Organizational buyers follow the approach when a routine purchase changes in some way

ABSTRACT - This paper explores recent developments in the information processing and judgmental decision areas as they may apply to organizational buying behavior. It considers the possibility of expanding information processing concepts to group buying behavior as this may more accurately reflect how decisions are made in organizations.

Citation:

James W. Hanson (1979) ,"Organizational Buying Behavior: a Conceptual View of the Buying Center As an Information Processing Unit", in NA - Advances in Consumer Research Volume 06, eds. William L. Wilkie, Ann Abor, MI : Association for Consumer Research, Pages: 622-627.

Advances in Consumer Research Volume 6, 1979      Pages 622-627

ORGANIZATIONAL BUYING BEHAVIOR: A CONCEPTUAL VIEW OF THE BUYING CENTER AS AN INFORMATION PROCESSING UNIT

James W. Hanson (student), University of Oregon

ABSTRACT -

This paper explores recent developments in the information processing and judgmental decision areas as they may apply to organizational buying behavior. It considers the possibility of expanding information processing concepts to group buying behavior as this may more accurately reflect how decisions are made in organizations.

INTRODUCTION

A number of recent articles have discussed the group decision-making process in organizational buying decisions and have made reference to the potential use of information processing research in this area (Webster, 1978 and Wilson, 1978). One of the purposes of this paper is to explore recent developments in the information processing and judgmental decision areas as they may apply to organizational buying behavior. Cognitive theories of information processing are utilized in the fields of psychology, communications and consumer research. The essential focus of such models is on how individuals select, store, evaluate and utilize information for decision making purposes.

Another purpose is to consider the possibility of expanding information processing concepts to group buying behavior. This would follow closely the group dynamics approach to organizational buying. The emphasis is placed on understanding the interaction process among a small group of individuals who may work together, but who probably have different expectations about products and suppliers as well as different decision processes and rules.

FORMAT

Dubin (1976), after outlining the four basic features of a theoretical model (units, laws of interaction, boundaries and system status), indicates there are three other features. These are: propositions - conclusions derived that represent logical and true deductions about the model; empirical indicator - the outcome of converting terms in each proposition; hypothesis - rewording the proposition by substituting the empirical indicator.

This paper will address the proposition and empirical indicator features using a decision process model adapted from Newell and Simon (1972) and Wilson (1977). A series of propositions will be presented and will concern actions of an identifiable group and individuals within that group with respect to:

(a) the buying task

(b) power or influence

(c) roles

(d) group size  

(e) conflict resolution

(f) vendor or supplier attribute evaluation

(g) acquisition of sources of information

(h) judgmental or decision rules

The empirical indicators will be discussed in terms of possible instruments and methodologies that may be utilized in future research.

The outline for the remaining portion of the paper is: presentation of the model; description of terminologies; the propositions; suggested instruments and methodologies; and conclusion.

THE MODEL

The decision process model depicted in Figure 1 indicates that both individuals and groups process information and make choices. At the individual level, intervening variables such as perceived risk, buying task, decision style, perceptual bias, and belief structures affect the processing of information and the choice process. At the group level, variables such as buying task, group membership, group roles, power or influence, group interaction, and conflict and conflict resolution affect the processing of information and the choice process.

The term decision process may also be applied to the broader decision making process as depicted by Webster and Wind (1972). Their process includes: problem recognition, information source acquisition; evaluative criteria; supplier identification; and selection process.

The basic elements of the model, then, are an individual and a group in a task environment attempting to choose among sources of information about product-vendor attributes and attempting to choose among a number of product-vendor attribute sets.

TERMINOLOGIES

Descriptions, meanings and definitions of various terms, and concepts used in the paper are offered below.

Buying task. There are three types of buying situations: (a) the new task represents the most complex buying situation. The magnitude of the problem-solving challenge, information requirements, and numbers of alternatives will be at a maximum; (b) straight rebuy represents the routine buying situation. The need is not new, the amount of information sought may be small and fewer alternatives may be considered; (c) modified rebuy stands between the two others in terms of newness of the need, the amount of information needed to make a decision and the extent to which new alternatives are considered. (Kotler, 1976)

Buying Center. Those people in the organization who are involved in the buying process may be centrally located, as in a purchasing department, or they may be assembled from various parts of the organization as specific groups or buying committees.

