Organizational buying behaviour and buying decision

Organization buying is the decision-making process by which formal organizations establish the need for purchased products and services and identify, evaluate, and choose among alternative brands and suppliers.

Major Influences on Business Buyers

Environmental factors:

Expected demand for the product that the buying organization is selling, expected shortages for the item, expected changes in technology related to the item etc. are the environmental factors that will have an effect.

Organizational factors:

Changes in purchasing department organization like centralized purchasing, decentralized purchasing and changes in purchasing practices like  long-term contracts, relationship purchasing, zero-based pricing, vendor-performance evaluation are the organization factors of importance to marketers.

Interpersonal factors:

These factors are the relationship between buyers and sales representatives of various competitor companies.

Individual factors:

These factors related to the buyer. What sort of ways of interacting and service are appreciated by the buyers and what ways are considered as irritants? Marketers have to understand the reactions of buyers.

  

Organizational Buying Situations

Straight rebuy:

In this buying situation, only purchasing department is involved. Thet get an information from inventory control department or section to reorder the material or item and they seek quotations from vendors in an approved list.

The "in-suppliers" make efforts to maintain product and service quality. The "out-suppliers" have to make efforts to get their name list in the approved vendors' list and for this purpose they have to offer something new or find out any issues of dissatisfaction with current suppliers and promise to provide better service.

Modified rebuy:

In this buying situation, there is a modification to the specifications of the product or specifications related to delivery. Executives apart from the purchasing department are involved in the buying decisions. The company is looking for additional suppliers or is ready to modify the approved vendors list based on the technical capabilities and delivery capabilities.

New task buy:

In this situation, the buyer is buying the product for the first time. As the cost of the product or consumption value becomes higher, more number of executives are involved in the process. The stages of awareness, interest, evaluation, trial, and adoption will be there for the products of each potential supplier. Only the products which pass all the stages will be on the approved list and price competition will follow subsequently.

Systems buy:

Systems buying is a process in which the organization gives a single order to a single organization for supplying a full system. The buying organization knows that no single party is producing all the units in the system. But it wants the system seller to engineer the system, procure the units from various vendors and assemble, fabricate or construct the system.

Pricing Decisions

Price is the one element of marketing mix that produces revenue while the other produces cost (Kotler). Revenue not only drives the company’s profit margin but also decides how well a product will be accepted by the customers leading to its stay in the market. When deciding a product price, a company needs to remember

·         The past, present and current market scenario

·         Competition

·         Customer

·         Company’s own status quo (positioning, value proposition, target segmentation)

Product Pricing

Selecting the pricing objective:

The main objective of pricing is to acquire maximum market share. Parachute is sensitive in its pricing strategy and is not that expensive in order to stimulate its market growth. According to 2012 survey, Parachute has a market share of 53% and is the brand leader and the first brand in that particular segment.

Determining Demand:

The Indian customers prefer small frequent purchases. Parachute hair oil is available in different sizes thereby providing all the options to its customers. Parachute faces tremendous competition from Vatika, Bajaj, Dabur, etc,  but it still remains  the leader. It targets the rural and the urban population both. The price Catalog of Parachute Hair Oil is as follows.

Normal 200ml- Rs39, 20ml- Rs5; mini pack- Re1; Parachute Therapy 50ml- Rs190 Parachute Advanced 80ml- Rs27, 170ml- Rs48, 300ml- Rs80. Customers are loyal to this product and purchase this in spite of small changes in prices.

The price of the oil also differs in various distribution channels:

For Example:

Product	Parachute advanced tender coconut hair oil (200ml)
MRP	Rs85/-
Kirana store/Medicos	Rs85/-
Easy day	Rs84/-
Big  Bazaar	Rs83/-
Whole seller would probably sell at even cheaper price

The difference in price is very minute through the different distribution channels but has no effect on consumer’s choice preference.

Estimating Costs:

The cost of the oil is mainly influenced by its raw materials, packaging and ingredient oil prices. The cost is different for different variants as the key ingredients and packaging differs from product to product.

Analyzing Competitors Cost, Pricing and Offers:

The brand Parachute enjoys tremendous amounts of brand loyalty from its customers. Competitor’s presence has never really affected Parachute but it is crucial for it to strategize on its pricing at par with the competitors to attract new customers and hence needs to subtract the cost of additional features.

Selecting a Pricing Method:

Parachute aims at pricing its products so as to suit the requirements of both rural and urban areas. It aims at being non expensive but also feasible and appropriate at the same time.

