CHAPTER 4.

Industrial Buying & Buyer Behavior

Selling and buying are the two major pillars in industrial marketing. But, buying (purchase) is an
important function in an organization. To maintain an adequate flow of goods and services into
the operations; purchase department of a firm develops organizational buying objectives and
performs activities. The behavior of suppliers as well as potential users of the organization
influences the department. To know these influences, firstly we have to study the purchase
objectives of the industrial customers.
 Business buyers respond to many influences when they make their decisions.
 When supplier offerings are similar, business buyers can satisfy the
purchasing requirements with any supplier, and they place more weight on
the personal treatment they receive.
 Where supplier offerings differ substantially, business buyers are more
accountable for their choices and pay more attention to economic factors.

4.1 Factors affecting industrial buying decisions

Webster and Wind have classified the various influences on industrial/business buyers in to four
main groups of factors: Environmental factors, organizational factors, interpersonal factors, and
industrial factors.

i. Environmental Forces
These are forces that define the boundaries within which buyer-seller relationships develop in the
industrial market. They are characteristics of the world beyond the market level, and include the
economy, technology, political factors, and social factors.

o Economic Environment -- Economic recession and high interest rate with prevalence of
high interest rate /in recession, industrial buyers reduce their investment in plant assets,
equipments, inventories etc. Interest rate is nothing but it is the cost of money. It inhibits
industrial buyers form investing huge amount of investment. The economic environment
consists of the general situation of economic growth or recession, interest rates, and corporate
profitability, within which all firms operate.

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 o Physical environment -- the physical environment affecting the buying firm consists of
the geographical spread of the firm’s suppliers and customers. This factor will affect the firm’s
costs and the extent of logistical problems it may face in actually getting the products it has
bought. For example, many firms that buy large quantities of components for continuous
production favor suppliers that are located in close proximity to their plant. Having a close
supplier helps the company keep a reduced inventory and facilitates just-in-time (JIT) delivery
schedules.
o Rate of technological change – it has a direct impact upon restructuring of an industry.
The restructuring of industries may alter the buying plans of industrial buyers. Not only this, it
may also influence the composition of decision making unit in the buying organization. E.g the
computer technology is rapidly changing the publishing industry. Few years back books were
available in their text book form but they are being available in their soft copy form—in a CD
(compact Disk).
o Legal and Political Environment – the legal and political environment within which
business buying takes place refers to the ways in which government legislation affects
purchasing, directly or indirectly. For example, environmental protection legislation directly
affects which products can be bought or sold in some country. Government tariff and trade
agreements with other countries, government funding of selected programs, and government
attitude towards business and social activities are also factors affecting organizational buying.
As industrial marketers, you should therefore, monitor all developments taking place with
different environmental forces; particularly how they influence buying organizations and do
something about it in order to turn problems into solutions.

ii. Organizational Forces

They are force prevailing/emerging from within buying organizations and influence buying
actions of buyers. These include:

o Organizational policies – they are standing plans that guide actions and decision making
policies can be written or implied (implicit). In buying organizations most purchase
decisions are made according to policies.

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 o Organizational objectives – all decisions in the buying organizations are made in
accordance with the objectives set by organizational customers.
o Procedures – are plans that show chronological sequence of actions. Thus, procedures do
influence the buying behavior of buying organization.
o The roles of purchasers – they are highly dependent up on organizational structure.
As industrial marketer, you have to know therefore:

 How these and other organizational factors influence buying behavior.

 The number of people involved in the buying decisions
 Who they are
 The criteria that they use for evaluating alternative suppliers and brands.
iii. Interpersonal Forces
These are forces that arise from the interactions of participants in the buying decision making
process. Some of such forces that are important for an industrial marketer to know are:

o The degree of conformity within the group setting i.e. degree of compliance to what
others have said.
o Aggressive behavior of individuals in the group.
o Degree of cooperation between individuals in the group.

iv. Individual Forces

These are forces which every individual in the buying decision making unit caries with him/her
self. The most important individual forces are the following ones:

o Personal information of every individual in the buying decision making unit.

o Perception of every individual in the group.
o Performances of every individual in the buying decision making unit.
The above three individual forces are determined by age, income, education, job position,
personality, and risk attitude culture. Because of the presence of these forces, buyers exhibit
different buying style examples include:

 “Keep it simple” buyers – they do not make thorough analysis.

