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A buying center, also called decision-making unit (DMU), brings together "all those members of an organization who become involved in the buying process for a particular product or service". The concept of a buying center (as a focus of business-to-business marketing, and as a core fundamental 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 (e.g. straight rebuy, new task or modified rebuy)
- Product type (e.g. materials, components, plant and equipment and MRO (maintenance, repair and operation))
- Importance of the purchase
Types of buying decisions
Four main buying decisions can be distinguished in the area of organisational buyers: Straight rebuy, Modified rebuy, New-task buying and Systems buying.
This is a routine, low involvement purchase. Minimal information is needed and consideration of alternatives is not needed. This type of purchase is handled by the purchase department and is usually purchased from a list of approved suppliers. Examples of straight rebuy are repeat purchases of office supplies, and small components.
This type of purchase is similar to a straight rebuy with more information and people involved. The buyer may want to reconsider suppliers, prices, terms, or modify product specifications.
New-task buying is deemed the most complex buying situation because it is a first-time purchase of a major product. Several people are involved in the decision because there can be high amounts of money and risk. Much information is gathered and evaluations of alternatives are explored. It is also complex as the decision makers have little experience with the product before the purchase can be made. The buying center has the challenge of finding out all the organisation's needs and communicating the product's ability of meeting the needs.
This type of buying is purchasing a packaged solution to a problem from a single supplier. This originates from governments buying packages such a major communications systems. Instead of buying separate components, buyers look for suppliers who supply the components and assemble the package for them.
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 peculiarities 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 organizations 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.
The different roles are:
- Initiator: the initiator(s) make a request to purchase a product or service or recognizes the problem, with this action they start the decision-making process. e.g. maintenance manager
- Decider: the decider makes the actual purchase decision. Typically, deciders do not have or need formal authority but have sufficient weight within the buying team to decide if a service/product will be purchased.
- Buyer: the buyer (also called: purchasing manager) selects the suppliers and manages the buying process such that the necessary products are acquired.
- Influencer: the influencer contributes to the formulation and determination of the specifications of the product or service. The influencer evaluates and recommends which potential supplier satisfies the specific needs of the organization.
- User: the user(s) are the persons that actually use the product or service. Users are not always involved in the buying process, but have a critical role in the feedback and evaluation process of the performance of the good that has been purchased.
- Gatekeeper: the gatekeeper(s) control(s) the flow of information in to and out of the company and buying center/team.*
In some cases the buying center is an informal ad hoc group, but in other cases, it is a formally sanctioned group with specific mandates, criteria, and procedures.
The formation of the buying centers or decision-making unit (DMU) is considered as an important process and therefore depends on several factors like: the size of the company and skills of the personalities and staff members, the type of product/service that is needed, the type of the organization, the different buying process stages (BPS), the duration of the relationships between the buyer (the organization) and sellers or suppliers, and the technologies that are used in the production.
Buying center size
American research undertaken by McWilliams in 1992 found out that the mean size of these buying centers mainly consists of four people. 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.
Conceptual and methodological issues in buying center research
There are several issues concerning buying centers which need additional research. These issues can be divided into various spheres:
- Buying center boundaries and buying center domain
- Distinguishing the buying center from its environment, also defining and delimiting the activities of a particular buying center.
- Buying center structure
- Understanding how organizational structure 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.
- 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.
- 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 6 December 2015
- 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.
- Kotler, Philip; Armstrong, Gary (2015). Principles of Marketing (6th ed.). Melbourne, Victoria, Australia: Pearson Australia. ISBN 9781486002535.
- Cant, M; Strydom, J; Jooste, C; du Plessis, P (2006). Marketing Management (Fifth ed.). Cape Town, South Africa: Juta & Co Ltd. p. 458.
- 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.
- 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.