Chapter 3: Analyzing consumer and Business Market

Chapter Three
Analyzing Consumer and Business Markets and Buyer Behavior
The aim of buyer behavior model is to take the complex interrelated variables involved in
purchase decisions and to simplify them to be of use to the marketer. Buyer behavior
models have two basic functions:
1. They describe the parameters and characteristics affecting the purchase of certain
types of goods and services.
2. They allow predictions to be made of the likely outcomes of specific marketing
strategies

3.1. Analyzing Consumer Markets and Consumer Buyer Behavior

Consumer buying behavior- refers to the buying behavior of final consumers -
individuals and households that buy goods and services for personal consumption. All of
these final consumers combined make up the consumer market.

3.1.1. Models of Consumer Behavior

The central question for marketers is how consumers respond to various marketing
stimuli that the company might use. The company that really understands how consumers
will respond to different product features, prices and advertising appeals has a great
advantage over its competitors. Therefore, companies and academics have researched
heavily the relationship between marketing stimuli and consumer response. Their starting
point is the stimulus -response model of buyer behavior.

Marketing stimuli consist of the four Ps: product, price, place and promotion. Other
stimuli include significant forces and events in the buyer's environment: economic,
technological, political and cultural. All these stimuli enter the buyer's black box, where
they are turned into a set of observable buyer responses (shown on the right-hand side of
the following figure): product choice, brand choice, dealer choice, purchase timing and
purchase amount.

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3.1.2. Characteristics Affecting Consumer Behavior

Consumer purchases are influenced strongly by cultural, social, personal and
psychological characteristics, as shown in figure above. For the most part, marketers
cannot control such factors, but they must consider them. Paragraphs that follow describe
these factors.

I. Cultural Factors
Cultural factors exert the broadest and deepest influence on consumer behavior. The
marketer needs to understand the role played by the buyer's culture, subculture and social
class.

 Culture -culture is the most basic cause of a person's wants and behavior. Human
behavior is largely learned. Example: A child growing up in the United States is
exposed to these broad cultural values: achievement and success, activity,
efficiency and practicality, progress, material comfort, individualism, freedom,
external comfort, humanitarianism, and youthfulness. Marketers are always trying
to spot cultural shifts in order to imagine new products that might be wanted.
 Subculture- each culture contains smaller subcultures or groups of people with
shared value systems based on common life experiences and situations.
Subcultures include nationalities, religions, racial groups and geographic regions.
Many subcultures make up important market segments and marketers often design
products and marketing programmes tailored to their needs.
 Social Class- almost every society has some form of social class structure. Social
classes are society's relatively permanent and ordered divisions whose members
share similar values, interests and behaviors. Social class is not determined by a
single factor, such as income, but is measured as a combination of occupation,
income, education, wealth and other variables. Individuals can move from one
social class to another—up or down—during their lifetime. Because social classes
often show distinct product and brand preferences, some marketers focus their
efforts on one social class.

II. Social Factors

A consumer's behavior is also influenced by social factors, such as the consumer's small
groups, family, and social roles and status. Because these social factors can strongly
affect consumer responses, companies must consider them when designing their
marketing strategies.
 Reference Groups – reference groups consist of all of the groups that have a direct
(face-to-face) or indirect influence on a person’s attitudes. Groups that have a direct
influence and to which a person belongs are called membership groups. Some
membership groups are primary groups with whom there is regular but informal
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interaction - such as family, friends, neighbors and fellow workers. Some are
secondary groups, which are more formal and have less regular interaction. These
include organizations like religious groups, professional associations and trade
unions. Reference groups expose people to new behaviors and lifestyles, influence
attitudes and self-concept, and create pressures for conformity that may affect product
and brand choices. People are also influenced by groups to which they do not belong.
For example, aspirational groups are those the person hopes to join; as when a
teenage football player hopes to play some day for Manchester United. Dissociative
groups are those whose values or behavior an individual rejects.

