How do business buyers make

their decisions ?

Business buying decision process is divided into 8

stages called the buy phase

Problem recognition

Product specification

General need description

Suppliers search

Proposal solicitation

Supplier selection

Order routine specification

Performance review

Problem recognition

1

First step is to

recognise a

problem or need

that can be met by

acquiring a good or

service. Recognition

can be triggered by

an internal or

external stimuli

General need description

2

The buyers

determine needed

item’s general

characteristics and

required quantity

Product specification

3

Buying

organisations

develop the items

technical

specification.

Product value analysis

It is an approach to

cost reduction that

studies whether

components can be

redesigned or

standardised or made

by cheaper methods

without impacting

products performance

Supplier search

4

Buyer tries to

identify the most

appropriate

suppliers through

different modes

Trade

directories

Trade shows

Contacts

with other

companies

Trade

advertisement

Internet

Companies that purchase

over internet are utilising

electronic market places in

several forms

Catalog sites

Buying alliances

Barter markets

Private exchanges

Spot (exchange)

market

Vertical markets

Pure play auction

sites

E-Procurement

Websites are

organised around

two types of E-hub

Functional hubs

Logistic, media ,buying,

advertising, energy

management

Vertical hubs

Centred on industries

Websites are

organised around

two types of E-hub

Set up direct extranet

links to major suppliers

Set up company buying

sites

Form buying alliance

Lead generation

Marketing must

work together with

sales to define sales

ready prospect and

cooperate to send

right message to

customers

searching for

suppliers

Proposal solicitation

5

The buyer invites

qualified suppliers

to submit proposals

Proposals should be

marketing

documents that

describe value and

benefits in

customer terms

Oral presentation

must inspire

confidence and

position the

company’s

capabilities and

resources .

Supplier selection

6

Buying center will

specify and rank

customer attributes

often using a

supplier evaluation

model.

Overcoming

price pressure

The buying center

tries to negotiate

with preferred

suppliers for better

prices and terms

Some companies

handle price

oriented buyers by

lowering price but

establishing

restricted condition

Limited

quantities

No refunds

No

adjustments

No services

Solution selling can

also elevate price

pressure

Solutions to enhance

customer revenue

Solutions to reduce

customer cost

Solutions to decrease

customer risk

Number of

suppliers

Companies are

increasingly

reducing the no. Of

suppliers

Multiple sourcing

Often cite threat of

labour strike

Single sourcing

Suppliers may become

too comfortable and

lose their competitive

edge

Order routine

specification

7

Buyers negotiate

the final order,

listing the technical

specifications, the

quantity needed,

the expected time

of delivery, return

policies e.t.c

Blanket contracts

It establishes a long

term relationship in

which supplier

promises to

resupply the buyer

as needed. At

agreed upon prices,

over a specified

purchase plan

Vendor

management

inventory

Some companies

shift the ordering

responsibility to the

suppliers. Suppliers

take responsibility

for replenishing

automatically

through continuous

replenishment

program

Performance review

8

The buyer

periodically reviews

the performance of

chosen supplier

By contacting end users

and asking for their

evaluation

Aggregate the cost of

poor performance to

come up with adjusted

costs of purchase

Rate the supplier on

various criteria using

weighted score

method

SUMMARY

Problem recognition

Product specification

General need description

Suppliers search

Proposal solicitation

Supplier selection

Order routine specification

Performance review