Industrial Buying Decision Process
It is also known as organizational buying process or
business buying process. Industrial purchasing
decision making involves more physical and
observable stages. There are many decision makers
involved in each of the eight stages as elaborated by
the buy grid framework.
The important stages of business buying includes
recognizing the problem, developing product specs
to solve the problem, searching for possible
products, selecting a supplier and ordering the
product, and finally evaluating the product and
supplier performance.
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Phase 1 – Recognition of a problem
The purchasing /buying process begins when
someone in company recognizes a problem or need
that can be met by acquiring goods or services. The
common events that lead to this phase could be – a
machine break down and require replacement or
new parts, company decides to diversify or expand
business, the company decides to develop new
products.
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Phase 2 – Description of the need
This phase involves determination of the characteristics
and quantity needed of them. The general
characteristics could be reliability , durability , price etc.
and the marketer along with the purchasing manager
,engineers and users can describe the needs. The
question can arise like – what type of goods /services
should be considered, what quantities should be
needed, what performance specification need to be
met.
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Phase 3- Product specification
Obtaining the input from the second phase , the buying
organization has to develop the technical specifications
of the needed items. In this phase, the product is broken
down into items. The specification about product and
items are listed. Companies do not encourage the
supplier participation at this stage.
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Phase 4 – Supplier Search
This phase pertains to the search for the qualified
suppliers among the potential sources. The marketer
has to ensure that he is in the list of potential suppliers.
For this to happen , he has to make periodic visits to all
potential companies and create awareness. Brochures
have to be circulated and advertisements placed in
specific media like trade journals. This phase only
involves making a list of qualified suppliers.
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Phase 5- Proposal Solicitation
The list of qualified suppliers are now further shortened
based on some critical factors. Than the purchasing
departments ask for proposals to be sent by each
supplier. After evaluations , base on specified criteria ,
some firms are asked to come over for formal
presentations. The proposal must include all specification
like price , delivery period , charged taxes, and so on. For
technically complex product and services , a lot of time
spent in analyzing proposals in terms of comparison on
product services , deliveries and the landed cost.
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Phase 6- Supplier Selection
Each of the supplier’s presentation are rated according
to certain evaluation models. The buying organization
may also attempt to negotiate with its preferred
suppliers for better prices and terms before making a
final decision. Various parameters like reliability ,
delivery ,flexibility, price, service etc. are used for
supplier selection and their rating.
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Phase 7- Order Routine Specification
After the suppliers have been selected , the buyer
negotiates the final order, listing the technical
specifications , the quantity needed , the expected time
of delivery etc. Buyers are increasingly moving towards
Blanket contracting rather than periodic purchase
orders.
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Phase 8- Performance Review
The final phase in the purchasing process consists of a
formal or informal review and feedback regarding
product performance as well as vendor performance.
The buyer may contact the end user and ask for their
evaluations which are in turn given to the supplier or
he may rate the supplier on several criteria using a
weighted score method. The performance review might
lead to the buyer to continue , improve or drop a
supplier
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