8 Steps of Business Buying Process

Business Buying is the process in which the need for buying products and services is determined and then the most suitable supplier or brand from among the available alternatives is selected by identifying and evaluating them. Other names for Business Buying are Organisational Buying and Industrial Buying.

It is essential for organisational marketers to understand the phenomena as well as the features of business buying in developing appropriate marketing strategies to attract organisational buyers. This involves investigating the buying circumstances, the purchasing procedure for making purchasing decisions, the ways in which various organisational members influence these buying decisions, the criteria utilised in making such judgments, etc. In order to create the purchase criteria, it is crucial for purchasing managers to communicate with various people in the organisation who have a variety of responsibilities. Normal customers tend to be geographically dispersed, whereas organisational buyers are a collection of people who have a common yet derived demand. As a result, it can be quite difficult to understand organisational business buying behaviour because it involves several decision-makers.   

The processes for making decisions for organisations and consumers are quite different from each other. There are eight stages in a business buying process:

Problem recognition is the first and most essential step of the business buying process. In this step, a company recognises a problem or need that requires to be solved by acquiring a particular product or service. This step can be a result of internal or external factors.

(i) Internal Factor Responsible for Organisational Problem:

• It can arise as a result of the company’s choice to launch a new product in response to market demand. This will require the procurement of new materials and machinery.
• The company may have breakdowns, which calls for the procurement of new parts for machine repairs. Even while machinery has a lifespan, it eventually needs to be replaced.
• Sometimes the procured material is rejected because it is of poor quality. This causes the business to procure from a different provider urgently.

(ii) External Factor Responsible for Organisational Problem:

The marketers that the organisation places in the market should act as the external fact-informers; i.e., they should inform the organisation about the performance of the product in the market and any improvements that need to be made immediately, as well as details about the products of its competitors. This will serve as an external motivator for the business to make rational purchases in order to maintain its level of competition.

The second step involves determining the quantity and quality of the product and thus preparing a general need description. If the items are standard, the business buying process presents limited problems. However, in the case of complex products, to define them, the buyer may have to work with other people like engineers, consultants, users, etc. The team defining the item may want to rank the importance of price, durability, reliability, and other attributes required in it. Thus, in the second step of the business buying process, the buyers can get help from the alert business marketer in defining their needs by providing them information regarding the value of characteristics of different products.

After receiving input from the second step, the buying organisation must prepare technical specifications for the required parts. At this step, the technical and other value-related specifications of the product are examined. These requirements need to match the organisational needs. The suppliers may offer products with broader applications but at a higher price. The product value analysis helps in reviewing product requirements and actual specifications to reduce waste. The marketer must collaborate with his technical and financial partners to assess the feasibility of the project and to explain the services they can provide to create and supply the product.

For instance, The 100 cc bike “Freedom” was designed and developed by LML’s Kanpur factory, which invited the help of various companies for the design and supply of many parts. In addition to Daclin designing and providing the frame, Sriram provided the piston, Borg Warner of Germany provided the cam chain, and MRF was enlisted to create the tires. The technology components for changes to the gear system were given by the British company Prodrine.

The next step in buying for a business is to identify the most suitable vendors. The organisational buyers evaluate the potential vendors and suppliers based on the effectiveness and quality of their products and services. In general, the vendors’ dependability, market standing, and financial situation are taken into consideration. Some vendors are removed from the consideration list because they can’t deliver by the specified time or have a bad reputation for their brands. Finally, the approved list, from which the final suppliers are chosen, contains the qualified vendors. It is necessary to distribute brochures and place advertisements in particular media, such as trade publications. This stage consists only of compiling a list of qualified vendors.

In the fifth stage, vendors are invited to submit their price quotes. To provide their quotations, the suppliers employ catalogues or sales representatives. When purchasing expensive and complex things, it is possible to ask vendors for written proposals, compare those proposals and choose the best vendor based on the results. The requested proposal from vendors should include both technical and marketing information. The effectiveness of the oral presentations depends on the vendor’s ability to gain the organisation’s buyer’s trust by showcasing their capabilities and possibilities.

