The Business Buying Process

The Business Buying Process

Buyers who face a new task buying situation usually go through all stages of the buying process. Buyers making modified or straight rebuys may skip some of the stages.

Problem Recognition: Problem recognition can result from internal or external stimuli. Internally, the company may decide to launch a new product that requires new production equipment and materials. Externally, the buyer may get some new ideas at a trade show, see an ad, or receive a call from a salesperson who offers a better product or a lower price.

General Need Description: The buyer next prepares a general need description that describes the characteristics and quantity of the needed item. For standard items, this process presents few problems. For complex items, however, the buyer may have to work with others—engineers, users, and consultants—to define the item.

Product Specification: The buying organization next develops the item’s technical product specifications, often with the help of a value analysis engineering team. Product value analysis is an approach to cost reduction in which components are studied carefully to determine if they can be redesigned, standardized, or made by less costly methods of production. The team decides on the best product characteristics and specifies them accordingly.

Supplier Search: The buyer now conducts a supplier search to find the best vendors. The buyer can compile a small list of qualified suppliers by reviewing trade directories, doing a computer search, or phoning other companies for recommendations. Today, more and more companies are turning to the Internet to find suppliers. The newer the buying task, the more complex and costly the item, and the greater the amount of time the buyer will spend searching for suppliers.

Proposal Solicitation: In the proposal solicitation stage of the business buying process, the buyer invites qualified suppliers to submit proposals. When the item is complex or expensive, the buyer will usually require detailed written proposals or formal presentations from each potential supplier.

Supplier Selection: During supplier selection, the buying center often will draw up a list of the desired supplier attributes and their relative importance. Buyers may attempt to negotiate with preferred suppliers for better prices and terms before making the final selections. In the end, they may select a single supplier or a few suppliers. Many buyers prefer multiple sources of suppliers to avoid being totally dependent on one supplier and to allow comparisons of prices and performance of several suppliers over time.

Order-Routine Specification: The buyer now prepares an order-routine specification. It includes the final order with the chosen supplier or suppliers and lists items such as technical specifications, quantity needed, expected time of delivery, return policies, and warranties. In the case of maintenance, repair, and operating items, buyers may use blanket contracts rather than periodic purchase orders. A blanket contract creates a long-term relationship in which the supplier promises to resupply the buyer as needed at agreed prices for a set time period.

Performance Review: The performance review may lead the buyer to continue, modify, or drop the arrangement. The eight-stage model provides a simple view of the business buying-decision process. The actual process is usually much more complex.

Institutional and Government Markets: Much of this discussion also applies to the buying practices of institutional and government organizations. However, these two non-business markets have additional character¬istics and needs.