Selecting the Final Price:

The final price is selected keeping in mind the various additional factors including the impact of other marketing activities, company pricing policies, gain and risk sharing pricing and the impact of price on other parties.

Marketing Mix

4 P's of Marketing: Product, Place,  Price and Promotion.

Product - 'Product' refers to the variety of products or services that a company is selling including  quality, reputation  and branding of the product. The variants of Parachute (Product Depth) are Parachute Advansed, Parachute Scalp Therapie and Parachute Jasmine, etc. 

Price - Price is the amount of money for which the product is available. Parachute oil products are available in different forms and also in different sized packs. Parachute: 200ml- Rs 39, 20ml- Rs 5, mini-Re 1; Parachute Jasmine: 500ml-Rs90, 50ml-Rs 12; Parachute Therapie: 50ml-Rs 190; Parachute Advansed: 80ml-Rs 27, 300ml-Rs 80. The different sizes and accordingly different prices ensure that Parachute affordable for all.

Place - It is the location where the shops selling Parachute exist and where this product is actually sold. Parachute hair oil is easily available in urban as well as rural India and also a few other countries where it is expanding its market. It is available in supermarkets and kirana stores alike.

Promotion - Parachute promotes its product by advertising through Print,  Digital Media and Television. It has celebrities promoting the brand such as Deepika Padukone and Yuvraj Singh. Advertising is especially heavy before Holi and during winters. Campaigns like '1 hour champi kiya ' help remind people about the benefits of oiling before hair wash. Sales promotion such as 20% extra was also made on the 200ml pack. This creates awareness among the people and generates more customers.

Five Product Levels:

Core benefit:  For Parachute hair oil, The actual service that the customer is buying is strong and healthy hair.

Basic product is generated by the company as it provides with customer benefit. The company is the first to provide such a product with a fresh design and in a new form. Marico created the basic product, Parachute Hair Oil.

Expected product: It is the reaction to all the products available in the market. Customer compares the competitors such as Bajaj Almond Oil, Dove Elixir, etc.

Augmented Product: It points towards product differentiation. It explains why variants of Parachute Hair Oil were introduced.

Potential product: The company or the innovator of the product has this aspect in its hands. Competition will also have potential product as it innovates to create products that can compete with the company's product. This would be an impetus for innovative line extensions, product line filling and stretching.

Market Sructure and Competition

Competitors are not really a trouble if they are dealt with and understood pro-actively.  They give insights of your current position relative to them and when do you need to make changes in your management to outrun them. Competition makes the companies want to stay out of their comfort zone and put efforts in delivering exceptionally. If you know your competitor well, it can help you make assumptions about their futuristic decisions and guesses and act accordingly.

Competition analysis is a learning process which helps you knowing about your competitors in and out. Parachute, despite being the world’s largest selling coconut hair oil, is subject to competition. 

Here are the competitors of Parachute:

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Direct competitors are competitors who compete against the brand in same product category while indirect competitors are competitors who can act as a substitute for a product. Parachute coconut oil is facing direct competition from Vatica Enriched Coconut hair oil since both are in the same category. Now, brands like Bajaj Brahmi Amla oil, Dabur Amla hair oil, Bajaj Almond drops et cetera are substitutes for Parachute coconut oil since they also offer hair care, but with different type of oil. If customer prefers other types of oil and is unhappy with Parachute’s sticky oil, they might just shift their preference to any substitute.

This is how the competitors differ with each other.

The demand for hair oil is very elastic, hence product differentiation and positioning plays a very important role in carving out a niche and eliminating competition, thereby increasing market share.

IMC and Promotions

According to the American Marketing Association, Integrated Marketing Communications (IMC) refers to “a planning process designed to assure that all brand contacts received by a customer or prospect for a product, service, or organization are relevant to that person and consistent over time.”

Promotion deals with increasing awareness about the product in question, its visibility and its reach. As the integrated marketing communications inculcates new concepts, it is important not only to promote through different channels but also make sure that all the communication across mediums is brought about one central theme. An effective communication

•         Identifies the target audience
•         Has clear objective as to what needs to be conveyed to target audience
•         Designs proper and relevant message
•         Selects appropriate medium of communication
•         Plans a media mix optimally using the available budget
•         Measures and test the results and finally monitor
•         Manage everything to ensure smooth synced run.

