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Who are organizational buyers?

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Organizational Buyers

A large portion of the market for goods and services is attributable to organizational, as opposed to individual, buyers.  In general, organizational buyers, who make buying decisions for their companies for a living, tend to be somewhat more sophisticated than ordinary consumers.  However, these organizational buyers are also often more risk averse.  There is a risk in going with a new, possibly better (lower price or higher quality) supplier whose product is unproven and may turn out to be problematic.  Often the fear of running this risk is greater than the potential rewards for getting a better deal.  In the old days, it used to be said that “You can’t get fired for buying IBM.” This attitude is beginning to soften a bit today as firms face increasing pressures to cut costs.   

Organizational buyers come in several forms.  Resellers involve either wholesalers or retailers that buy from one organization and resell to some other entity.  For example, large grocery chains sometimes buy products directly from the manufacturer and resell them to end-consumers.  Wholesalers may sell to retailers who in turn sell to consumers.  Producers also buy products from sub-manufacturers to create a finished product.  For example, rather than manufacturing the parts themselves, computer manufacturers often buy hard drives, motherboards, cases, monitors, keyboards, and other components from manufacturers and put them together to create a finished product.  Governments buy a great deal of things.  For example, the military needs an incredible amount of supplies to feed and equip troops.  Finally, large institutions buy products in huge quantities.  For example, UCR probably buys thousands of reams of paper every month.

Organizational buying usually involves more people than individual buying.  Often, many people are involved in making decisions as to (a) whether to buy, (b) what to buy, (c) at what quantity, and (d) from whom.  An engineer may make a specification as to what is needed, which may be approved by a  manager, with the final purchase being made by a purchase specialist who spends all his or her time finding the best deal on the goods that the organization needs.  Often, such long purchase processes can cause long delays.  In the government, rules are often especially stringent—e.g., vendors of fruit cake have to meet fourteen pages of specifications put out by the General Services Administration.  In many cases, government buyers are also heavily bound to go with the lowest price.  Even if it is obvious that a higher priced vendor will offer a superior product, it may be difficult to accept that bid.

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