Unit 6: Business Buyer Behavior

Subject Code : MB0046

Contents
Introduction Difference between consumer and business buyer behavior Buying situations in industrial marketing Buying roles in industrial marketing Factors that influence business buyers Steps in business buying process

Introduction
The market where customer buys roducts but not !or ersona" consum tion is known as business market# The business market inc"udes or$ani%ationa" buyin$& institutiona" buyin$ and $o'ernment buyin$# The number o! buyers in such markets is "ess but the (uantity urchased is 'ery hi$h# Business buyers e)ist in industria" towns& techno"o$ica" arks and industria" areas# In business markets& the demand !or the roduct is deri'ed& i#e#& de ends u on !ina" consum tion o! roduct and ser'ice# *or e)am "e& demand !or car en$ines de end on number o! customers who wi"" urchase the car# I! the number o! eo "e who urchase the car decreases& the demand !or car en$ines a"so decreases#
+

Learning Objectives
After studying this chapter you will be able to1. Differentiate between consumer behavior and organization behavior. 2. Discuss the different types of buying situations involved in the organizational buying 4. Understand the buying roles and their importance in industrial mar eting. !. Analyze the factors that influence the organizational buying process. ". #$amine the business buying process in the industrial mar eting.

Difference between consumer and business buyer behavior

Characteristics 1. Demand 2. o of customers Consumer Market Direct %arge Dispersed (ersonal &ew #asy Advertising Business market Derived &ew 'oncentrated. (rofession )any 'omple$ (ersonal selling

!. Location ". #. %. ature of buy o of buying ro$es egotiations

&. 'romotion

Buying Situations in The Industrial Marketing

There is a large difference between buying situations in industrial marketing and consumer markets. In industrial marketing, there are three different buying situations, namely,

1. ew task * +t is the stage where an organization is purchasing

a ma,or product for the first time. A large number of people are involved in decision ma ing.

2.(traight re)buy * +t is the situation in which an organization

follows routine steps of informing seller about their re-uirements and supply specifications. +t provides fle$ibility to both buyers and sellers. !.Modified re)buy * +n this situation. buyer wants either product modification. price modification. terms modification or suppliers/ modifications.

Buying *o$es in the +ndustria$ Marketing

The number of people involved in decision making in industrial marketing is more. Hence, many business organizations consist of a buying center or buying committee. The characteristics of a buying center are: Many individuals can perform a given role or one individual can perform many roles. The buying centre may include people from outside the organization such as government officials, consultants, etc. Different members of the buying centre have different views. Members of a buying centre have different personal motivations, perceptions and preferences which depend on the person s age, income, education, !ob position, attitude, culture, etc.
-

The various buying roles in the business buying process are: 1.Users . These are eo "e who actua""y use the roduct# 2.Influencers . They are eo "e who $i'e in!ormation to assess the 'endor and his roducts# 3.Buyers . These are eo "e who urchase the roduct# They a"so e'a"uate the 'endor and se"ect him# 4.Deci ers . They are eo "e who take !ina" decision on su "iers# !."ate#eepers . /e is a !i"terin$ a$ent between the buyin$ committee and se""ers#

,actors that +nf$uence Business Buyers

1. $cono%ic evelop%ents: 1urchasin$ de ends on the economy o! the country# I! the economy is $rowin$ we"" the consum tion a"so increases accordin$"y# 2. &upply con itions: 2aw materia"s re(uired shou"d match with the demand o! the com any# Com any shou"d make chan$es in su "y when there is irre$u"ar or seasona" demand# 3. 'olitical an legal environ%ent: 3n unstab"e 4o'ernment has un redictab"e o"icies# Chan$es in 4o'ernment o"icies ha'e an im act on the com any# 4. (o%petitive environ%ent: In business buyin$& the number o! buyers are "ess# Techno"o$ica" chan$es ado ted by the com etitor shou"d be 5 care!u""y obser'ed#

#. Cu$ture and customs0 #very country has its own culture and customs and buying is affected by culture and customs. %. Organi-ationa$ objectives0 (urchasing ob,ectives are influenced by organizational ob,ectives. &or e.g.. if a company wants to reduce the overall cost by 212. then its purchasing ob,ectives ta es this as a benchmar . &. Organi-ationa$ .o$icies and .rocedures0 'ompanies/ policies li e centralization or decentralization of buying and selling will have direct effect on company/s production. /. Organi-ation structure and systems0 An organization is more fle$ible if the number of hierarchical levels is less. 0. +nter.ersona$ factors0 3usiness buying will have different results on the basis of authority. status. empathy that customers and organization have. 11. +ndividua$ factors0 &actors li e age. education. ,ob position. attitude. etc. determine the buying behavior.
10

&teps in Business Buying 'rocess

1rob"em 2eco$nitio n 6eed 7escri tion 1roduct S eci!icatio n Su "ier Search

1ro osa" So"icitation

Su "ier Se"ection

8rder 2outine S eci!icatio n

1er!ormanc e 2e'iew

11

(tage 12 'rob$em *ecognition (roblem can be identified from either internal stimuli or e$ternal stimuli. (tage 22 eed Descri.tion After finalizing the problem. companies will define need description. +t includes
'haracteristics and -uantity of the item needed. &or comple$ products. team assessment is re-uired. 4he re-uired items are assessed on the basis of reliability. durability. price. etc.

(tage !2 'roduct (.ecification 5rganizations develop detailed product specification with value analysis. 6alue analysis means analyzing the components and the production process.

12

(tage "2 (u..$ier (earch 4he buyer finds the most suitable suppliers. 4his can be done by using trade directories. doing computer search. watch trade advertisements and attend trade shows. 4he supplier tries to get listed in ma,or business directories and build a good reputation in the mar et. (tage #2 'ro.osa$ (o$icitation 4he buyer invites suppliers to submit proposals. 7ome suppliers may send only a catalog or a sales representative. 4he buyer may also invite suppliers to ma e formal presentations.
1+

(tage %2 (u..$ier (e$ection 4his stage is also nown as vendor selection. At this stage. companies prepare a list of suppliers and assign weightages to each supplier and evaluate each of them. 4he common characteristics used to evaluate suppliers are
8uality Delivery 'ommunication 'ompetitive prices 7ervice 4echnical advice (erformance history 9eputation

14

(tage &2 Order routine s.ecifications At this stage. the buyer negotiates the final order with the selected supplier and lists the technical specifications. the -uantity needed. the e$pected time of delivery. return policies. warranties. etc. &or )95 :maintenance. repair and operating items;. buyers are using blan et contracts :long term contract; rather than periodic purchase orders. (tage /2 'erformance *eview At this stage. the organization reviews the performance of the suppliers. 4hey decide whether to continue with the same supplier or search for a new supplier.
1,

Buying "ri

)o el
,e-buy re-buy

Buyin$ 4rid Mode" is de'e"o ed to understand the business buyin$ rocess in three business buyin$ situations# Buying 'rocess *e+ Tas# )o ifie &traight
1# 1rob"em reco$nition 2# 4enera" need descri tion +# 1roduct s eci!ication 4# Su 6# Su "ier Search "ier se"ection ,# 1ro osa" so"icitation -# 8rder routine s eci!ication 0# 1er!ormance re'iew 9 9 9 9 9 9 9 9 9 sometimes 9 9 sometimes 9 sometimes 9 9 9 9 9

16

1-