Nature of Industrial Buying

Industrial Marketing, 2nd Edition By Krishna K Havaldar,

Tata McGraw - Hill Companies
Chapter - 3

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

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 Buy Phase in Industrial Buying
 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

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8 phases in Industrial Buying

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8 phases in Industrial Buying
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 All rights reserved © Focus EduCare 2009
8 phases in Industrial Buying

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
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
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8 phases in Industrial Buying

Analyzing Supplier Proposal

•Once the qualified suppliers are
decided, the buying organization
obtains the Request for proposals
(RFPs)
•Supplier proposal or quotation of
product
Supplierspecification,
Selection price, delivery
period, payment
•Evaluation of theterms, taxes of
proposals and
duties, freight
competing charges
suppliers and
and other
select
relevant
supplierscost is enclosed in the
proposal
•Further negotiations continue with
selected suppliers on price, payment
and deliveries All rights reserved © Focus EduCare 2009
8 phases in Industrial Buying

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

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Organizational Purchase Situation
Purchase Situation

Modified Straight
New Task
Rebuy Rebuy

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Straight Rebuy

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Modified Rebuy

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 New Task

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

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Participants in the Business
Buying Process
Initiator

Gatekeeper Influencer

Buyer Approver

Decider User

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 Participants in the Business
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

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Participants in the Business
Buying Process

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 Participants in the Business
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

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 Key Members of Buying Center
 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

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Key Members of Buying Center
 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

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 Summary
 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

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 Questions 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?
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END OF SESSION 4

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