FIGURE 1

DECISION PROCESS MODEL

Roles. The buying center consists of five roles: (a) users - those members of the organization who use the purchased products and services, (b) buyers - those with formal responsibility and authority for contracting with suppliers, (c) influencers - those who influence the decision process directly or indirectly by providing information and criteria for evaluating alternative buying actions, (d) deciders - those with authority to choose among alternative buying actions, (e) gatekeepers - those who control the flow of information (and materials) into the buying center. (Webster and Wind, 1972)

Product-Vendor Attributes. Various product-vendor attributes lists are available in the literature (Kiser, Rao, and Rao, 1975; Lehman and O'Shaughnessy, 1974; and Wind, Green and Robinson, 1968). These are typically described as relevant choice criteria used by buyers in their choice of vendor or supplier. The lists vary in length from ten to sixty-five.

Sources of Information. Different sources of information may be used by various participants in the buying process. Again, lists of information sources have been developed by various researchers (Monoky, Matthews and Wilson, 1975; Ozanne and Churchill, 1968; and Webster, 1970).

Judgmental or Decision Roles. These are composition rules used by people in the buying center to process product-vendor related information. Judgmental rules are generally one of two types: (a) noncompensatory-conjunctive, disjunctive and lexicographic and (b) compensatory-unweighted and weighted. Further details of these five rules are given in Park and Lessig (1977).

THE PROPOSITIONS

Proposition 1

: The Number of People Involved in the Purchase Will Change as the Buying Task Changes.

As the buying task alternates between straight rebuy, modified rebuy and new task, more people, both in numbers and variety, become involved in the decision process. The characteristics of the buying task may account for this as variables such as perceived risk, repetitive versus nonrepetitive purchase, and number and variety of sources of supply vary with the task.

For straight rebuy, decisions may at times be 'automatic' and past experience may be an important factor in supplier selection. The buying center may be composed of only one person who has probably been delegated responsibility for these type purchases.

Modified rebuy tasks entail seeking out more suppliers, seeking more information, and more involvement in actual evaluation of vendors, The product itself may be of a risky nature either from a capital expenditure viewpoint or from its importance in terms of contribution to the production process. More than one person may be involved in the decision process as various points of view from purchasing, finance and production may be required.

New tasks may be 'one shot' deals on a major capital expenditure or of such major significance in terms of impact on the organization, that a great deal of effort and involvement is required for the decision process. The buying center may be composed of representatives from various departments as well as top management in an effort to have diverse views represented.

Few empirical studies have been reported on group size and buying task. Hare (1962) discusses research on size and general tasks such as physical pulling power, concept formation tasks, and completion tasks. With increasing group size, problems may be solved more efficiently, although at some point, depending on the task, the addition of new members brings diminishing returns. Buskirk (1970) and Weigand (1964) quote general statistics on group size and purchase decisions but no breakdown is given with respect to the type of buying task. Hoffman (1965) briefly discusses group size, but only in relation to participation on the part of members. In their summary of a discussion on group size, Ebert and Mitchell (1975) state, "we would expect that routine decisions made at low levels of the organization will be influenced less by group activity than decisions that are more complex and require interpersonal interaction." (p. 173)

There seems to be very little support, both empirically and intuitively, for the notion that buying task and group size are related. Further research is necessary.

Proposition l(a)

: The Number of Perceived Roles Will Change as the Buying Task Changes.

This proposition follows from the first. As the number of people in the buying center increase or decrease, it seems logical that the numbers of perceived roles will change as well.

As representatives from both purchasing and other areas are included in the buying center, more user, influencer and decider roles are available for interaction. Role sets of individuals may alter depending on the task. These sets are defined by three variables - role expectations, role behavior and role relationships (Webster and Wind, 1972). The interaction process in any given task is partially a result of the role performance of individual members and as such, shifts in the buying task may bring about shifts in the composition and numbers of role sets.

