THE NATURE OF INDUSTRIAL BUYING AND BUYING

BEHAVIOUR

Learning Objectives
Understand Organizational buying objectives.
Gain knowledge of buying activities, including different
phases in buying decision process, types of buying
situations; buy grid framework & its analysis.
Identify members of buying centers.
Understand organizational buying behavior.
Know how industrial buyers choose and evaluate
suppliers.
 PURCHASING OBJECTIVES OF FIRMS
• Reliability in delivery.
• Consistent product Quality.
• Lowest price (If delivery & Quality objectives are met)
• Excellent pre & post – sales services.
• Long – Term collaborative relationship.
Industrial buyers try to achieve organizational
purchasing objectives & personal objectives like
higher status, job security, salary increments,
promotions & social relationships.
 Industrial Buying Decision Process
• Marketers must study this for developing effective
marketing strategy.
• In Consumer Marketing, Household / Individual
consumer / Buyer makes buying decisions based on
certain mental stages like (i) Problem (Need) Recognition,
(ii) Information Search (iii) Evaluation
(iv) Purchase decision (v) Post Purchase Behavior
• In Industrial Marketing, Buying Decision making process
is observable, involving many people in buying firm &
includes sequential activities / stages / phases, as follows:
 (A) PHASES IN INDUSTRIAL BUYING DECISION MAKING
PROCESS / BUYPHASES
• PHASE –1 :- Recognizing A problem / need.
• PHASE – 2 :- Determining Characteristics &
Quantity of needed product / Service*.
• PHASE – 3 :- Developing specifications of the product*.
• PHASE – 4 :- Searching & Qualifying Suppliers.
• PHASE – 5 :- Obtaining & Analyzing suppliers’ offers*
• PHASE – 6 :- Evaluating & Selecting Suppliers.
(shown on next slide)
• PHASE – 7 :- Selecting an order routine
• PHASE – 8 :- Post – Purchase evaluation
* These are in addition to five stages of consumer buying
decision process.
 A SUPPLIER EVALUATION SYSTEM.
ATTRIBUTE/ WEIGHT/ SUPPLIER’S SUPPLIER’S
FACTOR IMPORTANCE PERFORMANCE RATING SCORE

PRICE 15 0.5 07.5

QUALITY 30 0.7 21.0

DELIVERY 25 0.6 15.0

SERVICE 20 0.7 14.0

FLEXIBILIY 10 0.4 04.0

TOTAL 100   61.5

 (B) Buying Situations / Buy classes
3 Common types of purchases / buying situations
i.  New Task / New Purchase :
Here, buyers have limited knowledge and experience of the
new product/service. Hence, more information is obtained,
more people are involved, risks are more, and decisions take
longer time.
ii. Modified Rebuy / Change in supplier :
This situation occurs when the firm is not satisfied with the
performance of existing suppliers, or there is a change in
product specs. Hence, the need for searching alternate
suppliers.
iii. Straight Rebuy / Repeat purchase :
Here, the buying firm places repeat orders on suppliers who
are currently supplying certain products/services. Such
decisions are routine, with less risks and less information
needs, and can be taken by junior executives.
 (C) Buygrid Framework
BUYPHASES BUYCLASSES
  New Task Modified Straight
Rebuy Rebuy
1. Problem Recognition Yes May Be No
2. Characteristics of Product Yes May Be No
3. Product Specification Yes May Be No
4. Supplier Search Yes Yes No
5. Analyzing Supplier Offers Yes Yes May Be
6. Supplier Selection Yes Yes No
7. Order – Routine Selection Yes Yes May Be
8. Post Purchase Review Yes Yes Yes
 BUYGRID FRAMEWORK ANALYSIS
• All Phases are Applicable for a New Task.
• Some Phases are Applicable for modified / Straight
Rebury.
• New task situation is most difficult since buyers have
less knowledge, no experience & more people involved.
• Modified Rebury is not difficult situation since it has few
activities.
• Straight rebury situation is handled routinely, as repeat
purchases are made.
 (D) Buying Center roles & key members.
Roles of Buying center members are
• Initiators. First recognize problem / need. Any individual in
buying firm – often, users.
• Buyers. Carry out purchase activities. They are purchase officers
/ executives.
• User. Any person who uses the product / service.
• Influencers. Influence buying decision. Technical people are
often key influencers.
• Deciders. Make buying decisions. Senior executives are deciders
for high value & complex products. For straight rebuy / routine
purchase, junior purchase officer can decide.
• Gatekeepers. They control / filter information & meetings with
buying center members. Often, P.A. / Junior person attached to
purchase head is the gatekeeper.
 (E) Identifying key members of buying centre
• Sales / Marketing persons must identify important members of buying
centre.

• Buying centre consists of individuals and groups who take part in buying
decision making process, have common objectives & share common risks.
It is also called purchase committee, buying committee or decision making
unit.

