Business buyer behaviour

Business Buyer Behaviour:-

“The buying behaviour of the organizations that buys goods and services for use in the
production of other products and services or for the purpose of reselling or renting them to
others at a profit.”

The Business Market vs. The Consumer Market:-

The business market consists of all of the organizations that acquire goods and services used
in the production of other products or services that are sold, rented, or supplied to other
customers. Business markets involve far more money and items than do consumer markets.
Before any consumer purchase has been made, more than one business purchase would have
been made.

Business markets differ from consumer markets in 3 main ways. They are:
1. Market structure and demand.
2. Nature of the buying unit.
3. Types of decisions and the decision process.

Market Structure and Demand:

A business marketer usually deals with fewer but larger buyers than the consumer
marketer would deal with. Even in the case of large business markets, only a few
buyers often account for the purchasing.
For example, Black & Decker sells its power tools and outdoor equipments to millions
of customers worldwide. However, it must sell these products to retailer first so as to be
able to sell to the customers. The retailers for Black & Decker are Home Depot,
Lowe’s, and Wal-Mart. These 3 retailers, combined, account for more than half of
Black & Decker’s sales.
Business markets are more geographically concentrated (most of the country’s business
buyers are concentrated in a specific geographical region), and the business buyer’s
demand is derived from final consumer demand. Business markets also have inelastic
demand. The total demand for business products is not affected by a change in price.

Nature of the Buying Unit:

Compared to consumer purchases, a business purchase involves more decision
participants and a more professional purchasing effort. Business buying for companies
is the responsibility of trained purchasing agents. These agents spend their working
lives on how to buy better. The decision making process will have several people
participating. Hence, more complex the purchase, more the number of people trying to
make a decision.
 Types of Decisions and the Decision Process:
Business buyers usually face more complex buying decisions than customer buyers.
Business purchases involve large sums of money, technical and economic
considerations, and interactions among many people at many levels of the organization.
Due to the complexity of the purchases, business buyers take longer to come to a final
decision. Also, the business buying process is much more formal than the consumer
buying process. This is because, when organizations are buying, they usually call for
detailed product specifications, written purchase orders, supplier searches, and formal
approval.
In the business buying process, the buyer and the seller are dependent on each other.
Consumer marketers on the other hand, are at a distance from their customers. There is
a chance that B2B marketers may work closely with their customers during all stages of
the buying process- from defining the problem, to finding the solution, to supporting
after sale operation.

Business Buyer Behaviour:-

At the most basic level, marketers want to know how business buyers will respond to various
marketing stimuli. Similar to consumer buyers, the marketing stimuli consist of the 4P’s
(Product, Price, Place, and Promotion). Other stimuli include economic factors,
technological factors, political factors, cultural factors, and competitive factors. Now, these
stimuli enter the organization and are turned into buyer responses. In order to design good
marketing mix strategies, the marketer must understand what happens within the organization
to turn stimuli into purchase responses.
Major Types of Buying Situations:

There are 3 types of buying situations. They are:

1. Straight Rebuy- Straight rebuy is a business buying situation in which the

buyer routinely reorders something without any modifications. Based on past
buying satisfaction, the buyer simply chooses from the various suppliers on its
list.

2. Modified rebuy- Modified rebuy is a business buying situation where the

buyer wants to modify product specifications, prices, terms, or suppliers. It
usually involves more decision participants than the straight rebuy.

3. New Task- New task is a business buying situation in which the buyer
purchases a product or service for the first time. In such cases, the greater the
cost or risk, the larger the number of decision participants and greater their
efforts to collect information

Participants in the Business Buying Process:

The decision making unit of a buying organization is called a buying centre. Buying
centre is all the individuals and units that play a role in the purchase decision-making
process.
The buying centre includes members of the organization who play a role in the
purchase decision process.

i. Initiators- The people who request that something be purchased.

ii. Users- Members of the organization who will actually use the purchased
product or service.

iii. Influencers- People in an organization’s buying centre who affect the buying
decision; they often help define specifications and also provide information for
evaluating alternatives.

iv. Buyers- The people in the organization’s buying centre who make an actual
purchase. They have the formal authority to select the supplier and arrange
terms of purchase. The major role for buyers is selecting vendors and
negotiating.

v. Deciders- People in the organization’s buying centre that have formal or

informal power to select or approve the final suppliers.

vi. Gatekeepers- The people in the organization’s buying centre who control the
flow of information to others.
Major Influences on Business Buyers:

Business buyers are influenced by many factors to buy a product or a service when
making their buying decision. Some marketers assume that the major influences on
buyers are the economic factors (low price, greater services for low price). However,
business buyers are influenced not only by economic factors but also by personal
factors.

