying prices are usually fixed and discounts are hardly allowed. Again, because an individual buyer may make purchases from different malls such one-to-one arrangements may not be encouraged.
A firm making computers may make arrangements with another organization such that, the latter makes packaging materials for the former and the former sells computers to the latter. Organizational buying is mainly influenced by the process of organization buying, reasons for buying and the role of the purchasing. Individuals may be influenced by adverts, friends, families and influencing groups, cultural and economic factors (Kotler & Armstrong 1993:113).
P. Kotler, G. Armstrong (1993) Marketing, An Introduction, Prentice-Hall. p 45- 167 (Kotler & Armstrong 1993).