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Industrial Buying Behaviour Process

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22 views5 pages

Industrial Buying Behaviour Process

Uploaded by

Charmi Patel
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Industrial buying behavior

 MEANING :Organisational buying is the decision making process by which formal


organisations establish the need for purchasing products and services and identify,
evaluate , and choose among alternative brands and suppliers.

 BUSINESS MARKET VERSUS CONSUMER MARKET :

The business market consists of all the organisations that acquire goods and services used in
the production of other products or services that are sold , rented , or supplied to others.
Business markets have several characteristics that sharply differ with those of consumer
markets :

• Fewer , larger buyers : The business marketer normally deals with far fewer , much
larger buyers than the consumer market does.

• Close supplier – customer relationship : Because of the smaller customer base and the
importance and power of the larger customers , suppliers are frequently expected to
customize their offering to individual business customer needs

• Professional purchasing : Business goods are often purchased by trained purchasing


agents, who must follow their organisations’ policies, constraints , and requirements.
Many of the buying instruments – request for quotations , proposals , and purchase
contracts – are not typically found in consumer buying.
• Several buying influences : More people typically influence business buying decisions.
Buying committees consisting of technical experts and even senior mgmt are common in
the purchase of major goods.
• Derived demand : The demand for business goods is ultimately derived from the
demand for consumer goods. For this reason , business marketer must closely monitor
the buying patterns of ultimate consumers. Business buyers must also pay close
attention to current and expected economic factors , such as the level of production ,
investment , consumer spending and the interest rate.
• Fluctuating demand : The demand for business goods and services tend to be more
volatile than demand for consumer goods and services.
INDUSTRIAL BUYING BEHAVIOUR PROCESS

 PROBLEM RECOGNITION : The buying process begins when someone in the


company recognizes a problem or need that can be met by acquiring goods or
services. The recognition can be triggered by internal or external stimuli.
Internally , some common events lead to problem recognition. The company
decides to develop a new product and needs new equipment and materials. A
machine breaks down & requires new parts. Externally , the buyer may get new
ideas at a trade show , see an ad , or receive a call from a sales representative
who offers a better product or lower price. Business marketers can stimulate
problem recognition by direct mail , telemarketing , and calling on prospects.

 GENERAL NEED DESCRIPTION AND PRODUCT SPECIFICATION : Next , the


buyer determines the needed item’s general characteristics and required
quantity. For standard items , this is simple. For complex items, the buyer will
work with others – engineers , users – to define characteristics like reliability ,
durability , or price. The buying organisation now develops the item’s technical
specifications. Often the company will assign a product – value- analysis
engineering team to the project. Product value analysis is an approach to cost
reduction in which components are studied to determine if they can be redesignd
or made by cheaper method of production. Tightly written specifications will allow
the buyer to refuse components that are too expensive or that fail to meet
specified standards.

 SUPPLIER SEARCH : Now buyers try to identify the most appropriate suppliers
through trade directories , contacts with other companies , trade advertisements
and trade shows. Business marketers also put products, prices, and other
information on internet.
 E – PROCUREMENT: Web sites are organised around two types of e – hubs ;
vertical hubs centered on industries like (plastics , steel , chemical , paper )and
functional hubs ( logistics , media buying , advertising , energy mgmt ). In
addition to using this web sites , companies can do e- procurement in other
ways.
1. Direct extranet links to major suppliers : A company can set up extranet
links to its major suppliers.
2. Buying alliances : Coca cola , kraft , Gillette , P & G and several other
companies joined forces to form a buying alliance called Transora to use
their combined leverage to obtain lower price for raw materials. Several
auto companies ( GM , Ford ) formed Covisint for the same reason.
3. Company buying sites : General electric formed the trading process
network (TPN ) where it posts request for proposals , negotiates terms ,
and place orders.

Moving into e – procurement requires changing purchasing strategy and


structure. The supplier’s task is to get listed in major online catalogs or
services , develop a strong advertising and promotion program and build a
good reputation in the market place. This often means creating a well
designed and easy to use web site.

 PROPOSAL SOLICITATION : The buyer invites qualified suppliers to submit


proposals. If the item is complex or expensive , the buyer will require a detailed
written proposal from each qualified supplier. After evaluating the proposal , the
buyer will invite a few suppliers to make formal presentations .
 SUPPLIER SELECTION :Before selecting a supplier , the buying center will
specify desired supplier attributes and indicate their relative importance. To rate
& identify the most attractive suppliers , buying center often use the supplier –
evaluation model.
The choice and importance of different attributes varies with the type of buying
situation . Delivery , reliability , price and supplier reputation are important for
routine – order products. For technical product such as , Copying machine , the
three most important attributes are technical service , supplier flexibility , and
product reliability.
The buying center may attempt to negotiate with preferred suppliers for better
prices and terms before making the final selection.
As part of buying selection process , buying center must decide how many
suppliers to use.

 ORDER – ROUTINE SPECIFICATION : After selecting suppliers , the buyer


negotiate the final order , listing the technical specifications , the quantity needed,
the expected time of delivery , return policies, warranties, & so on.
In the case of maintenance , repair , and operating items, buyers are moving
towards blanket contracts rather than periodic purchase orders. A blanket
contract establishes long term relationship in which the supplier promises to
resupply the buyer as needed. Because the stock is held by seller , blanket
contracts are sometimes called stockless purchase plans. The buyer’s computer
automatically sends an order to the seller when stock is needed.
Companies that fear a shortage of key materials are willing to buy and hold large
inventories. They will sign long term contract with suppliers to ensure a steady
flow of materials. Dupont , Ford , and several other companies regards long term
supply planning as a major responsibility of their purchasing managers. In
addition, business marketers are using internet to set up extranet with important
customers to facilitate and lower the cost of transactions. The customer enters
order directly on the computer , and these orders are automatically transmitted to
the supplier.

 PERFORMANCE REVIEW : The buyer periodically reviews the performance of


the chosen suppliers. some methods are commonly used. Buyer may contact the
end users and ask for their evaluations or buyer may rate supplier on several
criteria. Performance review may lead buyer to continue , modify , or end a
supplier relationship.

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