The major influence on business buyers, specifically speaking are:

1. Environmental factors- Business buyers are influenced by factors in the

current and expected economic environment, such as level of demand,
economic outlook, and cost of money. Business buyers are also affected by
technological, political, and competitive developments. Culture and customs
also strongly influence business buyers.

2. Organizational Factors- Each buying organization has its own objectives,

policies, procedures, structure, and systems. The business marketer must
understand these factors well.

3. Interpersonal Factors- The buying centre includes many participants who

influence each other. These are known as interpersonal factors. However, it is
difficult to assess such interpersonal factors and group dynamics. It’s not that
the participants with the highest rank have the most influence. Any participant
may influence the buying decision. This maybe because they control rewards
and punishments, are well liked, have special expertise or have a special
relationship with the important participants.

4. Individual Factors- Each participant in the business buying decision process

brings personal preferences, motives, and perceptions. These individual
factors are affected by personal characteristics such as age, income, education,
personality, attitudes, job position, buying styles, and risk attitudes.
The Business Buying Process:

There are 8 stages in the business buying process. They are:

1. Problem Recognition- The first stage of the business buying process in which
someone in the company recognizes a problem or need that can be met by acquiring
a good or a service.

2. General Need Description- The stage in the buying process in which the
company describes the general characteristics and quantity of a needed item.

3. Product Specification- The stage of the buying process in which the buying
organization decides on and specifies the best technical product characteristics for a
needed item.

4. Supplier Search- The stage of the business buying process in which the buyer
tries to find the best vendors.

5. Proposal Solicitation- The stage of the business buying process in which the
buyer invites qualified suppliers to submit proposals.

6. Supplier Selection- The stage of the buying process in which the buyer
reviews proposals and selects a supplier or suppliers.

7. Order-Routine Specification- The stage of the business buying process in

which the buyer writes the final order with the chosen supplier(s), listing the
technical specifications, quantity needed, expected time of delivery, return policies,
and warranties.

8. Performance Review- The stage of the business buying process in which the
buyer assesses the performance of the supplier and decides to continue, modify, or
drop the arrangement.
 E-Procurement: Buying on the Internet:

Advances in information technology has changed the face of the B-to-B marketing
process. Online purchasing (e-procurement) has grown rapidly. E-procurement gives
buyers, access to new suppliers, lowers purchasing costs, and hastens order processing
and delivery. In turn, business marketers can connect with customers online to share
marketing information, sell products and services, provide customer support services,
and maintain ongoing customer relationships.

So far, most products bought online are MRO (maintenance, repair, and operations)
materials. The actual amount spent on the procurement of these MRO materials pales in
comparison to amount spent on items bought physically. Yet, MRO materials make up
80% of all business orders and the transaction costs for order processing are high.

E-procurement shaves transaction costs and results in more efficient purchasing for
both buyers and suppliers. It reduces the time between order and delivery, and frees
purchasing people to focus on more strategic issues

Institutional Markets and Government Markets:-

Institutional Markets:

Institutional markets consist of schools, hospitals, nursing homes, prisons, and other
institutions that provide goods and services to people in their care. Many institutional markets
are characterised by low budgets and captive patrons. For example; a hospital purchasing
agent must decide on the quality of the food to buy for patients. The purchasing agent will
have to buy food that tastes good for the patients (so that the patients do not ruin the
hospital’s reputation) and is also within the budget allocated.

Government Markets:
Government markets include governmental units that purchase or rent goods and services for
carrying out the main functions of government. The government market offers large
opportunities for many companies, both big and small. In most countries, government
organizations are major buyers of goods and services. To succeed in the government market,
sellers must locate key decision makers, identify the factors that affect buyer behaviour, and
understand the buying decision process.