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

marketCHARACTERISTICS 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 re-buy 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

Industrial Buying

Users

Gatekeeper

Deciders

Buyers

Influencers

Factors Influencing Business Buyers

1. Economic Developmento If the economy is growing rapidly usually the

consumption also grows proportionately2. Demand Conditionso 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 Environmento Any change in the government policy will have

direct or indirect impact on the company

Factors Influencing Business Buyers4. Competitive Environmento Company has to identify the competitor’s moveo The technology adopted by the competitors should also

be carefully observed5. Culture and Customs6. Organizational Objectiveso Purchasing objectives are derived from the organization

objectives7.Organizational Policies and Procedures8. Organizational Structure and Systems9.Interpersonal Factors10. 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

Supplier Search

Order Routine Specification

Need Description

Proposal Solicitation

Performance Review

Production Specification

Supplier Selection

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 problemStage 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 processStage 3: Product Specification• Organization develops detailed product specification

with value analysis• In the value analysis company analyses the

components and their production processStage 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 processStage 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 processStage 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 processStage 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 processStep 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 situations BUYING PROCESS NEW TASKS MODIFIED RE-BUY STRAIGHT RE-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 review