BUSINESS BUYING BEHAVIOUR

Sometimes described as Business to Business buyer or industrial buyer. Organizations that buy goods and services for further production of other goods and services, reselling, renting or supplying to others( Kotler and Amstrong, !!"#

4 main categories of a Business buyers :

$. Producers %urchase goods and services to produce other products. &'amples( manufacturers, construction builders . Resellers )holesalers or retailers that purchase finished goods and resell them for a profit. *. Government +ederal, state and local bodies ,hich purchase goods to provide benefits to the public at large. -. Institutions .ollege, /niversities, schools, hospitals

Differences bet een Or!"ni#"tion"l "nd $onsumer %"r&et $'"r"cteristics Dem"nd Distribution structure N"ture of bu(in! unit )(*e of decision decision *rocess Use of reci*rocit( Use of le"sin! Dem"nd 0emand for business products is derived demand and therefore suppliers must monitor demand patterns and preferences of final consumers. Or!"ni#"tion"l %"r&et Or!"ni#"tion"l Direct %ore Profession"l "nd %ore com*le+ "nd form"li#ed Yes Gre"ter $onsumer %"r&et Individu"l Indirect %ore Person"l Sim*ler "nd inform"l No ,esser

0emand for organizational product is inelastic. A situation in ,hich the supply and demand for a good are unaffected ,hen the price of that good or service changes.

An e'ample of perfectly inelastic demand ,ould be a life s"vin! dru! that people ,ill pay any price to obtain. &ven if the price of the drug ,ere to increase dramatically, the 1uantity demanded ,ould remain the same.

0emand for organizational products is more volatile. 2eans3a decrease consumer demand ,ill lead to a much larger change for business products. &'ample( ,hen the demand for proton cars decreases, the demand for tyres used in the production also reduces.

Distribution Structure 2ore common in organization mar4et because products are often sold in larger 1uantities.

N"ture of Bu(in! Unit Organizational buyers involve many people and also professional approach. Some organization hires purchasers ,ho concentrate on ma4ing better purchaser for the organization.

)(*e of Decisions "nd Decision *rocess 5he purchase decision for organization is more comple' as it involves price negotiations, payment terms, deliver date and so on. 6t ta4es months and also involved lots of money and technical interactions in an organization. 5he decision process is more formal ,here details on products and suppliers are searched thoroughly.

Use of Reci*rocit( Reci*rocit( - mutu"l or coo*er"tive e+c'"n!e of t'in!s it' ot'ers for mutu"l benefit.

Business buyer purchase from their o,n customer. &'ample( 2anufacturer of plastic container may buy chemicals used in the production from the customer a chemical manufacturer.

Use of ,e"sin! ,e"sin! - contr"ct of rentin! l"nd/ buildin! Business tend to lease products for use as is uses less capital, better services are the advantages business gain. &'ample( 2achines, e1uipment, land, building

Bu(in! centers 5he decision ma4ing unit in an organization. 6ncludes all members in the organization in purchase decisions. &'ample( %urchasing 0epartment or %urchasing Officer and he or she plays the role of a buying centre. 5he role of a !"te&ee*er only e'its in the buying centre.

E-Procurement and Buying on the Internet: Online purchasing .ompany buying sites &'tranets

Adv"nt"!es Access to ne, suppliers 7o,ers costs Speed in order processing and delivery Share information Sales Service and support

Dis"dv"nt"!es .an erode relationships as buyers search for ne, suppliers Security

Major Types of Buying Situations "0 Str"i!'t rebu(1 is a routine purchase decision such as a reorder ,ithout any modification b0 %odified rebu(1 is a purchase decision that re1uires some research ,here the buyer ,ants to modify the product specification, price, terms, or suppliers c0 Ne t"s&1 is a purchase decision that re1uires thorough research such as a ne, product

RO,ES IN )HE PUR$HASING PRO$ESS DO%INAN) PEOP,E Users G"te&ee*ers RO,ES %eople in the organization ,ho uses the product 2embers ,ho control the information flo, in relation to purchasers. &'ample( Secretary to 2anager maybe the 89ate: as she controls the re1uest from others in the department %eople ,ho influence the buying decision 5he person ,ho have formal and informal po,ers to choose the final vendors or brands. 2embers ,ho have formal authority to select vendors and negotiate the purchases.

Influencers Deciders Bu(ers

BUSINESS BUYING DE$ISION2%A3ING PRO$ESS

5here are 4 m"in st"!es in the business buying decision ma4ing process(

50 NEED RE$OGNI)ION PHASE a# %roblem ;ecognition o Someone sees that specific product or services can solve a problem or fulfill the need in the organization. 2aybe internal stimuli < Organization may need to replace an old computer 2aybe e'ternal stimuli- 2anager sees machine at a trade e'hibition.

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b# 9eneral =eed 0escription o o o 0escribe the characteristics and 1uantity of the needed item. At this stage, the buying centre may need to discuss ,ith technical people to define the type of products needed to complete the tas4. 0efining the product ,ill re1uire ran4ing according to its importance.

c# %roduct Specification %urchasing department ,ill need to develop the technical spec for the product re1uired.

60 SUPP,IER IDEN)I7I$A)ION PHASE a# Supplier Search Search for the 1ualified supplier and starts ,ith the available list of suppliers from the company:s record.

b# %roposal Solicitation o %eople at the buying centre ,ill re1uest for proposals or bids from >potential suppliers. 6f it:s a comple' buying then a ,ritten proposal may be re1uested from the suppliers.

c# Suppler Selection o Buying centre analyze the choice of proposal and select a supplier.

=ormally a rating system is developed in ,hich the rating may include( ?onesty, competitive process, customer service, reputation, and location and performance history.

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a# Order %lacement o o Once the supplier has been selected, the purchasing agent ,ill place the order and determine on the delivery instructions. 5his may include the 0O, information on the product, 1uantity, methods of payment, price, and mode of delivery, payment terms in ,hich all are detailed out.

b# %erformance ;evie, o o %urchaser:s and users may need to monitor the performance of the supplier 5his revie, ,ill determine ,hether to continue, change or stop the arrangement.

F !T"#S

FFE!TI$% B&SI$ESS B&'E# BE( )I"&#

50 ENVIRON%EN)A, 7A$)ORS o Business buyer need to pay attention to the economic climate, political, technological and also competitive factors. &'ample( 0uring recession, companies may defer investments or purchase ne, e1uipment until the economic situations improves. .ultural also affects on the buying decision process across the globe. 0emand and Supply conditions ( labor and ra, material# is another factor that need to be consider as an increase in the price of ra, materials may force organization to loo4 for domestic alternatives.

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60 ORGANI8A)IONA, 7A$)ORS o Business buying decisions are affected by the organizations goals and obAectives, policies and procedures, structures and purchasing system.

5his is because organizations obAectives and goals may differ in the criteria use to ma4e buying decisions. &'ample( 6f a firm ,ants to be a cost leader in an industry then the materials purchased are at reasonable 1uality at lo,est possible.

40 IN)ERPERSONA, 7A$)ORS o 5here are many people in the buying centre and they influence other in the organization. 6ndividuals in an organization may influence the buying decision process maybe because of the authority, status, e'pertise and relationship ,ith other buying centre members. Buying decisions may also be affected by personal, social, cultural and psychological factors. %o,er, conflicts may also complicate buying process as ,e need to remember that individuals in the buying centre may have different e'periences and s4ills and also personality.