For instance, A well-known multinational corporation (MNC) that produces soaps wants potential vendors to go through three stages: qualified vendor, approved vendor, and chosen vendor. The provider must exhibit expertise in technology, good financial health, cost efficiency, following high-quality standards, and innovation to be approved. When a vendor meets these requirements, they submit a sample lot for approval. When a supplier receives approval and displays high product uniformity, ongoing quality improvement, and JIT delivery capabilities, the vendor is designated as a “select supplier.”

During this step in business buying process, several ideas are evaluated based on their relevance. The buying centre is prepared to choose the vendor for organisational buying after carefully examining the various vendor proposals. It is usually done with the compilation of a list of the necessary vendor attributes and their significance.

Some of the attributes include:

• Nature of technical support services
• Method and speed of delivery
• Nature of addressing customer needs
• Quality of products supplied
• Reputation in the market
• Price of the products supplied
• Credit Facility

At this point, the vendor analysis not only focuses on the technical aspects but also considers reliability, punctuality, price, credit offers, etc.

The purchaser places an order with the chosen vendor by listing technical specifications, required quantity, expected time of delivery, return policies, and warranties. However, in the case of repair, maintenance, and operating products, the buyer instead of using periodic purchase orders, may use blanket contracts. A blanket contract is a contract that creates a long-term relationship under which the supplier makes a promise to the buyer to resupply goods when required at agreed prices for a determined time period.

In present times, various large buyers are practising vendor-managed inventory. Under this, the buyers turn over ordering and inventory responsibilities to their suppliers. Here, the buyers share information related to sales and inventory, directly to the major suppliers. After that, the suppliers monitor inventories and automatically replenish the stock as per the requirement. Such a system is used by various suppliers and retailers such as Croma, Big Bazaar, E-Zone, Walmart, etc.

The final step in an organisation’s purchasing process is post-purchase evaluation. Buyers create an evaluation based on factors like cost, quality, delivery schedule, after-sale service, etc. After routine departmental discussions, an overall rating is provided. It helps in making the choice of whether to work with the vendor going ahead or to look for another. The assessment sheet is also distributed to them in order to provide vendors with a chance to get better.

Understand the process that businesses go through when making purchases if they are to create effective strategies. The are 8 steps of this business buying process, starting from identifying a problem and ending with appraising the performance of selected suppliers. Knowing what happens at every level will enable to customize their methods for influencing those in charge of decisions so they can win deals.

The fact that buying of business is more complicated than that done by individuals shows why there must be elaborate communication channels as well as efforts geared towards forming strong bonds between potential buyers and sellers. Those involved in the process should therefore ensure they meet all particular needs and specifications throughout the whole thing in order for them prosper within B2B sector.

Why Business Process Management is Important?

Business Process Management (BPM) is important because it helps organizations improve efficiency, reduce costs, and achieve better customer satisfaction by streamlining and optimizing their internal processes. In short, BPM helps businesses run smoother and perform better.

Where to Buy a Business?

Several online marketplaces specialize in connecting business buyers and sellers. Look for platforms like BizBuySell, BusinessesForSale.com, or industry-specific sites to find businesses for sale in your area.

What to Look for When Buying a Business?

Look for a business with a strong financial history, a solid customer base, and a clear reason for selling. Investigate the industry trends and future prospects to ensure it’s a growing market. Finally, ensure you understand the legal and regulatory environment surrounding the business.

How Many Business Can You Own?

Legally, there’s no limit to the number of businesses you can own, though forming separate legal entities (LLCs or corporations) is recommended. The real limit depends on your ability to manage them effectively – consider the time, resources, and focus each requires.

is Buying a Business a Good Idea?

Buying a business can be a good idea if you have the capital and industry expertise. It offers a faster path to profits with an established customer base and operations. However, it also involves inheriting existing problems and requires careful due diligence to avoid future headaches.