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Industrial Buying Process & Buyer Behavior

Prof. Ronak Shah

Session Objective

Industrial Marketing

Stages of Organizational Buying Organizational Purchasing Situations Organizational Buying Criteria Role of Buying Center in Organizational Buying

Prof. Ronak Shah

Problem Recognition 2. Product Specifications Industrial Marketing 8. Ronak Shah 6. Acquire & Analyze Proposals . Selection of Order Routine Prof. Supplier Selection 5. Performance Review 4. Supplier Search 7. Description of Need 3.Stages of Organizational Buying 1.

Decision making process for Buying includes observable sequential stages involving many people of Organizations 1) Industrial Marketing Recognition of a Problem (Need): Quality/specifications of Product supplied by the existing supplier is not satisfactory. Prof. Ronak Shah .Stages of Organizational Buying Stages of Organizational Buying In Industrial Markets. or the material is not available when required. or too many breakdowns happen in the purchased product Technological changes can also create need for purchasing the product Ex: Need to provide employees with a good Cup of Coffee to enhance productivity.

Cappuccino Prof. Should also provide different Varieties like – Cardamom.Stages of Organizational Buying 2) Industrial Marketing Description of Need What type of Product (Goods or Services) to be considered What Quantity of Product to be needed Level of Technical Advancement of the Product Internal / External Source of Information for the Product to be purchased The Buying firm will try to Answer Following Questions… Ex: Offering a Coffee Machine that brews One Cup of Coffee at a time according to each employee’s preference. Ronak Shah .

Stages of Organizational Buying 3) Industrial Marketing Prepare Product Specifications Putting Product requirements on Paper Prepared by Purchase Department with the help of internal Technical person or by involving outside source such as Supplier or Consultant Industrial Marketer has a great opportunity to get involved at this stage and molding Product Specifications which fit best to their own Product Ex: Firms need a simple system for brewing a good cup of coffee. Quantity requirements are easily correlated to the number of coffee drinkers. Ronak Shah . Ex: Supplier’s Role in Government Tenders Prof.

Govt.Stages of Organizational Buying 4) Industrial Marketing Search & Qualify Potential Suppliers Obtain Information on all available suppliers from various sources like – Trade Journals. Industrial Directories.e. Catalogues. etc. Trade shows. Ronak Shah . Institution.) Ex: Nestle & Coca Cola are available vending Machine Supplier here Ex: DGS&D’s Role in Govt. The Qualifying Criteria for acceptable Supplier depends on the type of Organization (i. Commercial Enterprise. Sales Calls. Undertakings Prof. Undertaking. etc. Internet.

Transportation Cost. Ex: May involve competitive bidding. # Request for Information / Request Prof. or a Formal Bid which includes – Product Specification. Quotation. Ronak Shah for Proposal . Taxes & Duties applicable. Delivery Period. Payment Terms.Stages of Organizational Buying 5) Industrial Marketing Obtain & Analyze Supplier Proposals Send Enquires (RFI/RFP # ) Document to all Qualified Suppliers Suppliers will respond in the form of a Formal Offer. Implementation (of Software Solution) /Installation (of Capital Goods) Charges and Free Service Period For purchase of Routine Product. Stage-4 & Stage-5 may occur simultaneously. Cost of Transit Insurance. Price.

and Delivery Schedule and Payments. Frequency of Order Placement. Delivery. Prof. Further Negotiations may continue with selected suppliers on Price. 7) Selection of an Order Routine The Mechanism of Exchange of Goods and Services between a Buyer & a Seller is worked out The activities include – Placement of Order. The Quantity to be Purchased.Stages of Organizational Buying 6) Industrial Marketing Evaluation of Proposal & Selection of Supplier The Decision Maker will evaluate all proposals and selects One or More Suppliers The Decision Panel may use Scoring or Rating method to evaluate them. Ronak Shah . etc. Payment Terms.

Ronak Shah .Stages of Organizational Buying 8) Industrial Marketing Post Purchase Evaluation Review regarding the Performance of Supplier takes place The User Department gives a Feedback on whether the purchased item solved the problem or not Prof.

Ronak Shah .Stages of Organizational Buying Industrial Marketing Prof.

Ronak Shah .Types of Purchase or Buying Situation Industrial Marketing New Purchase Straight Rebuy Modified Rebuy Prof.

– Buyers operate in the extensive problem solving stage. •Lack strong inclination toward a solution. – Significant amount of information is required. Ronak Shah . •Buyers lack well defined criteria. Prof.Types of Purchase or Buying Situation Industrial Marketing New Purchase The problem or need is totally different from previous experiences.

Ronak Shah . – The specifications of the product-to-be-purchased have changed a bit.Types of Purchase or Buying Situation Industrial Marketing Modified Rebuy Decision makers feel there are more benefits to be derived by reevaluating alternatives. Prof. – Most likely to occur when displeased with the performance of current supplier.

Ronak Shah . Prof. –Buyers operate in the routine problem solving stage.Types of Purchase or Buying Situation Industrial Marketing Straight Rebuy The problem or need is a recurring or from continuing situation –Buyers have experience in the area in question. –Require little or no new information.

Buying Situation with Variables Buying Center Dimension People Involved Decision Time Problem Definition Buying Objective Supplier Considered Buying Influence Straight Rebuy 1 Short Well-Defined Modified Rebuy 2-3 Short New Buy Many Long Uncertain Good Solution New/Present Technical/Operatio n Personnel Industrial Marketing Minor Modification Low-Price Supplier Low-Price Supplier Present Purchasing Agent Present Purchasing Agent and others Prof. Ronak Shah .

Key Criteria for Organizational Buying Industrial Marketing Prof. Ronak Shah .

Sometimes he is an Initiator too Assistant to Purchase Manager Industrial Marketing Purchase Manager V P Operations / Purchase Prof. involved in Buying-Decision Process….Buying Centre It includes Individuals & Groups. Ronak Shah Production Engineer or Shop Floor Manager .

Ronak Shah .Buying Centre Buyer Formal authority to sign contracts Member of purchasing department Influences the vendor selection Not in technical details Main criteria: price + terms and conditions of the contract Industrial Marketing Prof.

Ronak Shah .Buying Centre User Person working with the product Interested in benefits and unobstructed function of the product to buy Large knowhow and preconceived opinion Influencer A person with high technical knowledge and practical experience Industrial Marketing Prof.

Ronak Shah .Buying Centre Gatekeeper Controls the flow of information within the buying center Assistant of Buey or Decision maker Influences by preparing the relevant documents Decider Right to say yes or no Mightiest person Industrial Marketing Prof.

Ronak Shah .Factors Influencing Organizational Buying Industrial Marketing Prof.

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