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  “Own expert” buyers – they want to examine the product.
 “Want the best” buyers – want the best out of others.
 “Want everything done” – they want every service that should accompany the product.
Note that some other experts in the area add cultural factors as part of the environmental forces.

 Buying factors vary from one country to another.

 Here are some rules of social and business that marketers should understand when doing
business in other countries:
 France—if you do not speak French, apologize for your lack of knowledge. The
French are quite proud of their language and believe that everyone should feel
privileged to speak it.
 Germany—Germans are sticklers for titles. Try to introduce people using their full,
correct title, no matter how long it is. Also, Germans shake hands at both the
beginning and the end of business meetings.
4.2 Industrial Buying Objectives
Basically, the objective of the purchase department in an organization is defined as buying the
right items in the right quantity, at the right price, for delivery at the right time and place‖ to
define what is right for each dimension is the responsibility of management. The objectives of
the purchasing function are as follows:
Delivery and availability of goods and services
The prime objective of the purchasing department is to ensure that purchased goods and services
are available or delivered when and where they needed. The untimely delivery of the purchased
good/services may affect adversely performance of the purchase function. On the other hand, the
vendor/supplier‘s reliability in delivery is the most important criterion at the time of vendor
evaluation.
Product quality
The quality of product should be consistent with the specifications and use of the product. Some
products meet the Indian Standard (IS) or British Standard (BS) specifications, but they fail on
shop-floor when they are used on a machine. It is significant to ensure consistency in quality of
product to reduce the cost of inspection, interruptions in production process due to rejections,
and arranging replacements of rejected material.
Lowest price of the product

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Always, the buyers like to buy at the lowest price consistent with availability and quality of the
product. The buyers consider price as an important objective, if delivery and quality objectives
are met, because low price is worthless, if the product is not delivered when needed or if the
quality of the product is unacceptable.
Services
The industrial buyers need many types of services to accompany the purchase of goods for
achieving the goals of organization. These services include prompt and accurate information
from suppliers, application or technical assistance, spare-parts availability, repairs and
maintenance capability, and training, if required.
Supplier relationship
Different industrial buyers have developed the purchase departments in their organization.
Because, manufacturing firms spend more than fifty per cent of their sales revenue on purchase.
To develop a good long-term supplier/vendor relationship and to develop new sources of supply,
industrial marketers need to understand that purchasing objectives. These objectives are also
based on the company objectives. Resultantly, the buying members of an organization are also
influenced by both purchasing objectives of the firm and personal objectives. Personal objectives
of industrial buyers include higher status, job security, salary increments, promotions and social
considerations: friendship, mutually beneficial relationships, and personal favors. The industrial
buyers try to achieve both objectives simultaneously. The industrial marketers ought to realize
that it is important to satisfy the purchasing objectives of an industrial firm as well as the
personal objectives of the buying members.
4.3 Industrial Buying process
In consumer marketing, consumers make buying decisions based on certain mental stages such
as need recognition, information search, evaluation, purchase decision, and post-purchase
behavior. But, in industrial markets the buying decision making process includes observable
sequential stages involving many people in the buying organization. The understanding of these
steps/phases of buying-decision making is helpful to an industrial marketer to develop an
appropriate selling strategy.
Need Recognition
A smart marketer recognizes the need/problem of industrial buyer originated within the firm. If
the material supplied by the existing supplier is not satisfactory in terms of quality, or the

