Explain in detail the Industrial / Business Buying Process

There are common steps involved in Business buying though each organisation has its own way of making decision for buying products. The process may also differ for all the three buying situations – New Task, Modified Rebuy and Straight Rebuy. Below are the common steps involved in Business buying process-

(1) Need/ Problem recognition – in business buying the need or problem arises for a product needed for operation of the business. Business buyers buy products either to take advantage of new opportunities in the market or to find a solution for any issues related to operations.

There could be situations like – a machinery broke down, new machinery needed, inventory/raw materials needed for continuous production, technologically advanced new instruments needed, new product launch, new insurance provider for the staff, etc.

Understanding the buying needs helps business marketers plan suitable marketing programs. For example, breakdown of a machinery results in losses till it is repaired or replaced. Here the suppliers can provide free repairs for certain period, buy back options for a new machinery, etc. They need to learn about the various buying scenarios for every client they have. Basis this they should clearly define market opportunities for themselves.

In situations like Straight Rebuy, organisations usually have a contract signed to have the products supplied once the already bought products reach a specified inventory level. For example, a firm in production of leather boots will intimate the supplier of leather to send the material once it has the supplies left for few days of production. Same example applies for a construction company which needs cement and steel supplied at regular intervals. The final approving authority is informed about the buying situation in the organisation by the production managers, etc.

The suppliers should grab such opportunities and fulfil the contract so that the clients don’t switch to other suppliers. The need recognition is complicated in New Task and Modified Rebuy situations.

(2) Need/ Problem Description – since there are many individuals involved in the decision process, a clear draft outlining the problem, quality and quantity of products needed is made for approval and discussion of concerned authorities. Inputs from primary users of the products must be taken. All the details of the product performance, characteristics, quantity, delivery time, installation requirements and price limits should be clearly defined by the buying centre.
For example, a school was in need of new fleet of buses as part of its expansion. The inputs from the drivers and the admin staff responsible to get the school teachers and children to school were also taken. The need description for this case may include –

• The requirement of a mini bus, etc. as per the traffic in the town, AC/ non-AC basis the weather, additional training need for the drivers, etc.
• The exact number of buses needed to service the need, seat requirements, etc.
• The price limit that the finance department can approve
• Life of the buses, resale value, and service and repair, etc.

In the discussion for the above scenario, a driver highlighted the need wherein a child with special needs should be able to alight the school bus. This resulted in a specification written which could have been overlooked and would have resulted in additional costs and grievance issues at a later stage.

The requisition should be accurate as per the need recognition to ensure right product is bought. The whole effort will result in loss of time and money if the details are not accurate.

(3) Information search – for Straight and Modified Rebuy the buying centre already has information on the existing suppliers. In New Task situations the buying centre may involve technical staff and people from other departments for their inputs. The purchasing team may seek know-how from their contacts in other organisations, refer advertisements in trade journals, internet search, or scan any proposals sent by suppliers in the recent past.

A supplier search can be formal as well as informal (A.M. Weiss and J. B. Heide, “The Nature of Organizational Search in High-Technology Markets”, Journal of Marketing Research, May 1993, p 220-33). A formal search may include site visits of suppliers, analysis of product characteristics, sample test of the product, etc. Informal search includes visiting trade shows, referring journals, and meeting sales people from the supplier side.

Based on the requirements a final list of suppliers is created. The suppliers not shortlisted could be because of various reasons, like bad image in the industry, high price, delivery time, quantity and quality criteria, etc.

(4) Supplier Evaluation and Selection – additional information on suppliers is needed to further evaluate and select the suppliers. The organisation asks the shortlisted suppliers to send proposals / quotations. The specific terms of the proposals made by each supplier helps the organisation select the suppliers which meets its criteria. The organisations asks the suppliers for a formal meet or make presentations. A supplier not meeting the requirement may be immediately dropped from the list. These could be because of quality, support services, supplier flexibility, delivery terms, etc. The importance of these attributes varies according to the buying situation.

The purchase agents need to be highly qualified for making negotiations. They should have the requirements listed as discussed in the meeting at the Buying Centre. The negotiations could be based on price and contract before final selection. Many organisations select more than one supplier to overcome any hurdles like a strike, etc. at one of the supplier organisation. This also gives advantage at the negotiation table in bargaining on price, etc. As organisations are in the business for making profits, most of the negotiations are around the price of the product. A contract mutually agreed between the supplier and buyer is signed. The final order is made listing the product specifications, delivery terms, payment, after sale services, etc. The order is shipped, received and payment is made after inspection.

(5) Post purchase evaluation – Once the products are used in the production department, organisations assess if the supplier has fulfilled all the terms of the agreement. This process is formal as compared to consumer post purchase evaluations. The outcome of this activity paves the way for learning in the purchase activity. A questionnaire may be sent to the production team for getting a clear picture on the product bought. The suppliers also follow this activity to ensure the buyers are satisfied so as to continue with the business, and maintain and increase market share. Other evaluation criteria may include delivery time, service during and after sale.

A dissatisfied buyer may make demands for correction of problems and may even switch to other supplier. The supplier should work closely with the buyer in the competitive world to help each other meet their marketing objectives.