Industrial Buying Process

In consumer marketing, consumers make buying decisions based on certain  mental stages such as need recognition, information search, evaluation, purchase  decision, and post-purchase  behavior. But, in industrial markets the buying  decision making process includes observable sequential stages involving many  people in the buying organisation. The understanding of these steps/phases of  buying-decision making is helpful to an industrial marketer to develop an  appropriate selling strategy.

The purchasing activities of industrial buyers consist of various steps/phases in  buying decision making process. The importance of each step depends upon the  type of buying situation. The industrial marketers should understand both (step  in decision-making process and the type of buying situations) to market the product or service. In 1967, Robinson, Faris, and Wind developed a process  “buy-phases” having eight steps in buying-decision process in industrial market.  These phases or steps in industrial buying process  are elaborated as follows:

Industrial Buying Process

1. Recognition of Need of Industrial Buyer

A smart marketer  recognizes  the need/problem of industrial buyer originated  within the firm. If the material supplied by the existing supplier is not  satisfactory in terms of quality, or the material is not available as per  requirement, or the machine supplied by him breaks down too often, the buying  organisation  recognizes  the problem. If an industrial marketer identifies a  problem in the buying organisation and suggests how the problem could be  solved, there will be a better possibility of it being selected as a supplier.

2. Determination of the Characteristics and Quantity of Needed  Product

If the problem is recognized within or outside the buying organisation, then the  buying firm will try to answer questions such as: What type of products or  services to be considered? What quantity of the product needed? and so on. For  technical products, the technical departments (R&D, industrial engineering,  production, or quality control) will suggest general solutions of the needed  product. For non-technical goods or services, either the user department or  purchase department may suggest products or services, based on experience and  also the quantity required to solve the problem. Nevertheless, if the required  information is not available internally within the buying organization, the same  can be obtained from the outside sources.

3. Development of Specification of Needed Product

Stage 2 and 3 are closely related. After the general solution to the problem is  determined in the second phase, the buying organisation, in the third stage,  develops a precise statement of the specifications or characteristics of the  product or service needed. During this stage the purchase department takes the  help of their technical personnel, or if required, outside sources such as suppliers  or consultants. Industrial marketers have a great opportunity to get involved at  this stage by helping the buyer organisation to develop product specifications  and characteristics. It would give a definite advantage by ensuring that the  needed product includes his or her company’s product characteristics and  specifications.

4. Search the Qualified Potential Suppliers

In this stage, the buying organisation searches for acceptable suppliers or  vendors. Firstly, they have to obtain information about all available suppliers  and secondly, they have to decide the qualifying suppliers. The search for  potential suppliers is based on the various sources of information like trade  journals, sales calls, work-of-mouth, catalogues, trade-shows, industrial  directories. The qualifications of acceptable supplies may depend on the type of  buying organization such as government undertaking, private sector commercial  organisation, or institutions, and the buying situation, and the decision-making  members. Furthermore, the factors like quality of product or service, reliability  in delivery, and service are considered in qualifications of suppliers.

5. Obtaining and  Analyzing  Supplier Proposals

If the qualified suppliers are decided then the buying organisation obtains the  proposals by sending enquiries to the qualified suppliers. A supplier’s proposal  can be in the form of a formal offer, quotation, or a formal bid, submitted by the  supplier to the buying organisation. It must include the product specification,  price, delivery period, payment terms, taxes and duties applicable, transportation  cost (or freight), cost of transit insurance, and any other relevant cost or free  service provided. For purchases of routine products or services, the stages 4 and  5 may occur simultaneously, as the buyer may contact the qualified suppliers to  get the latest information on prices and delivery periods. For technically  complex products and services, a lot of time is spent in analyzing proposals in  terms of comparisons on products, services, deliveries, and the landed costs:  includes the price after discount plus excise duty, sales tax, freight, and  insurance.

6. Evaluation of Proposals and Selection of Suppliers

The industrial buyers evaluate the proposals of competing suppliers and selects  one or more suppliers. Further negotiations may continue with selected  suppliers on prices, payment terms, deliveries, and so on. The decision makers  in the buying organization may evaluate each supplier on a set of agreed-upon  attributes or factors. Each supplier is evaluated on each attribute by giving a  weightage to each attribute proportionately or on rating scale basis. The  supplier(s) who get the highest total score receives the business or the order  from the buying organisation. If a buying firm faces a make-or-buy decision, the  supplier’s proposals are compared with the cost of producing the needed item  within the buying organization. If it is decided to make the item within the  buying organization, the buying process is stopped at this stage.

7. Routine Order Selection

In this stage the procedure of exchange of goods and services between a buyer  and a seller is worked out. The activities include placement of orders (i.e.  purchase orders) with the selected suppliers, the quantity to be purchased from  each supplier, frequency of order placement by buyers and delivery schedules to  be adhered to by the supplier, schedule, and the payment terms to be adhered to  by the buyer. The user department would not be satisfied until the supplier  delivers the required item as per delivery schedule, and with acceptable quality.

8. Performance Feedback and Post-Purchase Evaluation

In this final phase a formal or informal review regarding the performance of  each supplier (or vendor) takes place. The user department gives a feedback on  whether the purchased item solved the problem or not. If not, the members of  the decision-making unit review their earlier decision and decide to give a  chance to the previously rejected supplier.  The industrial vendor should recognize that marketing effort is no over after the  order is received. He or she must check the feedback and evaluation process in  the customer (buyer) organisation. In particular, the industrial marketer must  monitor the user satisfaction levels or complaints so that immediate corrective  action can be taken before a major damage. In fact, a quick response to  customers’ complaints can result in good buyer-seller relationship. The type of  products, the phase of the buying-decision making process of customer firms,  and the purchasing situations also influence the marketing strategy of industrial  seller.

Download PowePoint Presentation:  Industrial-buying-process  (pptx)

Leave a Reply

Your email address will not be published. Required fields are marked *