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material is not available as per requirement, or the machine supplied by him breaks down too
often, the buying organization recognizes the problem. If an industrial marketer identifies a
problem in the buying organization and suggests how the problem could be solved, there will be
a better possibility of it being selected as a supplier.
Quantity Determination
If the problem is recognized within or outside the buying organization, then the buying firm will
try to answer questions such as: What type of products or services to be considered? What
quantity of the product needed? and so on. For technical products, the technical departments
(R&D, industrial engineering, production, or quality control) will suggest general solutions of
the needed product. For non-technical goods or services, either the user department or purchase
department may suggest products or services, based on experience and also the quantity required
to solve the problem. Nevertheless, if the required information is not available internally within
the buying organization, the same can be obtained from the outside sources.
Product Specification
Stage 2 and 3 are closely related. After the general solution to the problem is determined in the
second phase, the buying organization, in the third stage, develops a precise statement of the
specifications or characteristics of the product or service needed. During this stage the purchase
department takes the help of their technical personnel, or if required, outside sources such as
suppliers or consultants. Industrial marketers have a great opportunity to get involved at this
stage by helping the buyer organization to develop product specifications and characteristics. It
would give a definite advantage by ensuring that the needed product includes his or her
company‘s product characteristics and specifications.
Search for Qualified Potential Suppliers
In this stage, the buying organization searches for acceptable suppliers or vendors. Firstly, they
have to obtain information about all available suppliers and secondly, they have to decide the
qualifying suppliers. The search for potential suppliers is based on the various sources of
information like trade journals, sales calls, work-of-mouth, catalogues, trade-shows, industrial
directories. The qualifications of acceptable supplies may depend on the type of buying
organization such as government undertaking, private sector commercial organization, or
institutions, and the buying situation, and the decision-making members. Furthermore, the

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factors like quality of product or service, reliability in delivery, and service are considered in
qualifications of suppliers
Obtaining and Analyzing Supplier Proposals
If the qualified suppliers are decided then the buying organization obtains the proposals by
sending enquiries to the qualified suppliers. A supplier‘s proposal can be in the form of a formal
offer, quotation, or a formal bid, submitted by the supplier to the buying organization. It must
include the product specification, price, delivery period, payment terms, taxes and duties
applicable, transportation cost (or freight), cost of transit insurance, and any other relevant cost
or free service provided. For purchases of routine products or services, the stages 4 and 5 may
occur simultaneously, as the buyer may contact the qualified suppliers to get the latest
information on prices and delivery periods. For technically complex products and services, a lot
of time is spent in analyzing proposals in terms of comparisons on products, services, deliveries,
and the landed costs: includes the price after discount plus excise duty, sales tax, freight, and
insurance.
Evaluation and Selection of Suppliers
The industrial buyers evaluate the proposals of competing suppliers and selects one or more
suppliers. Further negotiations may continue with selected suppliers on prices, payment terms,
deliveries, and so on. The decision makers in the buying organization may evaluate each supplier
on a set of agreed-upon attributes or factors. Each supplier is evaluated on each attribute by
giving a weight age to each attribute proportionately or on rating scale basis. The supplier(s) who
get the highest total score receives the business or the order from the buying organization. If a
buying firm faces a make-or-buy decision, the supplier‘s proposals are compared with the cost of
producing the needed item within the buying organization. If it is decided to make the item
within the buying organization, the buying process is stopped at this stage.
Routine Order Selection
In this stage the procedure of exchange of goods and services between a buyer and a seller is
worked out. The activities include placement of orders (i.e. purchase orders) with the selected
suppliers, the quantity to be purchased from each supplier, frequency of order placement by
buyers and delivery schedules to be adhered to by the supplier, schedule, and the payment terms
to be adhered to by the buyer. The user department would not be satisfied until the supplier
delivers the required item as per delivery schedule, and with acceptable quality