Promotional Strategies implied by Parachute

1. Parachute Advanced Tender Coconut Hair Oil:

      ·  Public Relations and Publicity

      ·  Event and Experiences Promotion

      ·   Interactive Promotion

In order to get on a journey that celebrates the moments of Tender Love and Care (TLC), both Parachute Advanced Tender Coconut Hair Oil and Yeh Jawaani Hai Deewani came together on same stage felicitating online contest winner as ‘TLC Queens‘ who shared their best moments of ‘Tender love & care Moments‘

Source

2. Parachute Advanced Ayurvedic Hair Oil:

·                     Advertising and Interactive Promotion

·                     Word-of-mouth PromotionThe combination of Print and Facebook:

Madison came up with a concept of combining print and social media. Since internet penetration was low, they tied with magazines, attached small oil bottles and a pre-addressed envelope send with every copy with message – ‘try this and if you like it recommend to friend by posting back envelope to us’. Friends later received hard written letter, oil bottle and two envelopes.

3. Parachute Advanced Therapie Hair Vitaliser:

·                     Advertising (TV)

The campaign where Deepika Padukone was the brand ambassador advised girls to massage the hair with Parachute Advanced for one hour and then use the shampoos in order to look Gorgeous Hamesha.

4.  Parachute Advanced Hair Oil:

·                     Advertising (TV)              

·                     Interactive Promotion

The World’s Best Hair Campaign:

The campaign hinges on a ‘Pass the Sash’ concept where users can share the ‘World’s Best Hair’ sash with other Parachute Advanced users they know. This was brought to life through a Facebook Application. Users could select a friend, add the sash to their profile picture and pass on the Badge. They could also choose to create a video compliment by selecting a few pictures and copy from a given list of options, which then renders into a video. The application also had a Sash Map that tagged places in India where the Sash had traveled, on Facebook.

Parachute has employed many more promotional strategies for its other variants and continues to do so.

Customer Behaviour

Understanding customers is the key to giving them good service. To give good customer care you must deliver what you promise. But great customer care involves getting to know your customers so well that you can anticipate their needs and exceed their expectations.

To understand your customers well, you need to be attentive to them whenever you are in contact with them. The potential rewards are great: you can increase customer loyalty and bring in new business through positive word-of-mouth recommendation.

There are three main ways to understand your customers better. One is to put yourself in their shoes and try and look at your business from their point of view. The second way is to collect and analyse data in order to shed light on their buying behaviour. The third way is simply to ask them what they think. 

Some factors influencing the customer buying behaviour:

Analyzing Customer Behaviour:

An analysis of the factors influencing customer behaviour helps understand the customer well and the manner in which he/she can be approached with the product. Parachute hair oil is being used since ages and gives an assurance to customers about its purity and value. It is a part of social custom in the Indian society to use this product. Consumers located in extreme weather conditions particularly use Parachute hair oil. Therefore we see that understanding how a consumer behaves essentially helps establish “universal specificity”.

Holistic Marketing

As the name suggests, holistic marketing helps keeping the business consistent across all the piers (people, processes and products) of marketing strategy and make sure the business runs its course properly. Marketing strategies have been unfolding over time and today there are a plethora channels which are being used to target the audience, hence in order to avoid conflict it is important to have sync/ harmony between the channels or the content itself. Holistic marketing helps the marketer to enable all perspectives. For a successful marketing, internal marketing, integrated performance marketing, effective relationship marketing and personal marketing is required. Everything ranging from goal setting to decision making to implementation of the goals through communication, distribution, innovation and management, needs to be in equilibrium. After all, there has to be a rationale for everything when it comes to marketing.

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Parachute: Holistic Marketing

Management: A holistic management has to be pro-active in his approach, which effectively communicates and is prompt in replying to any threat or changes. Marico’s management is such that has helped it to withhold the title of a market leader in coconut oil over the years. The management of Marico is driven by a vision of not only working with goal orientation in mind, but also working with devotion and trickle down the same zeal across all the management levels.

Products: The health of skin, nails and hair denotes the health of people, is what is believed in India. Going by this idea, Parachute has introduced many brand variants where each deals with a new value-add. Parachute has tried its best to always maintain a holistic approach towards their hair care products.

Communication: Parachute has expanded its consumer base across different regions, penetrating equally in urban and rural areas. Needless to say that Parachute has modified its communication with audience over the past years. Over time, more connotations got added to it, with central theme remaining quality and purity. In late years, Parachute has also commenced with digital marketing which has seen diversification in content and distribution channels both over years.