Consumer Behavior

MBA MM 3201
Business Buying Behavior
 Business Buying Behavior

Chapter concepts:

• Business markets.
• Organizational or business buying.
• The buying centre.
• Major influences on industrial buying behavior.
• The purchasing process.
 Business Buying Behavior

• Business market consists of all the organizations that acquire

goods and services used in the production of other products or
services that are sold, rented or supplied to others.

• Marketers need to understand these organizations’ needs,

resources, policies and buying procedures.

• Organizational buying is the decision making process by

which formal organizations establish the need for purchased
products and services and identify, evaluate and chose among
alternative brands and suppliers.
 Business Buying Behavior

• Business markets have several characteristics that distinguish

them from consumer markets.

 Fewer Buyers

 Larger buyers

 Close supplier-customer relationship

 Geographically concentrated buyers

 Business Buying Behavior

 Derived demand

 Inelastic demand

 Fluctuating demand

 Professional Purchasing

 Multiple sales calls

 Direct purchasing

 Reciprocity
 Business Buying Behavior

The Buying center:

• The decision making unit of a buying organization is called

buying center.

• The buying center includes all members of the organization

who play any of the seven roles in the purchase decision
process.

1. Initiators: Give requisition for goods or services to be

purchased. They may be users also.
2. Users: Those who ultimately use the products.
 Business Buying Behavior

3. Influencers: People who influence the buying decision. They

help define specifications of the products.
4. Deciders: People who decide on product requirements or
suppliers.
5. Approvers: People who authorize the proposed actions of
deciders or buyers.
6. Buyers: People who have formal authority to select the supplier
and arrange the purchase terms.
7. Gatekeepers: People who have the power to prevent sellers or
information from reaching members of the buying center.
Example, purchasing agents etc.
 Business Buying Behavior

Major Influences on Industrial Buying Behavior

ENVOIRNMENTAL
ORGANIZATIONAL
 Level of demand INTERPERSONAL
 Economic outlook  Objectives INDIVIDUAL
 Interest rate  Interests
 Rate of  Policies  Age
Technological  Authority  Income Business Buyer
change  Procedures  Education
 Political &  Status  Job position
regulatory  Organizational  Personality
developments structures  Empathy  Risk attitudes
 Competition  Culture
 Social  Systems  Persuasiveness
responsibility
concerns
 Business Buying Behavior

The Purchasing/Procurement Process:

1. Need or problem recognition

2. Definition of characteristics and quantity required
3. Development of specification to guide the procurement
4. Search for and qualification of potential sources
5. Acquisition and analysis of proposals
6. Evaluation of proposals
7. Selection of an order routine
8. Performance feedback and evaluation
 Business Buying Behavior

• The need may be for a machine in the existing plant to improve

efficiency or it may be setting up a new project to manufacture
new product/s.

• Depending on the nature of need, characteristics and quantity

of the requirement are defined.

• This leads to detailed technical specifications of the products

required. Services of outside agencies may be availed.

• Potential sources are identified and their capabilities are

ascertained.
 Business Buying Behavior

• The next step involves soliciting proposals.

• The proposals are scrutinized based on following criterion:

 Past reputation.
 Efficiency, durability and maintainability of the machine.
 Delivery period
 Terms of payment
 Price
 Guarantees offered
 Business Buying Behavior

 After sales service.

• The proposals received are evaluated and some of these may

be short listed.

• Depending on the nature of the requirement, in some cases,

buyer may hold discussions with the short listed vendors and
selects one for placement of Purchase order.

• Format of the order is prepared and discussed with the vendor

for placing formal purchase order.
 Business Buying Behavior

• Post order follow up is an important activity that involves

periodic evaluation of performance of the vendor for timely
execution of the purchase order.
 Business Buying Behavior

Recap:

• Business markets.
• Organizational or business buying.
• The buying centre.
• Major influences on industrial buying behavior.
• The purchasing process.