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Performance Feedback and post-purchase Evaluation
In this final phase a formal or informal review regarding the performance of each supplier (or
vendor) takes place. The user department gives a feedback on whether the purchased item solved
the problem or not. If not, the members of the decision-making unit review their earlier decision
and decide to give a chance to the previously rejected supplier.
The industrial vendor should recognize that marketing effort is no over after the order is
received. He or she must check the feedback and evaluation process in the customer (buyer)
organization. In particular, the industrial marketer must monitor the user satisfaction levels or
complaints so that immediate corrective action can be taken before a major damage. In fact, a
quick response to customers‘ complaints can result in good buyer-seller relationship. The type of
products, the phase of the buying-decision making process of customer firms, and the purchasing
situations also influence the marketing strategy of industrial seller.
4.4 Industrial buying situations
There are three common types of buying situations namely (i) New purchase (or New task), (ii)
Change in supplier/modified re-buy, and (iii) Repeat purchase/straight re-buy; discussed as
follows:
1 New Purchase/new task buying
The industrial buyers buy the item for the first time in this situation. The need for a new purchase
may be due to internal or external factors. For example, when a firm decides to diversify into
new purchase situations the buyers have limited knowledge and lack of previous experience.
Therefore, they have to obtain a variety of information about the product, the suppliers, the
prices and so on. The risks are more, decisions may take longer time, and more people are
involved in decision making in the new purchase decisions.
2 Change in Supplier/modified re-buy
This situation occurs when the organization is not satisfied with the performance of the existing
suppliers, or the need arises for cost reduction or quality improvement. The change in supplier
may also be necessary if technical people in the buying organization ask for changes in the
product specification, or marketing department asks for redesigning the product to gain some
competitive advantage. As a result, search for information about alternative sources of supply
becomes necessary. Even though, certain attributes or factors can be used to evaluate the
suppliers. There may be uncertainty regarding the supplier who can best meet the needs of the

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buying firm. Therefore, the modified re-buy situation occurs mostly when the buying firms are
not satisfied with the performance of the existing suppliers.
3 Repeat Purchase/straight re-buy
If the buying organization requires certain products or services continuously and
products/services had been purchased in the past then the situation of repeat purchase occurs. In
such a situation, the buying organization reorders/places repeat orders with the suppliers who are
currently supplying such items. This means that the product, the price, the delivery period, and
the payment terms remain the same in the reorder, as per the original purchase order. This is a
routine decision with low risk and less information needs, taken by a junior executive in the
purchase department. Generally, the buying firms do not change the existing suppliers if their
performance is satisfactory.
4.5 Decision making unit/Participants in industrial buying process
It is essential to understand the roles of buying-center members or decision-making units
(DMUs) before identifying the individuals and groups involved in the buying-decision process. It
is helpful to the industrial marketers to develop an effective promotion strategy. The roles of
buying center members are as follows:
1. Initiators
The initiators might be any individuals in the buying firm. Often, the users of a product/service
play the role of the initiators.
2. Buyers
The major roles of buyers are obtaining quotations (or offers) from suppliers, supplier evaluation
and selection, negotiation, processing purchase orders, speed up deliveries, and implementing
purchasing policies of the organization. Generally, they are the purchase (or material) officers
and executives.
3.Users
The user is those individuals who use the product or service that is to be purchased. Generally,
users play the role of the initiators. The influence of the users in purchasing decisions may vary
from minor to major. They may define the specifications of the needed product. They may be
shop floor workers, maintenance engineers, or R&D engineers.
4. Influencers

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Those individuals who influence the buying decision are known as influencers. Generally,
technical people such as designers, quality control engineers have a substantial influence on
purchase decisions. Sometimes, individuals outside the organization, who are experts or
consultants, play the role of influencers by drawing specifications of products or services.
5. Deciders
The deciders make the actual buying decisions. They may be one or more individuals involved in
the buying decision. It is very significant to identify the deciders, although at times it may be
difficult task. Generally, for routine purchases the buyer (or purchase executive) may be the
decider. But, for high-value and technically complex products, senior executives are the deciders.
6. Gatekeepers
The gatekeepers are those individuals who control (or filter) the flow of the information
regarding products and services to the members of the buying center. Sometimes, the
gatekeepers may control sales people‘s meetings with the members of the buying center.
Gatekeepers are often the assistants or junior persons attached to purchase (or materials)
manager.
After understanding the roles of DMUs, industrial marketers, must identify the individuals and
groups who are the members of buying center. The DMUs are useful tools which answers the
question-Who are involved in buying decision in an industrial organization? It is defined as a
body of all the individuals or groups participating in the buying decision process and who have
interdependent objectives and share common risks. The emphasis in the buying center is on the
organizational groups i.e. the functional areas, which participate in the buying decision process.
4.6 KEY MEMBERS IN BUYING ORGANISATION
The following discussion clarifies different key members or DMUs in industrial buying
decisions:
Top Management
For purchases of high value capital equipment, the top management in most firms got involved in
the supplier selection, as it may have a major impact on the firm‘s operations. The top
management in an industrial organization consists of managing director, director, presidents, and
vice-president of general manager. They are generally involved in purchase policy decisions
such as diversification into a new product/project, approval of purchase or materials department
annual budgets and objectives, and deciding the guidelines for purchase decisions.