More specifically, the straight rebuy situation would encompass buyer roles as the decisions are routine. Modified rebuy situations would include buyer, influencer and decider roles as the decision process becomes more complex with the additional search and evaluation stages added. A gate-keeper role may also be present depending on how far the group attempts to go in seeking information and identifying alternative sources of supply. New tasks would encompass the complete range of roles as users, influencers, deciders, buyers and gate-keepers are represented by various organizational interests.

Again there seems to be a lack of empirical research on either identification of specific roles in buying situations or the dynamics of role changes as the buying task changes. Hare does not discuss specific types of roles and only briefly discusses potential role conflicts due to group interaction. Both Hoffman and Hackman and Morris (1975) make no reference to roles or role dynamics at all.

Proposition 2

: As Uncertainty of the Buying Task Varies, So Does the Influence of the Appropriate Buying Center.

As the buying task shifts from straight rebuy to new task, the amount of uncertainty faced by the buying center increases. As it has been proposed that the size of the buying center increases with the task, specific persons who constitute the groups associated with the buying center/buying task may become identified as powerful or influential. The primary reason for this association of influence may be the proximity of the buying center to uncertainty. As the uncertainty increases, the individuals who constitute the group designated to handle the uncertainty will be those who are perceived as being influential or powerful.

Research in both the management and marketing areas have explored the relationship between uncertainty and power. Hickson, Hinings, Lee, Schneck and Pennings (1971) put forth the strategic contingencies theory of intraorganizational power and stressed the importance of the ability to cope with uncertainty as a source of power. Salancik, Pfeffer and Kelly (1974) reported on a study of a proposed contingency model of influence in organizational decision making. The method employed had decision contexts which bear close resemblance to the certainty-uncertainty continuum of the straight rebuy-new task buying situations. Their conclusions stated, in part, "as decision making contexts vary, so do the sources of organizational uncertainty and consequently the bases for influence in organizational decision making" (p. 10). Grashof and Thomas (1976) conducted an empirical study on an approach to identifying the varying responsibilities of members of the buying center. Their study also included self and other ratings of influence over stages in the buying process, but not over buying tasks. The only significant result was that individuals tended to inflate their own importance. However, the study does represent an initial attempt at investigating power or influence in an industrial buying context.

Proposition 3

: Vendor Attribute Evaluations Will Vary By the Buying Task.

Proposition 3(a)

: Individuals Within Buying Centers Will Differ With Respect to Vendor Attribute Evaluations.

Proposition 4

: Preference For Sources of Information Will Vary By the Buying Task.

Proposition 4(a)

: Individuals Within Buying Centers Will Differ With Respect to Preference for Sources of Information.

These propositions will be discussed as a group.

As has been shown previously, the buying tasks represent a continuum of uncertainty. High uncertainty may be represented by a lack of information. This lack of information may concern, for example, suppliers, specific attributes of suppliers, specific sources, impact of the decision on the individual and the organization and the consequences of success or failure. Risk is involved and individuals prefer different information and information sources depending on the perceived risk level (Cox, 1967). The propositions reflect, therefore, that sources of information and vendor attribute evaluations will vary by the buying task. Individuals of various backgrounds, from various parts of the organization and with different perceptions will prefer different sources of information and will evaluate vendor attributes differently depending on the buying task.

Propositions 3 and 4: Monoky, et. al, conducted research on information source and vendor attribute preference by industrial buyers as a function of the buying situation. Research instruments were administered to members of the National Association of Purchasing Management. Their results show that preferences for various information sources were systematically related to the nature of the buying task. Also, there were significant differences on the importance of the various attributes across the buying tasks,

Propositions 3(a) and 4(a): Kiser, et. al, concluded from their review of the literature that very little research attention has been paid to the assessment of roles played by relevant non-purchasing executives, i.e., individuals not formally considered part of the purchasing function. These individuals may influence, or may be part of, buying center decisions. Their study set out to find the relative importance of vendor attributes as perceived by non-purchasing executives under special product (new task) and standard product (straight rebuy) buying situations. Their findings indicate there were significant differences between vendor attribute evaluations and buying task.

