Business buy behaviour of organisations that buy goods and services for use in the production of other products and services that are sold, rented or supplied to others. The business buying process is the decision process by which business buyers determine which products and services their organisations need to purchase and then find, evaluate and choose among alternative suppliers and brands. The business market is bigger than the consumer markets, and differs in many ways.
The business markets consist normally with less, but larger buyers than consumer markets. Business demand is derived demand: business demand ultimately derives from the demand for consumer goods. Business markets’ demand is more inelastic and is less affected by short-term price changes, while demand also fluctuates more quickly.
The nature of the buying unit involves more decision participants and a more professional purchasing effort. The business buyers’ decisions are often more complex and formalized. Finally, buyer and seller often work on long-term relationships. Supplier development is the systematic development of networks of supplier-partners to ensure an appropriate and dependable supply of products and materials for use in making products or reselling them to others.
There are three types of business buying situations. A straight rebuy is a business buying situation in which the buyer routinely reorders something without any modifications. A modified rebuy is when the buyer wants to modify the product specifications, prices, terms or suppliers. A new task is a business buying situation in which the buyer purchases a product or service for the first time. Systems selling (or solutions selling) is buying a packaged solution to a problem from a single seller, thus avoiding all the separate decisions involved in a complex buying situation.
There are multiple participants in the business buying process. The buying centre are all the individuals and units that play a role in the purchase decision-making process.
- Users are members of the buying organisation who will actually use the purchased product or service.
- Influencers are people in an organisation’s buying centre who affect the buying decision, they often help define specifications and also provide information for evaluating alternatives.
- Buyers are the people in an organisation’s buying centre who make an actual purchase.
- Deciders are people who have formal or informal power to select or approve the final suppliers.
- –Gatekeepers are people in an organisation’s buyer centre who control the flow of information to others.
The buying centre is a set of buying roles assumed by different people.
There are a lot of things that can influence the business buyer, such as environmental factors. These can include the economic environment, the supply of key materials and culture and customs. Organisational factors such as objectives, systems and policies can also have an influence. Also interpersonal factors, such as authority, status and persuasiveness can exercise their influence. Lastly individual factors, such as age, income, education and risk attitudes can play a role in the decision of the business buyer.
The business buying process
The business buying process has eight stages.
- Problem recognition: someone in the company recognises a problem or need that can be met by acquiring a good or a service.
- General need description is the stage in the business buying process in which a buyer describes the general characteristics and quantity of a needed item.
- Product specification is the stage in the business buying process in which the buying organisation decides on and specifies the best technical product characteristics for a needed item.
- Supplier search is the stage in which the buyer tries to find the best vendors.
- Proposal solicitation is the stage in which the buyer invites qualified suppliers to submit proposals.
- Supplier selection is the stage in which the buyer reviews proposals and select a supplier or suppliers.
- Order-routine specification is the stage in which the buyer writes the final order with the chosen supplier(s), listing the technical specifications, quantity needed, expected time of delivery, return policies and warranties.
- Performance review is the stage in which the buyer assesses the performance of the supplier and decided to continue, modify or drop the arrangement.
E-procurement involves purchasing through electronic connections between buyers and sellers, usually online. This can be via reverse auctions, trading exchanges, company buying sites and extranet links. Benefits of e-procurement are lower transaction costs and efficient purchasing.
The institutional market consists of schools, hospitals, nursing homes, prisons and other institutions that provide goods and services to people in their care. These markets can be extensive and are often characterized by low budgets. Government markets consist of governmental units (federal, state and local) that purchase or rent goods and services for carrying out the main functions of government.