Although marketers try to identify target customers’ reference groups, the level of
reference-group influence varies among products and brands. Manufacturers of
products and brands with strong group influence must reach and influence the
opinion leaders in these reference groups. An opinion leader is the person in
informal product-related communications who offers advice or information about a
product. Marketers try to reach opinion leaders by identifying demographic and
psychographic characteristics associated with opinion leadership, identifying the
preferred media of opinion leaders, and directing messages at the opinion leaders.
 Family- family members can strongly influence buyer behavior. We can distinguish
between two families in the buyer's life. The buyer's parents make up the family of
orientation. Parents provide a person with an orientation towards religion, politics and
economies, and a sense of personal ambition, self-worth and love. Even if the buyer
no longer interacts very much with his or her parents, the latter can still significantly
influence the buyer's behavior. In countries where parents continue to live with their
children, their influence can be crucial. Husband-wife involvement varies widely by
product category and by stage in the buying process. Buying roles change with
evolving consumer lifestyles. Almost everywhere in the world, the wife is
traditionally the main purchasing agent for the family, especially in the areas of food,
household products and clothing.
 Roles and Status-A person belongs to many groups - family, clubs, and
organizations. The person's position in each group can be defined in terms of both
role and status. Each role carries a status reflecting the general esteem given to it by
society. People often choose products that show their status in society. For example,
the role of brand manager has more status in some societies than the role of daughter.
As a brand manager, you will buy the kind of clothing that reflects your role and
status.

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III. Personal Factors

A buyer's decisions are also influenced by personal characteristics such as the buyer's
age and life-cycle stage, occupation, economic situation, lifestyle, and personality and
self-concept.
 Age and Life-Cycle Stage- people change the goods and services they buy over their
lifetimes. Tastes in food, clothes, furniture and recreation are often age related. Hence
smart marketers are attentive to the influence of age. Buying is also shaped by the
family life cycle - the stages through which families might pass as they mature over
time.
 Occupation- a person's occupation affects the goods and services bought. Blue-collar
workers tend to buy more work clothes, whereas white-collar workers buy more suits
and ties. Marketers try to identify the occupational groups that have an above average
interest in their products and services.
 Economic Circumstances- a person's economic situation will affect product choice.
Marketers of income sensitive goods closely watch trends in personal income, savings
and interest rates. If economic indicators point to a recession, marketers can take
steps to redesign, reposition and reprice their products.
 Lifestyle-people coming from the same subculture, social class and occupation may
have quite different lifestyles. Lifestyle is a person's pattern of living as expressed in
his or her activities, interests and opinions. Lifestyle captures something more than
the person's social class or personality. It profiles a person's whole pattern of acting
and interacting in the world.

Successful marketers search for relationships between their products and lifestyle groups.
For example, a computer manufacturer might find that most computer buyers are
achievement-oriented. The marketer may then aim its brand more clearly at the achiever
lifestyle.

 Personality and Self-Concept- each person's distinct personality influences his or her
buying behavior. Personality refers to the unique psychological characteristics that
lead to relatively consistent and lasting responses to one's own environment.
Personality is usually described in terms of traits such as self-confidence, dominance,
sociability, autonomy, defensiveness, adaptability and aggressiveness. Personality can
be useful in analyzing consumer behavior or certain product or brand choices.
Self-concept (or self-image) is related to personality. Marketers often try to develop
brand images that match the target market’s self-image. Yet it is possible that a person’s
actual self-concept (how s/he views him/herself) differs from his/ her ideal self-concept
(how she would like to view him/ herself) and from his/her others-self- concept (how s/he
thinks others see him/ her).

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IV. Psychological Factors

A person's buying choices are further influenced by four important psychological factors:
motivation, perception, learning, and beliefs and attitudes.

 Motivation-a need becomes a motive when it is aroused to a sufficient level of

intensity. A motive (or drive) is a need that is sufficiently pressing to direct the person
to seek satisfaction.
 Perception- a motivated person is ready to act. How the person acts is influenced by
his or her perception of the situation. Two people with the same motivation and in the
same situation may act quite differently because they perceive the situation
differently. Thus, perception is the process by which people select, organize and
interpret information to form a meaningful picture of the world.

Perception depends not only on physical stimuli, but also on the stimuli’s relation to the
surrounding field and on conditions within the individual. The key word is individual.
Individuals can have different perceptions of the same object because of three perceptual
processes: selective attention, selective distortion, and selective retention.

 Selective attention- people are exposed to many daily stimuli such as ads; most of
these stimuli are screened out—a process called selective attention. The end result is
that marketers have to work hard to attract consumers’ attention.