Both of these studies lend support to the propositions as stated.

Proposition 5

: The Buying Center (Group) Vendor Attribute Evaluations Will Vary by the Buying Task and Will Tend to be Similar to Vendor Attribute Evaluations of the Individual Perceived to be Most Influential.

Proposition 6

: The Buying Center (Group) Preferences For Sources of Information Will Vary by the Buying Task and Will Tend to be Similar to the Source Preferences of the Individual Perceived to be the Gatekeeper.

These propositions follow closely those stated as propositions 3, 3(a), 4, and 4(a). The common thread through all of these is uncertainty and risk. As the buying task moves along the continuum, the amount of uncertainty and subsequent perceived risk increases. The group interaction processes that may take place as the buying task changes are many and varied. Information will be brought to the group by individuals and the group itself will generate a collective information bank. Throughout this process, information deficiencies will be noted and the group must decide what information to acquire and where to get it.

Individuals identified as being influential or powerful will have an effect on the buying centers actions. The roles involved may be the influencer role or, depending on the type of perceived risk and uncertainty, may be the user or decider roles. These three roles may be represented by one or a few individuals. They would influence the buying centers vendor identification as well as the vendor attribute evaluations. In terms of sources of information, a fourth role would be influential, i.e., the gatekeeper. Not only does the gatekeeper provide information, he may selectively keep information from the group as well as influence which sources to consider.

Research into the phenomena of 'risky shift' may be of value in discussing these propositions. The findings from recent research have tended to question the hypothesis (individuals confronted with a specific problem will make more risky decisions after participating in a group discussion than they will make alone) but agree that group interaction does produce shifts in judgments. Ebert and Mitchell in their review of the literature on this subject conclude that (a) it is the context of the group process which creates the shift rather than the idea that riskiness is valued or that one feels less responsible and is therefore more risky in a group, and (b) group discussion changes the overall value of the outcomes and the shift reflects a revision of the estimates of the best alternative.

Pettigrew (1972) conducted research on the information filtering process by a gatekeeper during an innovative decision process. The decision process was identified as one involving high uncertainty. The results of the study show conclusively that the gatekeeper does filter information to selected individuals and that this differential access to the flow of information during a decision making process is seen as a source of power.

There has been no evidence of research into group decisions on vendor attributes per se.

Proposition 7

: Judgmental Rules Will Vary by the Buying Task

One distinguishing characteristic of the stages in a consumer buying process is the consumers familiarity with the product. Howard and Sheth (1969) delineate three stages, (a) extensive problem solving in which predisposition towards and discrimination between brands is low and the consumer actively seeks out information, (b) limited problem solving in which there is a moderate predisposition toward brands, but the consumer does seek out information with which to compare and discriminate between various brands, and (c) routine response behavior in which there is a high predisposition toward one or two brands and very little information seeking.

Park and Lessig (1977) have recently attempted to relate judgmental rules and stages in the decision process. They argue that as the consumer's product and brand familiarity increase, different judgment rules are used for the purpose of identifying those brands which make up the consumer's evoked set and for the purpose of evaluating those brands within the evoked set. The conjunctive model is appropriate for the rejection of alternatives and therefore it is expected to be the one the consumer would use between extensive problem solving and routinized response behavior for the purpose of defining the evoked set composition. The disjunctive model may be more appropriate at the routinized response behavior stage when the consumer may purposefully engage in an exploratory search process to complicate his decision process. This may be seen as overcoming an habitual or boring choice process. Satisfaction of these exploratory needs may come about by accepting an alternative brand with some unique characteristic. The acceptance of a brand is the function of the disjunctive model.

Once the evoked set has been established, the consumer evaluates the alternatives. The unweighted linear compensatory model may be the most appropriate model when the consumer has a low level of familiarity with products and brands. This may be because he has established neither a related set of evaluative criteria to be used in product evaluations, nor a specific set of attribute weights. The weighted linear compensatory model may be the most appropriate at moderate and high levels of familiarity. The consumer is expected to have established both a reduced set of evaluative criteria and a corresponding weighting function. From this, it is possible to match the stage and the rule. The consumer will use the unweighted linear compensatory model in the extensive problem solving stage and the weighted linear compensatory model as he moves through the limited problem solving and routine response behavior stages.

