B2B Buying

The Nature of Business Buying

So far we’ve talked about how business-to-business markets are different from consumer marketsOpens in new window and about the different types of customersOpens in new window that make up business markets. In this segment of the series, we’ll discuss some of the important characteristics of business buying.

This is important because, just as with companies that sell to end consumers, a successful business-to-business marketer needs to understand how his or her customers make decisions. Armed with this knowledge, the company is able to participate in the buyer’s decision process from the start.

Take a firm that sells equipment to hospitals. Understanding that doctors who practice at the hospital (rather than buyers who actually purchase medical supplies) often initiate new equipment purchases means that the firm’s salespeople have to be sure that they establish solid relationships with such individuals, as well as with the hospital’s buyers – if they expect their products to be taken seriously.

The Buying Situation

In the same way as end consumers, business buyers spend more time and effort on some purchases than on others. Devoting such effort to a purchase decision usually depends on the complexity of the product and how often the decision has to be made.

1.     Straight re-buy

A straight re-buy is the routine purchase of items that a business-to-business customer regularly needs.

The buyer has purchased the same items many times before and routinely reorders them when supplies are low, often from the same suppliers. Reordering takes little time. Buyers typically maintain a list of approved suppliers that have demonstrated their ability to meet the firm’s criteria for pricing, quality, service and delivery. Such products could include paper or stationery.

Because straight re-buys often contribute the “bread and butter” revenue a firm needs to maintain a steady stream of income, many business marketers go to great lengths to cultivate and maintain relationships with customers who summit reorders on a regular basis.

Salespeople regularly call on these customers to handle orders personally and to see if there are additional products the customer needs. The goal is to be sure that the customer doesn’t even think twice about just buying the same product every time he or she is running low. Re-buys keep a supplier’s sales volume up and selling costs down.

2.     Modified re-buy

Life would be sweet for companies whose customers automatically do straight re-buys. Unfortunately, these situations do not last forever.

A modified re-buy occurs when a firm wants to shop around for suppliers with better prices, quality or delivery times. This situation also can occur when the organization has new needs for products it already buys. A buyer who has purchased many office printers in the past, for example, may have to evaluate several lines of printers if the firm has a new need for office equipment.

Modified re-buys require more time and effort than straight re-buys. The buyer generally knows the purchase requirements and a few potential suppliers. Marketers know that modified re-buys can mean that some vendors get added to a buyer’s approved supplier list while others may be dropped. Astute marketers routinely call on buyers to detect and define problems that can lead to winning or losing in such situations.

3.     New-task buy

A first-time purchase is a new-task buy. Uncertainty and risk characterize buying decisions in this classification, and they need the most effort because the buyer has no previous experience on which to base a decision.

Your university, for example, may decide (if it hasn’t done so already) to go into the “distance learning” business, which is delivering course to off-site students. Buying the equipment to set up classrooms with two-way audio-visual transmission via the Internet is an expensive and complex new-task buy.

The buyer has to start from scratch to gather information on purchase specifications that may be highly technical/complex and require detailed input from others. In new-task buying situations, not only do buyers lack experience with the product, but they also are often unfamiliar with firms that supply the product. Supplier choice is critical, and buyers gather much information about quality, pricing, delivery and service from several potential suppliers.

A prospective customer’s new-task buying situation represents both a challenge and an opportunity. Although a new-task buy can be significant in itself, often the chosen supplier gains the added advantage of becoming an “in” supplier for more routine purchases that will follow.

A growing business that needs an advertising agency for the first time, for example, may seek exhaustive information from several firms before selecting one, but then it may continue to use the chosen agency’s services for future projects without exploring other alternatives.

Marketers know that to get the order in a new-buy situations, they must develop a close working relationship with the business buyer.

Keep in mind that these relationships aren’t just important in sectors such as industrial services. There are, in fact, many situations where marketers focus on selling their product or service by inspiring people to recommend their products – over and above the end consumers who actually buy them.

To use an example, think about all of the products and services that make up the higher-education industry. For instance, even though you are perhaps the one who paid the money for this text, your tutor was the one who made the wise decision to assign it. He or she may have made their choice only after carefully considering numerous texts and talking to several publishing sales representatives.

The Professional Buyer

Just as it is important for marketers of consumer goods and services to understand their customers, it is essential that business-to-business marketers understand who handles the buying for business customers. Trained professional buyers frequently carry out buying in business-to-business markets. These people typically have a title such as purchasing manager, purchasing director or head of purchasing.

While some consumers like to shop till they drop almost every day, most of us spend far less time roaming the aisles. However, professional purchasers do it all day, every day. These individuals focus on economic factors beyond the initial price of the product, including transportation and delivery charges, accessory products or supplies, maintenance and other costs. They are responsible for selecting quality products and ensuring their timely delivery. They shop as if their jobs depend on it – and they do.

The Decision-Making Unit (DMU)

Often, in business buying situations several people work together to reach a decision. Depending on what they need to purchase, these participants may be production workers, supervisors, engineers, secretaries, shipping clerks or financial controllers. In a small organization, everyone may have a voice in the decision. The group of people in the organization who participate in the decision-making process is referred to as the decision-making unit. We discussed it at length hereOpens in new window.