 Selective distortion- even noticed stimuli do not always come across the way that
marketers intend. Selective distortion is the tendency to twist information into
personal meanings and interpret information in a way that fits our preconceptions.
Unfortunately, marketers can do little about selective distortion.
 Selective retention- people forget much that they learn but tend to retain
information that supports their attitudes and beliefs. Because of selective retention,
we are likely to remember good points mentioned about a product we like and forget
good points mentioned about competing products. Selective retention explains why
marketers use drama and repetition in messages to target audiences

 Learning-when people act, they learn. Learning describes changes in an individual’s

behavior arising from experience. Most human behavior is learned. Theorists believe
that learning is produced through the interplay of drives, stimuli, cues, responses, and
reinforcement.
 Beliefs and Attitudes-through doing and learning, people acquire their beliefs and
attitudes. These, in turn, influence their buying behavior. A belief is a descriptive
thought that a person has about something. Marketers are interested in the beliefs that

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people formulate about specific products and services, because these beliefs make up
product and brand images that affect buying behavior.

People have attitudes regarding religion, politics, clothes, music, food and almost
everything else. An attitude describes a person's relatively consistent evaluations, feelings
and tendencies towards an object or idea. Attitudes put people into a frame of mind of
liking or disliking things, of moving towards or away from them.

3.1.3. Types of Buying Decisions Behavior

Consumer decision making varies with the type of buying decision. Consumer buying
behavior differs greatly for a tube of toothpaste, a tennis racket, an expensive camera and
a new car. More complex decisions usually involve more buying participants and more
buyer participation.

High involvement Low involvement

Significance difference Complex buying Variety seeking buying

b/n brands behavior behavior
Few differences b/n Dissonance buying Habitual buying behavior
brands behavior

There are four types of buying decision behavior:

1. Complex Buying Behavior- is a consumer buying behavior in situations
characterized by high consumer involvement in a purchase and significant perceived
differences among brands. Consumers may be highly involved when the product is
expensive, risky, purchased infrequently and highly self-expressive. Here buyers will
pass through a learning process, first developing beliefs about the product, then
attitudes, and then make a thoughtful purchase choice. Marketers need to help buyers
learn about a product –class attributes and their relative and about what the
company’s brand offers on the important attributes. They need to differentiate their
brand’s features, perhaps by describing the brand’s beliefs.
2. Dissonance–Reducing Buying Behavior -is a consumer buying behavior in
situations characterized by high involvement but few perceived differences among
brands .The products may be expensive, infrequent, or risky purchase, but there is
little differences among brands. In this case, because perceived brand differences are
not large, buyers may shop around to learn what is available, but buy relatively
quickly. They may respond primarily to a good price or to purchase convenience.
After the purchase, consumers might experience post purchase dissonance (after-sale
–discomfort) when they notice certain disadvantage of the purchased product brand
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or hear favorable things about brands not purchased. To counter such dissonance, the
marketer’s after sale communication should provide evidence and support to help
consumers feel good about the brand choices.
3. Habitual Buying Behavior-is a consumer buying behavior in situations
characterized by low consumer involvement and few significant perceived brand
differences. Consumers appear to have low involvement with most low cost,
frequently purchased products. Here marketers usually use price and sales
promotions to stimulate product trial.
4. Variety –Seeking Buying Behavior:-is a consumer buying behavior in situations
characterized by low consumer involvement but significant perceived brand
differences. In this case, consumers often look for a lot of brand switching. Here
brand switching occurs for the sake of variety rather than because of dissatisfaction.
The marketing strategy may differ for such product categories for the market leader
and minor brands.

3.1.4. The Buyer Decision Process

We will examine the stages that buyers pass through to reach a buying decision. We will
use the model in figure below, which shows the consumer as passing through five stages:
need recognition, information search, evaluation of alternatives, purchase decision and
postpurchase behavior. Clearly, the buying process starts long before actual purchase and
continues long after. This encourages the marketer to focus on the entire buying process
rather than just the purchase decision.

This model implies that consumers pass through all five stages with every purchase.
However, in more routine purchases, consumers often skip or reverse some of these
stages.

I. Need Recognition
The buying process starts with need recognition - the buyer recognizing a problem or
need. The buyer senses a difference between his or her actual state and some desired
state. The need can be triggered by internal stimuli when one of the person's normal
needs - hunger, thirst, etc - rises to a level high enough to become a drive. From previous
experience, the person has learned how to cope with this drive and is motivated towards
objects that he or she knows will satisfy it.

