Business Buying
Organisational Buying as the decision- making process by which formal organizations establish the need for purchased products and services and identity, evaluate and choose among alternative brands and suppliers.
The business market consists of all the organizations that acquire goods and services that are sold, rented, or supplied to others.
Business markets have several characteristics that contrast sharply with those of consumer markets.
1) Fewer Buyers: The business marketer normally deals with far fewer buyers than consumer marketers. Good year company’s fate depends on getting orders from few major automobile makers.
2) Larger Buyers: A few large buyers do most of the purchasing in such industries as aircraft engines and defence weapons.
3) Close supplier-customer Base: Because of the smaller customer base and the importance and power of the larger customers, suppliers are frequently expected to customize their offerings to individual business customer needs.
4) Derived Demand: The demand for business goods is ultimately derived from the demand for consumer goods. For this reason, the business marketers must closely monitor the buying patterns of ultimate consumer.
5) Professional Purchasing: Business goods are purchased by qualified professional who must follow their organisation’s purchasing policies, constrains and requirements. Many business buyers requests for quotations, proposals and purchase contracts, -not typically found in consumer buying.
6) Several buying influences: More people typically influence business buying decisions. Buying committees consisting of technical experts and even senior management are common in the purchase of major goods. Business marketers have to send well trained sales representatives and sal;es teams to deal with well-trained buyers.
7) Multiple Sales Calls: Because more people are involved in the selling process, it takes multiple sales calls to win most business orders, and some sales cycles can take years.
Direct Purchasing: Business buyers often buy directly from manufactures rather than through intermediaries, especially items that are technically complex or expensive.
9) Leasing: Many industrial buyers lease instead of buy heavy equipment like machinery. The lease gains a number of advantages: Conserving capital, getting the latest products, receiving better service and gaining tax advantages. The lesser often ends up with a larger net income and chanceto sell to customers who could not afford outright purchase.
Buying Situation
There are types of buying situation:- the straight rebuy, Modified rebuy and new task.
Straight Rebuy: The straight rebuy is a buying situation in which the purchasing department reorders on a routine basis(e.g. office Supplies, bulk chemicals). The buyer choose from supplier on an approved list. These supplier make an effort to maintain product and service quality. The outside supplier attempt to offers something new or to exploit dissatisfaction with a current supplier.
Modified Rebuy: The modified rebuy is a situation in which the buyers want to modify product specifications, prices delivery requirements, or other terms. The modified rebuy usually involves additional decision participants on both sides.
New Task: The new task is a buying situation in which a purchase buys a product or service for the first time. The greater the cost or risk, the larger the number of decision participants and the greater their information gathering and therefore the longer the time to decision completion.
Many business buyers prefer to buy a total solution to their problem from one seller called System Buying , the buyer would solicit bids from prime contractors, who would assemble the package or system. The contractor who was awarded the contract would be responsible for bidding out and assembling the system’s subcomponents from second tier contractors. The prime contractor would thus provide a turnkey solution , so called because the buyer had to turn one key to get the job done.
Participents in the business buying process
The decision unit of the buying organization includes all the members of the organization who play any role in the purchase decision process. They include:-
1) Initiators:- Those who request that something be purchased. They may be users or others in the organization.
2) Users:- Those who will use the product or service. In many cases, the users initiate the buying proposals and help define the product requirement.
3) Influencer:- People who influence the buying decision. They often help define specifications and also provide information for evaluating alternatives. Technical personnel are particularly important influences.
4) Deciders:- People who decide on product requirements or supplies.
5) Approvers:- People who authorise the proposed actions of deciders or buyers.
6) Buyers:- People who have formal authority to select the supplier and arrange the purchase terms. They play a major role in selecting vendor and negotiating.