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Technical Persons
The technical persons are designers, production manager, maintenance manager, quality control
manager, R & D manager, and industrial engineers. Generally, they are involved in product
specification or description, technical evaluation of offers received from suppliers, negotiations
with suppliers, performance feedback on products supplied, and so on. They visit the factories of
potential suppliers to achieve more information and assurance of manufacturing capability.
Purchasers
Buyers are the individuals in the purchase or materials department. They may be senior
executives or managers, and also, at junior levels, purchase officers or assistants. Generally, they
are involved in most of the phases or steps of the purchase activities. They coordinate with
technical persons, top management, accounts or finance persons within an organization, as well
as, with suppliers or vendors externally. Buyer‘s influence on selection of suppliers is
considerable. They are conscious of keeping good relations with other decision-making members
within the organization and also with the suppliers.
Accounts/Finance Persons
The contribution of finance/accounts persons are seen while finalizing commercial terms such as
modes of payment, issuance of bank guarantees, financial approval of capital purchases, issuing
payments to suppliers, and so on.
Marketing People
When a purchase decision has an impact on the marketability of a firm‘s product, marketing
people become influencers in the buying decision process. For example, a manufacturing firm
market the electric motors had to change its packing due to damages caused to the product in
transportation. It also affects the satisfaction level of the customers. The marketing manager
insisted that suppliers should use good quality and thicker wood for packing the motors to
minimize damage in transit.
4.7 MODERN PURCHASING ACTIVITIES
There are some contemporary purchasing activities, which are used in industrial buying
processes. These are discussed as follows:
4.7.1 Just-in-Time (JIT)
It refers that the material arrives at the buyer‘s factory exactly when needed by the buyer. It
minimizes the inventory, and increases the quality and productivity. The goal of JIT delivery is

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zero inventory and excellent quality of the material delivered by the supplier. This ensures nil
rejection at the buyer‘s factory. The JIT delivery means that the buying and selling organizations
work together closely to reduce costs.
4.7.2 Single Sourcing
In this activity, the industrial customers place orders with only one supplier not to two or three
suppliers. It means all the eggs are not in one basket. The practice makes possible for the buying
and selling organizations to work closely together, involve the supplier from the design stage,
and utilize the supplier‘s expertise.
4.7.3 Value Analysis
The industrial buyers to reduce cost with maintaining product reliability use the value analysis. It
involves analyzing a product item by the function it performs, the value of the function, and the
alternate methods of performing the same function. It uses creative technique like brainstorming
and includes members of various departments such as production, quality control, design,
industrial engineering, marketing, and purchase.
4.7.4 Purchase Committee
Some industrial buyers develop a formalized decision-making unit i.e. purchase committee. It is
used in many industrial organizations including institutions (such as universities and hospitals)
and Government companies. Generally, in a typical purchase committee, one or two individuals
nominate in the decision- making. The salesperson must provide information to all the members
of the purchase committee, and should target the real sales efforts to those dominant members
who influence the buying decisions. Identifying purchase committee individuals, their technical
and commercial expertise, their individual needs, buying decision process, and the organization
structure are the important tasks to be performed by the effective industrial marketer.

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