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A need can also be triggered by external stimuli. You pass a bakery and the smell of
freshly baked bread stimulates your hunger; you admire a neighbor’s new car; or you
watch a television commercial. At this stage, the marketer needs to determine the factors
and situations that usually trigger consumer need recognition.

II. Information Search

The consumer can obtain information about a product he/she needs from any of several
sources:
• Personal sources: family, friends, neighbors, acquaintances.
• Commercial sources: advertising, salespeople, dealers, packaging, displays.
• Public sources: mass media, consumer-rating organizations.
• Experiential sources: handling, examining, using the product.
As more information is obtained, the consumer's awareness and knowledge of the
available brands and features increases.
III. Evaluation of Alternatives
The stage of the buyer decision process in which the consumer uses information to
evaluate alternative brands in the choice set. The marketer needs to know about
alternative evaluation - that is, how the consumer processes information to arrive at brand
choices. Unfortunately, consumers do not use a simple and single evaluation process in
all buying situations. Instead, several evaluation processes are at work.

IV. Purchase Decision

This is the stage of the buyer decision process in which the consumer actually buys the
product. In the evaluation stage, the consumer ranks brands and forms purchase
intentions. Generally, the consumer's purchase decision will be to buy the most preferred
brand. A consumer takes certain actions to reduce risk, such as avoiding purchase
decisions, gathering more information and looking for national brand names and products
with warranties. The marketer must understand the factors that provoke feelings of risk in
consumers and must provide information and support that will reduce the perceived risk.

V. Postpurchase Behavior
This is the stage of the buyer decision process in which consumers take further action
after purchase based on their satisfaction or dissatisfaction. The marketer's job does not
end when the product is bought. After purchasing the product, the consumer will be
satisfied or dissatisfied and will engage in postpurehase behavior of interest to the
marketer. The decision is either to continue if satisfied or stop if dissatisfied.

3.2. Analyzing Business Market and Business Buyer Behavior

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The business market consists of all the organizations that buy goods and services to use
in the production of other products and services that are sold, rented or supplied to others.
It also includes retailing and wholesaling firms that acquire goods for the purpose of
reselling or renting them to others at a profit.

3.2.1. Characteristics of Business Market

In some ways, business markets are similar to consumer markets. Both involve people
who assume buying roles and make purchase decisions to satisfy needs. However,
business markets differ in many ways from consumer markets. The main differences are
in market structure and demand, the nature of the buying unit, and the types of decision
and the decision process involved. Now let us see areas of differences between consumer
and business markets.

a) Market Structure and Demand

 The business marketer normally deals with far fewer but far larger buyers than the
consumer marketer does.
 Business markets are also more geographically concentrated. For example, most of
Ethiopian business buyers are concentrated in Addis Ababa and other relatively big
towns.
 Further, business demand is derived demand - it ultimately derives from the demand
for consumer goods. Mercedes buys steel because consumers buy cars. If consumer
demand for cars drops, so will the demand for steel and all the other products used to
make cars. Therefore, business marketers sometimes promote their products directly
to final consumers to increase business demand.
 Many business markets have inelastic demand: that is, total demand for many
business products is not affected much by price changes, especially in the short run. A
drop in the price of leather will not cause shoe manufacturers to buy much more
leather unless it results in lower shoe prices, which, in turn, will increase consumer
demand for shoes.
 Finally, business markets have more fluctuating demand. The demand for many
business goods and services tends to change more — and more quickly -than the
demand for consumer goods and services does. Sometimes a rise of only 10 percent
in consumer demand can cause as much as a 200 percent rise in business demand
during the next period.
b) Nature of the Buying Unit
 Compared with consumer purchases, a business purchase usually involves more
buyers and a more professional purchasing effort. Often, business buying is done by
trained purchasing agents, who spend their working lives learning how to buy well.
 The more complex the purchase, the more likely that several people will participate in
the decision making process. Buying committees made up of technical experts and

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top management are common in the buying of primary goods. Therefore, business
marketers must have well-trained salespeople to deal with well-trained buyers.
c) Type of Decision and the Decision Process
 Business buyers usually face more complex buying decisions than do consumer
buyers do. Purchases often involve large sums of money, complex technical and
economic considerations, and interactions among many people at many levels of the
buyer's organization. Because the purchases are more complex, business buyers may
take longer to make their decisions.
 The business buying process tends to be more formalized than the consumer buying
process. Large business purchases usually call for detailed product specifications,
written purchase orders, careful supplier searches and formal approval.
 Finally, in the business buying process, buyer and seller are often much more
dependent on each other. Consumer marketers are usually at a distance from their
customers. In contrast, business marketers may work closely with their customers
during all stages of the buying process – from helping customers define problems, to
finding solutions, to supporting after-sales operations.