The lexicographic model is assumed to be utilized in the routine response behavior stage. The consumer has well defined evaluative criteria and high familiarity and so can select a brand which is superior on a most important attribute.

The concept of stages in the consumer decision process is similar to the organizational buying task continuum. The extended problem solving stage can be matched with the new task; the limited problem solving stage matched with modified rebuy; and routine response behavior stage matched with straight rebuy. It can now be postulated which judgmental rules may be used at each part of the buying task continuum.

New task - the uncertainty element of this task may be made up of a lack of information about suppliers attributes, a lack of knowledge about the product itself and which of its attributes may be critical for the organization. These characteristics would imply that the un-weighted linear compensatory model may be used by the buying center in its evaluation and choice processes. Individuals may show varying types of judgmental rules in this type of task, but the group interaction process would necessitate at least an accommodation of viewpoints from individuals who may represent areas of the organization other than the purchasing function.

Modified rebuy - a lesser amount of uncertainty may exist as the buying center has had experience with previous purchases of this nature. Familiarity is increased and there may be a set of evaluative criteria established with appropriate weights. Individuals within the buying center for this type of task again may exhibit use of varying Judgmental rules but the characteristics of the situation imply that a conjunctive model and a weighted linear compensatory model may be in use. The conjunctive model may be used to reduce the numbers of suppliers the buying center considers in making a choice and the weighted linear compensatory model used to choose between suppliers who remain in the 'evoked' supplier set.

Straight rebuy - the automatic repurchase characteristic implies less uncertainty and a good deal of information and past experience with both the product and selected suppliers. Again a weighted linear compensatory model is most likely to be used in this buying task by the individual or relatively few individuals involved. Both the evaluative criteria and the list of suppliers has been limited to a select and important few. Two other models may appear in this task. The lexicographic model may be used if a critical attribute has been identified. The select set of suppliers, even though small, may then be evaluated against this attribute. Also, the disjunctive model may at times be used if the individual(s) responsible for purchasing intentionally complicates the buying process by considering a new supplier or new product.

Proposition 8

: Types of Conflict and Conflict Resolution Approaches Vary by the Buying Task

Conflict, according to March and Simon (1958), is present when there is a need to decide jointly among a group of people who have at the same time, different goals and perceptions. The buying task continuum indicates that various individuals comprise buying centers and therefore it is highly likely that conflict is a common consequence of decision making within these centers. Sheth (1973) points out that there are both rational and irrational methods of conflict resolution which may be applied when specific types of conflict arise:

(a) if the inter-party conflict is largely due to disagreements on expectations about the suppliers or their products, the conflict will be resolved in a problem-solving manner,

(b) if the conflict among the parties is due to disagreement on 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,

(c) if conflict arises due to fundamental differences in buying goals or objectives among the various parties, the conflict will be resolved by the process of bargaining,

(d) if the disagreement is not simply with respect to style of decision making, the conflict boarders on the mutual dislike of personalities among the individual decision makers. The resolution of this type of conflict is usually by political tactics.

Conflict may be present in the various buying tasks. The conflict of type (a) may be characteristic of new task and modified rebuy. The problem solving approach may be indicative of the buying centers use of compensatory type judgmental rules. Conflicts of type (b) may be characteristic of straight rebuy and the fact that a lexicographic judgmental rule may be used by one or more individuals. If the important attribute differs by individual, then conflict arises. Resolution by persuasion may just involve consensus on which of the two important attributes should be used in the lexicographic model. The conflicts of type (c) and (d) result in irrational methods of resolution and may reflect behaviors of powerful or influential individuals. These may arise in both the new task and modified rebuy as the roles of user, decider, influencer and gatekeeper interact.

