Nature of Industrial Buying

Industrial Marketing, 2nd Edition By Krishna K Havaldar, Tata McGraw - Hill Companies Chapter - 3

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Organizational Buying 
The buying decisions of organizations are influenced by environmental factors, organizational factors, interpersonal factors and personal factors

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Buy Phase in Industrial Buying 
Buying is an organizational ²decision making process  There are 8 phases in the buying-decision process  In Industrial markets the buying decision making process includes observable sequential stages, understanding these phases helps in developing appropriate selling strategy

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8 phases in Industrial Buying

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8 phases in Industrial Buying
Identify the problem ‡Industrial marketer identifies a problem in the buying organization and suggests how the problem is solved General Need Description ‡Once the problem is recognized, next phase is to resolve the problem ‡For technical products, the technical department will suggest the solution and for non-technical, departments suggest products or service All rights reserved © Focus EduCare 2009

8 phases in Industrial Buying
Product Specification ‡Develop a precise statement of the specifications of the product or service ‡Selecting right suppliers, recommend alternatives on sourcing, identify core competencies of company Supplier Search ‡Search of potential suppliers from vertical hubs, functional hubs, direct extranet links to major suppliers, trade journals, sales calls, catalogues, tradeshows and industrial directories and decide acceptable or qualifying suppliers
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8 phases in Industrial Buying
Analyzing Supplier Proposal ‡Once the qualified suppliers are decided, the buying organization obtains the Request for proposals (RFPs) ‡Supplier proposal or quotation of product specification, price, delivery Supplier Selection period, payment terms, taxes of ‡Evaluation of the proposals and duties, freight charges and other competing suppliers and select relevant cost is enclosed in the suppliers proposal negotiations continue with ‡Further selected suppliers on price, payment and deliveries

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8 phases in Industrial Buying
Selection of an Order Routine ‡Placing of orders with selected suppliers, frequency of the order placements, levels of inventory, follow up of actual delivery, delivery per schedule with quality and payment terms Performance Review ‡Performance feedback of each supplier takes place and post-purchase evaluation

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Organizational Purchase Situation
Purchase Situation

Modified New Task Rebuy

Straight Rebuy

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Straight Rebuy

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Modified Rebuy

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New Task

Is a situation the company is buying the item for the first

The buying organization will typically have had little experience with the product or service

The risk involved is more, decisions may take longer time and top management is involved

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Participants in the Business Buying Process
Initiator

Gatekeeper

Influencer

Buyer

Approver

Decider

User

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Participants in the Business Buying Process 
Participants in the organizational buying process play as many as seven different roles, namely those of initiator, influencer, approver, user, decider, buyer and gatekeeper

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Participants in the Business Buying Process

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Participants in the Business Buying Process
‡Users also play a role of initiators ‡Individuals who use products or services ‡Define specifications of needed products ‡Approver endorse and agree to the purchase and also play a role of deciders

‡Gatekeepers control the flow of information regarding products and services and control the buying center ‡Assistants or junior person of purchase managers
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Key Members of Buying Center 
Top Management Executives  Managing Director, Presidents, Vice President or General managers  Approve purchase, decide guidelines and purchase policy  Technical People  Technical people are design engineers, production, quality control, R& D managers  Specify products, technical evaluation, feedback on product supplied, negotiate with suppliers

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Key Members of Buying Center 
Purchase/Material Department  Senior executives, junior levels, purchaser officers or assistants  Coordinate with technical people, top management, accounts as well the suppliers or vendors  Accounts/Finance for finalizing the financial approvals, mode of payment and insurance of bank guarantees  Marketing  Are the influencers in the buying process
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Summary 
The industrial marketing need to understand the purchasing objectives and purchasing activities of the industrial buyers. The industrial buyers are influenced by both purchasing objective of the firm and personal objectives  The industrial buyers are influenced by many factors , the major factors like environmental factors, organizational factors, interpersonal factors and personal factors  There are 3 common types of buying situations include new task, modified rebuy and straight rebuy  There are 8 phases of buying decision making process include Initiator, Influencer, Approver, User, Decider, Buyer and Gatekeeper. The industrial markets should identify the key members of buying centre in each buying decision

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Questions for Review 
What is the industrial buying process?  What is the B2B buying Decision Model?  What are the possible buy situations?  What is the industrial buying center? What are the functions of the members of the buying center?  An industrial marketer wants to supply seat covers to the major auto manufacturer who has been buying from 2 suppliers on regular basis for 2 years, as per the purchase policy cannot buy from 2 suppliers? what should the industrial marketer do to change the supplier?
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END OF SESSION 4

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