BUSINESS BUYER BEHAVIOR

Features or Characteristics of Business Markets

Few but bulk buyers

Geographical concentration of buyers
Variable demand : Demand is derived demand
Inelastic demand: Firms cannot change rapid
changes in structure of production
Systematic purchasing: Direct purchase, very
few middlemen, purchase by purchase
department through tenders
Multiple buying influence
Reciprocation: Mutual buying
Lease Agreements

BUSINESS BUYER BEHAVIOR

Difference between consumer and
business buyer market
CHARACTERISTICS

CONSUMER
MARKET

BUSINESS MARKET

1. DEMAND

DIRECT

DERIVED

2.NO OF CUSTOMERS

LARGE

FEW

3.LOCATION

DISPERSED

CONCENTRATED

4.NATURE OF BUY

PERSONAL

PROFESSION

5.NO OF BUYING
ROLES

FEW

MANY

6.NEGOTIATIONS

EASY

COMPLEX

7.PROMOTION

ADVERTISING

PERSONAL SELLING

BUYING SITUATION IN THE INDUSTRIAL MARKETING

Industrial marketing usually involves three

different types of buying situations. They are:
New Task
Straight re-buy
Modified re-buy
NEW TASK
In new task situation, more number of people
are involved in the decision making process
The seller try to meet all the buying participants
of the organization and convince them
This leads to higher uncertainty and cost to the
seller

BUYING SITUATION IN THE INDUSTRIAL MARKETING

STRAIGHT RE-BUY
Here the organization follow routine step of
informing sellers about their requirements
and supply specifications
This provides so much flexibility to both the
buyers as well as the sellers
Company has the list of suppliers and
according to the requirement at the floor
level, the order will be placed to the
supplier
After the advent of ERP, the method of rebuy has become simpler and easier

BUYING SITUATION IN THE INDUSTRIAL MARKETING

MODIFIED RE-BUY
In this stage buyer wants either product
modification, price modification, terms modification
or suppliers modifications
BUYING ROLES IN THE INDUSTRIAL
MARKETING
Many business organizations have buying center or
buying committee
The characteristics of buying center are:
Several individuals can occupy a given role and one
individual can occupy multiple roles
The buying center may include people outside the
organization such as govt. officials, consultants, technical
advisors and other members of the marketing channel

BUYING SITUATION IN THE INDUSTRIAL MARKETING

Different members of the buying center

have different influences
Members of buying center have different
personal motivation, perceptions and
preferences. This depends on age, income,
education, job position etc

DIFFERENT BUYING ROLES

Factors Influencing Business Buyers

1. Economic Development
o. If the economy is growing rapidly usually the
consumption also grows proportionately
2. Demand Conditions
o. Raw materials required should be matched
with the demand condition of the company. If
there is an irregular or seasonal demand
exists, then company should adjust their
supplied
3. Political and Legal Environment
o. Any change in the government policy will
have direct or indirect impact on the company

Factors Influencing Business Buyers

4. Competitive Environment
o Company has to identify the competitors move
o The technology adopted by the competitors
should also be carefully observed
5. Culture and Customs
6. Organizational Objectives
o Purchasing objectives are derived from the
organization objectives
7.Organizational Policies and Procedures
8. Organizational Structure and Systems
9.Interpersonal Factors
10. Individual Factors

Retain Chains and Future B2B Trade in India- Cash & Carry Scheme

Cash and carry scheme focuses on small wholesale

customer who buy in bulk and pay in cash
It allow only authenticated bulk buyers to transact the
business
Medium sized business such as retail stores, hotels,
restaurants, caterers, exporters etc can buy from cash
and carry outlets at prices much cheaper than market
rate
In its original form, owners of cash and carry outlets
buy from producers directly at very high volume by
avoiding middlemen like wholesalers and stockist
They also establish their own brand
Volume purchase and removal of middlemen result in
substantial cost reduction and part of this savings goes
to B2B customers

Cash and Carry Scheme

How does cash and carry outlets
affect the business?
It affects various players in Indian B2B
supply chain
De-layering of Indian distribution system
may pose threat to middlemen

Cash and Carry Scheme

Where does small scale manufacturers
and exporters stand?
Small scale manufactures may enter into
collaboration with retail chains and hence
support them favorably
It will bring opportunities for small business
owners by helping them to maintain
stability in quality standard, avoid
uncertainty about round the year
availability and wide fluctuations in market
price

STEPS IN BUSINESS BUYING PROCESS

Problem
Recognition

Need Description

Production
Specification

Supplier Search

Proposal
Solicitation

Supplier Selection

Order Routine
Specification

Performance
Review

Steps in business buying process

Stage 1 : Problem Recognition
Problem can be recognized either from internal
stimuli or external stimuli
Internal stimuli is the internal requirements
External stimuli like trade show, conference also
help the company to identify the problem
Stage 2: Need Description
The need description includes:
Characteristics and quantity of the items needed
For complex products team assessment is required
The required items are assessed on the basis of
reliability, durability, price and other attributes
needed in the item

Steps in business buying process

Stage 3: Product Specification
Organization develops detailed product
specification with value analysis
In the value analysis company analyses the
components and their production process
Stage 4: Supplier Search
Suppliers can be searched through trade
directories, computer search, phone, trade
advertisements and trade shows
The suppliers task is to get listed in major
business directories, develop strong advertising
and promotion program and build good
reputation in the market place

Steps in business buying process

Stage 5: Proposal Solicitation
The buyer now will invite qualified suppliers
to submit their proposals
If the product is of complex nature and
expensive, the buyer requires a detailed
written proposal from each qualified supplier
This confirms that the business marketers
should be skilled in researching, writing and
presenting proposals
The proposals should be a marketing
document and not a technical document

Steps in business buying process

Stage 6: Supplier Selection
This stage is also known as vendor selection
During this stage companies will prepare a check list
and weightage is assigned against each checklist point
and evaluated
Some of the important factors that are considered in
vendor evaluation are:
Quality
Delivery
Communication
Competitive prices
Servicing
Technical advice
Performance history
Reputation

Steps in business buying process

Stage 7: Order Routine Specifications
The buyer now negotiates the final order with the
chosen suppliers by listing technical specifications, the
quantity needed, the expected time of delivery, return
policies, warranties etc
In MRO (Maintenance, Repair, Operating Items) items,
the buyers are generally moving towards blanket
orders or contracts
A blanket order establishes a long term relationship
where the supplier promises to resupply the buyer as
and when needed on agreed price terms over a
specified period of time
In modern ERP system, such orders automatically are
automatically send from the buyer to the seller when
stock is needed

Steps in business buying process

Step 8: Performance Review
The performance review of the supplier
will help to decide whether to continue
with existing suppliers or should search
the new vendor

BUY-GRID MODEL
Buy Grid Model is developed to understand
the business buying process in three different
BUYING
PROCESS NEW TASKS MODIFIED RESTRAIGHT REsituations
BUY

1.Problem
Recognition

2.General need
description

(sometime)

3.Product
specification

4.Supplier search

5.Proposal
solicitation

(sometimes)

6.Supplier selection

7.Order routine
specification

8.Performance

BUY