Cyert and March (1963) offer the concept of 'quasi resolution of conflict' as a rational means of conflict resolution. The mechanisms suggested to reduce conflict are local rationality, acceptable level decision rules and sequential attention to goals. Strauss (1962) studied tactics used by purchasing agents to influence their relationships with other departments. These tactics may be thought of as representing the irrational methods of conflict resolution.

SUGGESTED INSTRUMENTS AND METHODOLOGIES

Pretests to determine characteristics of buying tasks should first be conducted. Then questionnaires or personal interviews may be used to identify individuals involved in each task. Tabulations and simple summary statistics would indicate the composition of the buying center. Individuals may then be asked to identify particular people as to the role they play in various buying tasks. Cross tabulations and appropriate chi-square calculations would indicate relationships between self reporting and reporting of others for particular roles.

With respect to perceived roles and the buying task, participants may be asked to rank all participants in order of their importance in making decisions. The summed ranks could be used as a measure of influence. Kendall's measure of concordance may be used to assess the agreement among rankings (Salencik, Pfeffer and Kelly, 1974). Another approach again uses rank order of specific individuals and may be applied across buying tasks. The difference lies in use of Thurston's Law of Comparative Judgment (Case V) to develop interval scaled data from rank order data. An approach might be to locate individuals position of influence on interval scales according to their influence in each of the three buying tasks (Grashof and Thomas, 1976).

Pretests to determine sources of information normally used by particular organizations and attributes used in evaluating suppliers should be carried out before any study. Attitudinal type models such as those developed by Fishbein and Rosenberg may be used to compute both summary indices of preference toward a supplier and composite indices of the importance of attributes and perceived ability of a supplier to provide specific valued attributes.

Preference rating scales for various sources of information in a particular situation and importance rating scales for attributes in particular situations may be administered to individuals and then to groups. The group approach might employ verbal instructions as to what the group should accomplish. Interaction processes as well as the final outcome with respect to sources of information and evaluative criteria may be recorded.

Roles of individuals recorded earlier may be then compared to both individual and group decisions. Appropriate non-parametric tests may be applied for analysis.

Various methodologies have been used to identify individuals usage of judgmental rules. The 'think aloud' or verbal protocol method has been used in consumer research to identify what judgment rules are being used in the process of information seeking (Payne, 1976). Individuals as well as groups may participate in this type of exercise. Recordings of verbal responses either by coders or by video tape could be content analyzed to determine the categories of judgmental rules by task.

Wright (1975) suggests another methodology and that is to fix the judgmental rule and ask individuals or groups to indicate how they would apply the rule to various problem situations. Measures of precision and accuracy may be obtained as well as attitudinal and preference data with respect to different types of judgmental rules.

Group interaction processes would have to be studied in order to determine the types of conflict under various buying task situations. Methods of resolution would also be recorded, again either by coders or by first video taping group sessions and content analyzing them after the fact.

In general, the types of comparisons required under these prepositions may necessitate use of laboratory type experiments but in an organizational setting. Groups of individuals involved in purchasing may be asked to participate and appropriate experimental designs would have to be developed to accommodate individual and group comparisons. Internal validity would be heightened by this approach but external validity or generalization may be limited. Field experimentation would enhance external validity but due to the requirements of measurement, may not be appropriate. Problems with organization participation, measurement and response limitations would limit this approach to individual firms. Longitudinal studies in a single organization would provide relevant duties for testing these propositions. Again participation would be a problem and generalization to other firms and other buying centers would not be viable.

CONCLUSION

A series of propositions concerning actions of an identifiable group and individuals within that group have been presented in an organization buying context. Suggestions were offered with respect to methodologies, instruments and empirical measures that might be used in testing these propositions.

Some research has been conducted into a few areas indicated by the propositions but the overall aspect of comparisons between group and individual decision processes has not been looked into by researchers. Specifically, research into group approaches to vendor and source of information selection under varying buying task situations is lacking. Very little research has been done on judgmental rules used either by individuals or groups in an organizational buying behavior content. The dynamics of role set formulation as the buying task varies also has not been studied. By identifying gaps in current and past research, there is both an implicit and explicit call for research in the areas discussed.

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