What are the factors that affect Business Buying?

Like consumer buying, Business buying is also affected by many factors. We need to understand all these factors to understand how these factors force an organisation to adopt different strategies in different markets. There are external as well as internal factors that affect the organisational buying like government policies, industrial changes, organisational values, learning of the decision makers, experience, etc. Business Marketers need to understand these factors to design effective marketing strategies.

(1) Environmental Factors – The organisation is greatly influenced by its environment such as Government regulations, Location, industrial development or changes, technological changes, Cultural factrors. Buying centre of the organisation has to adjust to these changes and carefully take decision on purchase of products. Companies sign long term contracts with suppliers to ensue constant supply of materials for production. This also avoids price fluctuations. Various Government policies and regulations also affect business buying. A curb on certain materials by the government forces an organisation to make changes to the product requirements.

For example, governments intervene and bans chemicals used for making medicines by pharmaceutical companies for good of the public. Recently (March 2016) Indian government has banned over 300 drugs which had an impact on many organisations purchasing or materials.

Technological advancements or changes in the Industry (new product launch, manufacturing process, etc.) in which the organisation operates also force an organisation to invest in technology like buying new plant equipment, etc. to maintain competitive advantage.

The suppliers also need to study these changes to meet the buyer’s needs. For example, due to scarcity of underground water in recent decades in certain regions, farmers have opted to grow grains that require less water supply. This affects the use of fertilisers and pesticides which has to suit the new crops. Organisations have to accordingly adjust to the shortage of crops which could be available in a different region. Pesticide and fertilisers manufacturers also forces to change their strategies

Culture of the region in which the organisation operates affects the buying to a big extent. A business marketer should study these as it changes from region to region within a country and also from country to country. In an eastern countries, a senior in the organisation is regarded with great respect and his/her decision is final, whereas in a western country like US, individual input and dissent among employees irrespective of hierarchy is considered valuable. The location of the organisation gives an idea to business marketers about the culture it operates in.

The business marketers/suppliers should be ready to produce and supply products to organisations depending on the market demand. Close understanding of economic factors like increase or decrease in production, interest rates, investment, etc. is necessary. During economic recession, business buyers look for cost cutting and buying is significantly reduced to minimum.

Understanding which factors affect the buyers the most is crucial. Business marketers proactively suggest or make changes to their marketing strategy due to changes in environmental factors to stay ahead of competition.

(2) Organisational Factors – like people, organisations also have an image. They hold values that influence its style of functioning. These refers to its structure, formal or informal interaction among departments, etc. This understanding helps suppliers identify how dealing with one organisation is different from the other.

Organisations should ensure that they maintain a positive image as it becomes difficult to change the same in a short period. For example, some organisations rely on high quality of products for manufacturing. The purchasing process involves most of the discussion on quality. Some government organisations, like Indian railways, buy products by bidding process. Here most of the time lowest bid is often selected. Some other organisations rely more on factors other than price. The suppliers/business marketers need to create an adjacent marketing mix that suits the procedure of buying for individual organisation.

The organisational functioning in most of the private sector is different as compared to public sector (Government organisations). In private sector where efficiency, individual effort, continuous improvement, hard work instead of leisure, risk taking, etc. is dominant, some doesn’t holds true for a postal service offered by the government where the decisions are made at the top and passed on to the junior staff. Some organisations reward individual efforts rather than collective efforts. Western organisations prefer individual inputs and are rewarded for the same. Whereas in Japanese or other eastern origin organisations, team effort is rewarded.

The organisations also create an image of the suppliers basis the products, formal-informal approach/interaction, reliability, requests processing on various requirements, decision making authority (centralised or de-centralised), etc. A negative experience with a supplier or Buyer organisation constitutes learning for both sides. Relationship with such organisations or suppliers is often discontinued.

The business marketers should study these organisational characteristics as opportunities and design their Marketing Mix Strategies accordingly. The suppliers need to carefully influence and present themselves via ad campaigns in business magazines, and also their conduct with existing clients.

(3) Individual and Interpersonal factors of Buying centre participants – the individuals at the buying centre affect the purchase decisions due to many factors. The participants may exhibit conflict based on rewards, demotion, expertise, special relationship with other participants, etc. Other characteristics which business marketers should study include personal goals, professional experience, life-style, attitudes and opinions, personality traits, etc. Like consumer buying characteristics, the participants at buying centre are also influenced by emotions, beliefs, etc.

There could be difference of opinion on price and quality of product. The final approval authority may be concerned about the cost of the purchase whereas the production and marketing manager may stress of product characteristics. The participant of young age who have exposure to latest theories may have a different opinion from a participant of an older age working in the same organisation for a long period. A new member having worked in different organisations will bring new ideas to the table as a participant in the Buying Centre. The Buying centre should weigh all the inputs and opt for products that support the marketing objectives of the organisations.

The suppliers should try to understand the individual preferences during business meetings and presentations based on the questions asked. They may clearly make out from the questions asked if price, quality, continuous supply, long-term contract, etc. are significant for the organisations. Designing an appropriate Marketing Mix will be beneficial for the business marketers from the suppliers’ side.