4 nature of industrial buying

Nature of Industrial BuyingNature of Industrial Buying

Industrial Marketing, 2nd Edition By Krishna K Havaldar, Tata McGraw - Hill Companies

Chapter - 3

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Organizational BuyingOrganizational Buying

The buying decisions of organizations are influenced by environmental factors, organizational factors, interpersonal factors and personal factors


Buy Phase in Industrial Buy Phase in Industrial BuyingBuying

Buying is an organizational –decision making process

There are 8 phases in the buying-decision process

In Industrial markets the buying decision making process includes observable sequential stages, understanding these phases helps in developing appropriate selling strategy


8 phases in Industrial 8 phases in Industrial BuyingBuying




Identify the problem•Industrial marketer identifies a problem in the buying organization and suggests how the problem is solved

Identify the problem•Industrial marketer identifies a problem in the buying organization and suggests how the problem is solved

General Need Description•Once the problem is recognized, next phase is to resolve the problem•For technical products, the technical department will suggest the solution and for non-technical, departments suggest products or service

General Need Description•Once the problem is recognized, next phase is to resolve the problem•For technical products, the technical department will suggest the solution and for non-technical, departments suggest products or service



Product Specification•Develop a precise statement of the specifications of the product or service•Selecting right suppliers, recommend alternatives on sourcing, identify core competencies of company

Product Specification•Develop a precise statement of the specifications of the product or service•Selecting right suppliers, recommend alternatives on sourcing, identify core competencies of companySupplier Search•Search of potential suppliers from vertical hubs, functional hubs, direct extranet links to major suppliers, trade journals, sales calls, catalogues, trade-shows and industrial directories and decide acceptable or qualifying suppliers

Supplier Search•Search of potential suppliers from vertical hubs, functional hubs, direct extranet links to major suppliers, trade journals, sales calls, catalogues, trade-shows and industrial directories and decide acceptable or qualifying suppliers



Analyzing Supplier Proposal•Once the qualified suppliers are decided, the buying organization obtains the Request for proposals (RFPs)•Supplier proposal or quotation of product specification, price, delivery period, payment terms, taxes and duties, freight charges and other relevant cost is enclosed in the proposal

Analyzing Supplier Proposal•Once the qualified suppliers are decided, the buying organization obtains the Request for proposals (RFPs)•Supplier proposal or quotation of product specification, price, delivery period, payment terms, taxes and duties, freight charges and other relevant cost is enclosed in the proposal

Supplier Selection•Evaluation of the proposals of competing suppliers and select suppliers•Further negotiations continue with selected suppliers on price, payment and deliveries

Supplier Selection•Evaluation of the proposals of competing suppliers and select suppliers•Further negotiations continue with selected suppliers on price, payment and deliveries



Selection of an Order Routine•Placing of orders with selected suppliers, frequency of the order placements, levels of inventory, follow up of actual delivery, delivery per schedule with quality and payment terms

Selection of an Order Routine•Placing of orders with selected suppliers, frequency of the order placements, levels of inventory, follow up of actual delivery, delivery per schedule with quality and payment terms Performance Review•Performance feedback of each supplier takes place and post-purchase evaluation

Performance Review•Performance feedback of each supplier takes place and post-purchase evaluation

Organizational Purchase Organizational Purchase SituationSituation


Purchase SituationPurchase Situation

New TaskNew Task

Modified Rebuy

Modified Rebuy

Straight Rebuy

Straight Rebuy

Straight RebuyStraight Rebuy


Modified RebuyModified Rebuy


New TaskNew Task


Is a situation the company is buying the item for the first

Is a situation the company is buying the item for the first

The buying organization will typically have had little experience with the product or service

The buying organization will typically have had little experience with the product or service

The risk involved is more, decisions may take longer time and top management is involved

The risk involved is more, decisions may take longer time and top management is involved

Participants in the BusinessParticipants in the Business Buying Process Buying Process


InitiatorInitiator

InfluencerInfluencer

ApproverApprover

UserUserDeciderDecider

BuyerBuyer

GatekeeperGatekeeper

Participants in the BusinessParticipants in the Business Buying Process Buying Process

Participants in the organizational buying process play as many as seven different roles, namely those of initiator, influencer, approver, user, decider, buyer and gatekeeper


Participants in the Participants in the Business Business

Buying ProcessBuying Process


Participants in the Participants in the BusinessBusiness

Buying Process Buying Process


•Users also play a role of initiators•Individuals who use products or services•Define specifications of needed products

•Approver endorse and agree to the purchase and also play a role of deciders

•Gatekeepers control the flow of information regarding products and services and control the buying center•Assistants or junior person of purchase managers

Key Members of Buying Key Members of Buying CenterCenter

Top Management Executives Managing Director, Presidents, Vice President or

General managers Approve purchase, decide guidelines and

purchase policy

Technical People Technical people are design engineers,

production, quality control, R& D managers Specify products, technical evaluation, feedback

on product supplied, negotiate with suppliers


Key Members of Buying Key Members of Buying CenterCenter

Purchase/Material Department Senior executives, junior levels, purchaser officers

or assistants Coordinate with technical people, top

management, accounts as well the suppliers or vendors

Accounts/Finance for finalizing the financial approvals, mode of payment and insurance of bank guarantees

Marketing Are the influencers in the buying process


SummarySummary The industrial marketing need to understand the purchasing

objectives and purchasing activities of the industrial buyers. The industrial buyers are influenced by both purchasing objective of the firm and personal objectives

The industrial buyers are influenced by many factors , the major factors like environmental factors, organizational factors, interpersonal factors and personal factors

There are 3 common types of buying situations include new task, modified rebuy and straight rebuy

There are 8 phases of buying decision making process include Initiator, Influencer, Approver, User, Decider, Buyer and Gatekeeper. The industrial markets should identify the key members of buying centre in each buying decision


Questions for ReviewQuestions for Review

What is the industrial buying process?

What is the B2B buying Decision Model?

What are the possible buy situations?

What is the industrial buying center? What are the functions of the members of the buying center?

An industrial marketer wants to supply seat covers to the major auto manufacturer who has been buying from 2 suppliers on regular basis for 2 years, as per the purchase policy cannot buy from 2 suppliers? what should the industrial marketer do to change the supplier?


END OF SESSION 4END OF SESSION 4


4 nature of industrial buying

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