• Members of buying centre are

(i)  Technical persons. Represent design,production/operations,
maintenance, Q.C., Industrial Engg. Depts.
(ii) Purchasers / Buyers. Purchase / Materials dept. persons.
(iii) Accounts / Finance persons.
(iv) Marketing persons
(v)  Top management persons. G. M. & above.
 (F)  Organizational buying behavior
• Industrial / business buyers are influenced by many factors.
Two most important factors are (i) Organizational factors /
task – oriented objectives, like best product quality, lowest
price, dependable delivery.
(ii) Personal factors / Non-task oriented objectives, such as
good increments, promotion, Job security, personal favors.
• When suppliers’ offers are similar, buyers can satisfy
organizational objectives from any supplier. Hence, personal
factors become important.
• However, when suppliers’ offers differ substantially, buyers
give importance to organizational factors to satisfy
organizational objectives.
 Buying models
• Many models have been developed to explain organizational
buying behavior. One of the comprehensive models is the Sheth
model, described below.
• The Sheth model of industrial buyer behavior, shown below ,
focuses on (i) Psychological aspects of individual buyers
(Component 1), (ii) Conditions causing joint decision making
(Component 2), (iii) Conflict among those involved in decision
process & resolution of conflict
(Component 3).
• Situational factors include economic conditions, labour disputes,
mergers & acquisitions. The model does not explain their
influence on buying process.
Component (1) Component (2) Component (3) Situational Factors

Differences among Variables that Determine Methods used for

individual buyers if buying decision is conflict resolution
caused by factors : autonomous or joint : in joint-decision
 Background of A) Product Specific making process :
individuals (Education, Factors :
role & life style).  Time Pressure  Problem Solving
 Their information  Perceived Risk  Persuasion Supplier or
sources.  Type of Purchase  Bargaining Brand Choice
 Active Search B) Company Specific  Politicking
 Perceptual Distortion Factors :
 Satisfaction with  Company Size
past purchases  Company Orientation
 Degree of
Centralisation

Fig. : THE SHETH MODEL OF INDUSTRIAL BUYER BEHAVIOUR

W E B S T E R A N D W IN D M O D E L

E n v ir o n m e n ta l Va r ia b le s
 P h y s ic a l, Te c h n o lo g ic a l
 E c o n o m ic , C u ltu r a l
 P o lit ic a l a n d L e g a l
 L a b o u r u n io n s
 C u s to m e r d e m a n d s
 C o m p e t it iv e p r a c tic e s
 S u p p lie r in f o r m a tio n

O rg a n is a tio n Va r ia b le s
 O b je c t iv e s a n d g o a ls
 O r g a n is a tio n S t r u c tu re
 P u rc h a s in g P o lic ie s / P ro c e d u r e s
 E v a lu a tio n & r e w a r d s y s t e m s
 D e g r e e o f d e c e n tra lis a t io n

B u y in g C e n tre Va r ia b le s
 A u th o r ity, S iz e
 K e y in f lu e n c e r s
 I n t e r p e rs o n a l r e la t io n s h ip
 C o m m u n ic a t io n
O rg a n is a t io n B u y in g D e c is io n s
 C h o ic e o f S u p p lie r s
 D e la y d e c is io n & g e t m o r e in f o r m a t io n
 M ake, Lea se o r buy
 D o not buy

In d iv id u a l Va ria b le s
 P e r s o n a l G o a ls , Va lu e s
 E d u c a t io n , E x p e r ie n c e
 E x p e rt is e , J o b P o s itio n
 L if e s ty le , I n c o m e
 CUSTOMER SERVICE
• Important Customer Service Elements. Carry out market
survey to understand which of the following elements of
customer service are important to customers, what service
levels are expected by customers, the service levels offered by
the firm and its competitors.
  (i)   Pre – Sales Service : Advising, Informing, Problem
solving
(ii) During – Sales Service : Product availability,
on–time delivery, order cycle time, and information.
(iii)  Post – Sales Service : Warranty, AMC, Repair,
Installation & Training.
• Develop superior service package.
• Test, Set Goals, and Establish Control system
 SUMMARY OF CHAPTER
• Industrial marketers should understand that business buyers try to
achieve both organizational & personal objectives.
• Industrial buying decision process consists of eight steps / stages
(buyphases) & three types of buying situations (buyclasses).
• Buygrid model combines buyphases & buyclasses.
• Marketers must understand roles & key members of buying centre,
including key buying influencers.
• Many factors influence organizational buying behavior, but major factors
are organizational ( or task – oriented ) objectives and personal (non –
task oriented ) objectives.
• The Sheth model of industrial buyer behavior is comprehensive, focusing
of psychological & joint – decision making aspects.
• Webster and wind model is also widely used & comprehensive model on
buyer behavior.