How firms buy stuff

Apr 29, 2011 by

I recently completed a study on how hospitals acquire computed tomography machines (CT scanners). Although the study may not be generalizable, I had a number of findings on how hospitals make investments in equipment.

For the study, I looked at both how uncertainty the hospitals felt about what they acquired and at how much the equipment was worth. I found the following:

  • When hospitals felt that their prior CT machine performed worse than they had hoped, they tended to get a new CT machine that they felt more uncertain about. In contrast, when hospitals felt that their prior CT machine performed better than they had hoped, they tended to get a new CT machine that they felt less uncertain about.
  • Hospitals have multiple objectives when getting CT machines. The hospitals in my study were less uncertain about how well the CT machines would perform on the objectives that they felt were the most important.
  • When deciding how much to spend, hospitals considered how uncertain they were about whether the CT would fulfill customer desires. If they were uncertain about performance in fulfilling consumer preferences, physician preferences, and in providing care, they tended to get less expensive machines. Financial uncertainty didn’t significantly influence spending.

While the findings of this study may be specific to the context of hospitals getting CT machines, they suggest that non-financial issues matter when purchases are made. In fact, in some contexts, they may matter more than financial issues. So, when making sales pitches, it is important to consider both how the product being sold will be profitable for the purchaser and how it will fulfill non-financial needs.

Leave a Reply

Your email address will not be published. Required fields are marked *