3.2.2. Main Types of Business Buying Situations

The business buyer faces many decisions in making a purchase. The number of decisions
depends on the buying situation: complexity of the problem being solved, newness of the
buying requirement, and number of people involved, and time required. Patrick Robinson
and others distinguish three types of buying situations: the straight rebuy, modified rebuy,
and new task.
I. Straight Rebuy- in a straight rebuy, the buyer reorders something without any
modifications. It is usually handled on a routine basis by the purchasing department.
Based on past buying satisfaction, the buyer simply chooses from the various
suppliers on its list.
II. Modified Rebuy- in a modified rebuy, the buyer wants to modify product
specifications, prices, terms or suppliers. The modified rebuy usually involves more
decision participants than the straight rebuy.
III. New Task-a company buying a product or service for the first time faces a new task
situation. In such cases, the greater the cost or risk, the larger will be the number of
decision participants and the greater their efforts to collect information. The new-
task situation is the marketer's greatest opportunity and challenge.

3.2.3. The Buying Center

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Webster and Wind call the decision-making unit of a buying organization the buying
center. It is composed of "all those individuals and groups who participate in the
purchasing decision-making process, who share some common goals and the risks arising
from the decisions."
The buying center includes all members of the organization who play any of seven roles
in the purchase decision process.
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 proposal and help define the product requirements.
3. Influencers- people who influence the buying decision. They often help define
specifications and also provide information for evaluating alternatives. Technical
personnel are particularly important influencers.
4. Deciders- people who decide on product requirements or on 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. Buyers may help shape product specifications, but they play their
major role in selecting vendors and negotiating. In more complex purchases, the
buyers might include high-level managers.
7. Gatekeepers- people who have the power to prevent sellers or information from
reaching members of the buying center. For example, purchasing agents,
receptionists, and telephone operators may prevent salespersons from contacting users
or deciders.

Buying centers usually include several participants with differing interests, authority,
status, and persuasiveness. Each member of the buying center is likely to give priority to
very different decision criteria. For example, engineering personnel may be concerned
primarily with maximizing the actual performance of the product; production personnel
may be concerned mainly with ease of use and reliability of supply; financial personnel
may focus on the economics of the purchase; purchasing may be concerned with
operating and replacement costs; union officials may emphasize safety issues, and so on.

Business buyers also respond to many influences when they make their decisions. Each
buyer has personal motivations, perceptions, and preferences, which are influenced by the
buyer’s age, income, education, job position, personality, attitudes toward risk, and
culture. Buyers definitely exhibit different buying styles. There are "keep-it-simple"
buyers, "own-expert" buyers, "want-the-best" buyers, and "want-everything-done"
buyers. Some younger, highly educated buyers are computer experts who conduct
rigorous analyses of competitive proposals before choosing a supplier. Other buyers are
"toughies" from the old school and pit the competing sellers against one another.

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3.2.4. The Process of Organizational Buying

At this point we are ready to describe the general stages in the business buying decision
process. Robinson and others have identified the following stages and called them buy
phases. The buy phase model describes the major steps in the business buying process.
In modified-rebuy or straight-rebuy situations, some stages are compressed or bypassed.
For example, in a straight-rebuy situation, the buyer normally has a favorite supplier or a
ranked list of suppliers. Thus the supplier search and proposal solicitation stages would
be skipped.

