Industrial Buying Decision Process

The buying decision in a firm is not taken individually by someone but by a group of individuals therefore organisational buying decision process defers a lot from the consumer buying decision process.

The process includes eight stages which are as follows:

1) Problem Recognition

The buying process starts when someone in the organisation identifies a problem or a need which can be met by buying a good or service. The problem can arise as an outcome of internal or external stimuli.

The various factors which can act as internal stimuli are:

i) The company decides to launch a new product and requires new tools and materials for manufacturing the latest product.

ii) The breakdown of an appliance that requires new components or replacement immediately.

iii) The material purchased from a dealer proves to be unsatisfactory and the company is urgently looking out for another dealer.

iv) The purchase department head notices an opportunity to obtain better costs or quality materials.

So the organisational marketer has to act as the stimulant for problem recognition by developing informative and attractive advertisement, mailing literature to organisational buyers about the availability of technical products, and directing their sales personnel to call upon the buyers, prospects and so on.

2) General Need Description

Having recognised the problem, and realising to fulfilling the need, the shopper will now be involved in identifying the characteristic features and the quantity of the product which is required. Very much unlike the ultimate consumer, the organisational buyer will be motivated by budgetary considerations, such as profit goals, expense quotas and cost-benefit analysis.

3) Product Specification

The buying organisation in this step will proceed to the item’s technical specifications. For this, the buyer will do a value analysis to appraise a supplier’s effectiveness. Value analysis involves the review of product specifications about requirements, the identification of unnecessary cost elements and suggestions for their elimination.

4) Supplier Search

The shopper now tries to identify the most appropriate vendors. The customer has to be certain that their suppliers meet the standard of performance and quality for which they have worked out their operational plans. They will find out ways to accurately assess vendor capabilities, mainly in the areas of production, financial strength, technology and management. So, at times the vendors will be dropped from the list of considerations because they may not be able to supply the needed quantity or because of a poor reputation in the market. And finally, the customer will be left to choose the supplier from the ‘finally approved list’ of qualified suppliers.

5) Proposal Solicitation

The next stage demands qualified suppliers to submit proposals. Commonly, the supplier will furnish information in the form of a catalogue or send their sales representative to the customer with the necessary information. In case of a more complex or costly item, the buyer will prefer to have a detailed written proposal from the supplier.

The proposals must be marketing documents and not only technical documents. In the case of oral presentations, the supplier must be able to generate confidence in the buyer about the company’s capabilities and availability to be able to stand out amid the competition.

6) Supplier Selection

Now the stage is set whereby the members of the buying centre will review the proposals and take a decision for the final selection of the supplier. This buying centre will generally draw up a list of the desired supplier features and their relative importance. A few features looked out for in a prospective supplier are –

i) Technical support services.

ii) Prompt delivery.

iii) Quick response to customer needs.

iv) Product quality.

v) Supplier reputation in the market.

vi) Product price.

vii) Extension of credit, and so on.

In this stage, the buyer will do vendor analysis to ascertain not only the technical competence of the various suppliers but also their ability to deliver on time and also provide the necessary services.

7) Purchase Routine Selection

This stage involves placing an order (specifying all terms of purchase) with a dealer who processes it and ships the product. It is then received, approved, and then payment is made. Status reports within the company will let management know whether time-tables are being met or not. Rather than writing a purchase order for each purchase in a straight re-buy situation, companies often negotiate a contract to cover purchases over a specific length of time.

8) Post-Purchase Evaluation

The last step in the buying decision process involves an evaluation of the supplier’s performance by the shopper. This is an important stage in providing feedback so that the buyer and seller will be reasonably able to work as a team. Management may periodically have several units rate the supplier’s performance on such criteria as product delivery, quality, and post-sale service. The overall rating developed is used by the buyer to decide between continuing to use the supplier items or perhaps switching to an alternative source. Dealers may also receive the report so that they can modify their performance where needed to better serve customers’ needs.

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