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Notes on Lecture - 21 (20.06.

11)
:: Stages of business buying process in the organization
The business buying process is very similar to the consumer buying process, with a few exceptions. Business buying is not gene rally need-driven but it is instead problem-driven (Business markets and business Buying Behavior).

Stage 1 - Need Recognition: Problem can be identified from either

internal stimuli or external stimuli. Company would like to launch new product hence it searches for the suppliers who can supply the material and equipments required for the new product. External stimuli like trade show, conference also helps the company to identify the problem.

Stage 2 - General Need Description: After finalizing the problem,


companies will define need description. The need description includes: 1. Characteristics and quantity of the needed item. 2. For the complex products team assessment is required. 3. The required items are assessed on the basis of reliability, durability, price, and other attributes needed in the item.

Stage 3 - Product specifications: In this stage, the organization develops


detailed product specification with value analysis. In the value Analysis, Company analyzes the components and their production process. Here emphasis is given to find the alternative methods of producing the components and finding the optimum method that suits the company..

Stage 4 - Supplier Search: The buyer now tries to identify the most

appropriate suppliers. The buyer can examine trade directories, do a computer search, phone other companies for recommendations, watch trade advertisements, and attend trade shows. The suppliers task is to get listed in major business directories, develop a strong advertising and promotion program, and build a good reputation in the marketplace. Suppliers who lack the required production capacity or suffer from a poor reputation will be rejected. Those who qualify may be visited to examine their manufacturing facilities and meet their personnel. Qualified suppliers are short-listed for further process.

Stage 5 - Proposal Solicitation: The buyer will now invite qualified


suppliers to submit proposals. Some suppliers will send only a catalog or a sales representative. Where the item is complex or expensive, the

buyer requires a detailed written proposal from each qualified supplier. The buyer will invite qualified suppliers to make formal presentations. Thus business marketers must be skilled in researching, writing and presenting proposals. Their proposals should be marketing documents, not just technical documents. Their oral presentations should inspire confidence. They should position their companys capabilities and resources so that they stand but from the competition.

Stage 6 - Supplier selection: This stage is also known as vendor

selection. During this stage companies will prepare the checklist. Weight ages are assigned against each checklist point and evaluated. Some of the important attributes those commonly found in the vendor evaluations are: a. Quality b. Delivery c. Communication d. Competitive prices. e. Servicing f. Technical advice g. Performance history h. Reputation

Stage 7 - Order Routine specifications: The buyer now negotiates the


final order with the chosen supplier(s), listing the technical specifications the quantity needed, the expected time of delivery, return policies, warranties and so on. In case of MRO items (Maintenance, Repair and Operating items), buyers are increasingly moving towards blanket contracts rather than periodic purchase orders. Writing a new purchase order each time stock is needed, is expensive. Nor does the buyer want to write fewer and larger purchase orders because that means carrying more inventories. A blanket contract establishes a long-term relationship where the supplier promises to re-supply the buyer as needed on agreed price terms over a specified period of time. The stock is held by the seller, hence the name stockless purchase plan. The buyers computer automatically sends an order to the seller when stock is needed. This locks the supplier with the buyer and makes it difficult for out-suppliers to break in unless the buyer becomes dissatisfied with the in-suppliers prices, quality or service.

Stage 8 - Performance review: In this stage, the organization review the


performance of the suppliers. This will help it to decide whether to continue with existing suppliers or should search for the new vendor.

:: Buying Situations in The Industrial Marketing.


Buying situations varies to the large extent in the industrial marketing compared to the consumer markets. The negotiation process and vendor evaluation stages will not be there if company wants to purchase the same material from the existing suppliers. It means for each situations buying process changes. Therefore in this section we are discussing the different situation involved in the business buying. Industrial marketing usually involves three different types of buying situations. They are the followings: 1. New task: A purchaser buys a product or service for the first time (e.g., office building, new security system). The greater the cost or risk, the larger the number of participants and the greater their information gatheringand therefore the longer the time to a decision. 2. Straight rebuy: The purchasing department reorders on a routine basis (e.g., office supplies, bulk chemicals) and chooses from suppliers on an "approved list." The suppliers make an effort to maintain product and service quality and often propose automatic reordering systems to save time. "Out-suppliers" attempt to offer something new or to exploit dissatisfaction with a current supplier. Out-suppliers try to get a small order and then enlarge their purchase share over time. 3. Modified rebuy: The buyer wants to modify product specifications, prices, delivery requirements, or other terms. The modified rebuy usually involves additional participants on both sides. The in-suppliers become nervous and have to protect the account. The out-suppliers see an opportunity to propose a belter offer to gain some business.

:: Participants in the Business Buying Process


1. Initiators: Those who request that something be purchased. They may be users or others in the organization. 2. Users: Those who will use the product or service. In many cases, the users initiate the buying proposal and help define the product requirements. 3. Influencers: People who influence the buying decision. They often help define specifications and also provide information for evaluating alternatives. Technical personnel are particularly important influencers. 4. Deciders: People who decide on product requirements or on suppliers. 5. Approvers: People who authorize the proposed actions of deciders or buyers. 6. Buyers: People who have formal authority to select the supplier and arrange the purchase terms. Buyers may help shape product specifications,

but they play their major role in selecting vendors and negotiating. In more complex purchases, the buyers might include high-level managers. 7. Gatekeepers: People who have the power to prevent sellers or information from reaching members of the buying center. For example, purchasing agents, receptionists, and telephone operators may prevent salespersons from contacting users or deciders.