1. Problem Recognition
The buying process begins when someone in the company recognizes a problem or need
that can be met by acquiring a good or service. The recognition can be triggered by
internal or external stimuli. Internally, some common events lead to problem recognition.
The company decides to develop a new product and needs new equipment and materials.
A machine breaks down and requires new parts. Purchased material turns out to be
unsatisfactory, and the company searches for another supplier. A purchasing manager
senses an opportunity to obtain lower prices or better quality. Externally the buyer may
get new ideas at a trade show, see an ad, or receive a call from a sales representative who
offers a better product or a lower price. Business marketers can stimulate problem
recognition by direct mail, telemarketing, and calling on prospects

2. General Need Description and Product Specification

Next, the buyer determines the needed item's general characteristics and required
quantity. For standard items, this is simple. For complex items, the buyer will work with
others— engineers, users—to define characteristics like reliability, durability, or price.
Business marketers can help by describing how their products meet or even exceed the
buyer's needs. Here is an example of how a supplier is using value-added services to gain
a competitive edge. The buying organization now develops the item's technical
specifications. Often, the company will assign a product-value-analysis engineering team
to the project. Product value analysis (PVA) is an approach to cost reduction in which
components are studied to determine if they can be redesigned or standardized or made
by cheaper methods of production.

The PVA team will examine the high-cost components in a given product. The team will
also identify overdesigned components that last longer than the product itself. Tightly
written specifications will allow the buyer to refuse components that are too expensive or
that fail to meet specified standards. Suppliers can use product value analysis as a tool for
positioning themselves to win an account

3. Supplier Search

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The buyer next tries to identify the most appropriate suppliers through trade directories,
contacts with other companies, trade advertisements, and trade shows. Business
marketers also put products, prices, and other information on the Internet.

4. Proposal Solicitation
The buyer invites qualified suppliers to submit proposals. If the item is complex or
expensive, the buyer will require a detailed written proposal from each qualified supplier.
After evaluating the proposals, the buyer will invite a few suppliers to make formal
presentations. Business marketers must be skilled in researching, writing, and presenting
proposals. Written proposals should be marketing documents that describe value and
benefits in customer terms. Oral presentations should inspire confidence, and position the
company's capabilities and resources so that they stand out from the competition.

5. Supplier Selection

Before selecting a supplier, the buying center will specify desired supplier attributes and
indicate their relative importance. Business marketers need to do a better job of
understanding how business buyers arrive at their evaluations. The choice and importance
of different attributes varies with the type of buying situation. Delivery reliability, price,
and supplier reputation are important for routine-order products. For procedural-problem
products, such as a copying machine, the three most important attributes are technical
service, supplier flexibility, and product reliability.

The buying center may attempt to negotiate with preferred suppliers for better prices and
terms before making the final selection. Despite moves toward strategic sourcing,
partnering, and participation in cross-functional teams, buyers still spend a large chunk of
their time haggling with suppliers on price. Marketers can counter the request for a lower
price in a number of ways. They may be able to show evidence that the "total cost of
ownership," that is, the "life-cycle cost" of using their product is lower than that of
competitors' products. They can also cite the value of the services the buyer now receives,
especially if those services are superior to those offered by competitors.

6. Order-Routine Specification
After selecting suppliers, the buyer negotiates the final order, listing the technical
specifications, the quantity needed, the expected time of delivery, return policies,
warranties, and so on. Many industrial buyers lease heavy equipments like machinery and
trucks. The lessee gains a number of advantages: conserving capital, getting the latest
products, receiving better service, and some tax advantages. The lessor often ends up
with a larger net income and the chance to sell to customers who could not afford out-
rights purchase.

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In the case of maintenance, repair, and operating items, buyers are moving toward
blanket contracts rather than periodic purchase orders. A blanket contract establishes a
long-term relationship in which the supplier promises to resupply the buyer as needed, at
agreed-upon prices, over a specified period of time. Because the stock is held by the
seller, blanket contracts are sometimes called stockless purchase plans. The buyer's
computer automatically sends an order to the seller when stock is needed. This system
locks suppliers in tighter with the buyer and makes it difficult for out-suppliers to break
in unless the buyer becomes dissatisfied with the in-supplier's prices, quality, or service.
Companies that fear a shortage of key materials are willing to buy and hold large
inventories. They will sign long-term contracts with suppliers to ensure a steady flow of
materials.
7. Performance Review
The buyer periodically reviews the performance of the chosen supplier(s). Three methods
are commonly used. The buyer may contact the end users and ask for their evaluations;
the buyer may rate the supplier on several criteria using a weighted score method; or the
buyer might aggregate the cost of poor performance to come up with adjusted costs of
purchase, including price. The performance review may lead the buyer to continue,
modify, or end a supplier relationship. Many companies have set up incentive systems to
reward purchasing managers for good buying performance, in much the same way that
sales personnel receive bonuses for good selling performance. These systems are leading
purchasing managers to increase pressure on sellers for the best terms.

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