Nature of Industrial Buying

1. Problem Recognition

2. General Description of Need

3. Product Specifications

4. Supplier Search

Organizational Buying Process

5. Acquisition and Analysis of Proposals

6. Supplier Selection

7. Selection of Order Routine

8. Performance Review

Three Buying Situations

(slide 1 of 4)

1. New task 2. Modified rebuy 3. Straight rebuy

Three Buying Situations

1. New Task (slide 2 of 4)
New taskthe problem or need is totally different from previous experiences.
Significant amount of information is required. Buyers operate in the extensive problem solving stage.
Buyers lack well defined criteria. Lack strong predispositions toward a solution.

Three Buying Situations

2. Modified Rebuy (slide 3 of 4)
Modified rebuydecision makers feel there are benefits to be derived by reevaluating alternatives.
Most likely to occur when displeased with the performance of current supplier. Buyers operate in the limited problem solving stage.
Buyers have well defined criteria.

Three Buying Situations

3. Straight rebuy (slide 4 of 4)
Straight rebuythe problem or need is a recurring or continuing situation.
Buyers have experience in the area in question. Require little or no new information. Buyers operate in the routine problem solving stage.

Buying Decision Approaches

Causal purchasesinvolve no information search or analysis.

Routine low prioritydecisions are more important and involve a moderate amount of analysis.

 Enables individual employees to buy online while the company retains control of the purchasing process. The Buy-Side Requisitioning Process

Forces Influencing Organizational Economic Outlook: A projected change in Buying Behavior Domestic & Global
business conditions can drastically alter buying plan.

Environmental Forces

Pace of Technological Change Global Trade Relations Goals, Objectives, and Strategies Organizational Position of Purchasing Roles, relative influence, and patterns of interaction of buying decision participants Job function, past experience, and buying motives of individual decision participants

Organizational Buying Behavior

Organizational Forces

Group Forces

Individual Forces

The Buygrid Framework for Organizational Buying Situations

With rising competitive pressures managers are using rigorous cost modeling approaches to identify factors that drive the cost of purchased goods and services.

Overview of the Buyer Grid

Creeping commitment Center of gravity Marketing implications

Questions for the Industrial Salesperson

1. Which member takes part in the buying process? 2. What is each members relative influence in the decision? 3. What criteria is important to members in the evaluation process?

Members of the buying center assume different roles throughout the procurement process.

Clues for Identifying Powerful Buying Center Members

Buying Center Influence Matrix

Phase
Need identifcation

New Buy
Engineering Purchasing R&D Production Engineering Purchasing Production R&D

Modified Rebuy Straight Rebuy

Purchasing Production Engineering Engineering Purchasing Production R&D Quality control Purchasing Engineering Production Production Purchasing

Establishment of specification

Purchasing Engineering Production

Modification & evaluation of buying alternatives

Engineering Purchasing R&D

Purchasing Engineering Production

Supplier selection

Purchasing Engineering R&D Quality control

Purchasing Engineering Production

Purchasing Engineering Production

Buying Center Roles

1) Primary roles
Deciders Influencers 2) Secondary roles -Users -Buyers -Gate keepers

A model for determining composition of organizational buying center

Environment: Economic, technical, social & cultural, legal & political

FIRM BUYGRID Components

Buyer mission

Purchase needs Time commitment & life cycle

Buy class

Buy phase

Dollar value complexity

Procurement
INTERFIRM

Buying center membership

Other members

BOUNDARY
SPAN

Transaction

Selective Process & Cognition

Selective exposure. Selective attention. Selective perception. Selective retention.

Perceived Risk Components

1. Uncertainty about the outcomes of a decision. 2. The magnitude of consequences associated with making the wrong selection.

Major Elements of Organizational Buying Behavior

The behavior of organizational buyers is influenced by environmental, organizational, group, and individual factors.

Objectives of organizational buying

Task oriented objectives:
1) Price 2) Service 3) Quality 4) Assurance of supply 5) Reciprocity

Non-task objectives