How they buy

The 7 Steps in the Organization Buying Decision Process

The organizational (or business) buying process consists of several players, beginning with an initiator and ending with a buyer.

To make matters even more challenging to marketers, members of the buying team go through several stages in the decision making process. The Figure 1, below, describes the decision-making process for an organizational buyingOpens in new window.

Organizational+Buying+Process Buy phases: the organization decision-making process

The exact nature of the process will depend on the buying situation. In some situations some stages will be omitted. For example, in a routine rebuy situation the purchasing officer is unlikely to pass through the third, fourth and fifth stages (search for suppliers, and analysis and evaluation of their proposals).

These stages will be bypassed, as the buyer, recognizing a need—perhaps shortage of stationery—routinely reorders from an existing supplier. In general, the more complex the decision and the more expensive the item, the more likely it is that each stage will be passed through and that the process will take more time.

1.     Recognition of a problem (need)

Needs and problems may be recognized through either internal or external factors. An example of an internal factor would be the realization of under-capacity leading to the decision to purchase plant or equipment. Thus, internal recognition leads to active behavior (internal/active).

Some problems that are recognized internally may not be acted upon. This condition may be termed internal/passive. A production manager may realize that there is a problem with a machine but, given more pressing problems, decide to put up with it.

Other potential problems may not be recognized internally, and become problems only because of external cues. Production managers may be quite satisfied with their production process until they are made aware of another, more efficient, method.

Clearly, these different problems have important implications for marketing and sales. The internal/passive condition implies that there is an opportunity for a salesperson, having identified the condition, to highlight the problem by careful analysis of cost inefficiencies and other symptoms, so that the problem is perceived to be pressing and in need of solution (internal/active).

The internal/active situation requires the supplier to demonstrate a differential advantage of its products over those of the competition. In this situation a problem stimulation is unnecessary, but where internal recognition is absent, the marketer can provide the necessary external cues.

A fork-lift truck sales representative might stimulate problem recognition by showing how the truck can save the customer money, due to lower maintenance costs, and lead to more efficient use of warehouse space through higher lifting capabilities.

AdvertisingOpens in new window or direct mail could also be used to good effect. The Microsoft illustration shows how advertising was used to create awareness of its videoconferencing and instant messaging capabilities that can keep people on the move in touch.

2.    Determination of Specification and Quantity of Needed Item

At this stage of the decision-making process the DMUOpens in new window will draw up a description of what is required. For example, it might decide that five lathes are required to meet certain specifications.

The ability of marketers to influence the specification can give their company an advantage at later stages of the process. By persuading the buying company to specify features that only the marketer’ own product possesses, the sale may be virtually closed at this stage. This is the process of setting up lock-out criteria.

3.    Search For and Qualification of Potential Sources

A great deal of variation in the degree of search takes place in industrial buying. Generally speaking, the cheaper and less important the item, and the more information the buyer possesses, the less search takes place. Marketers can use advertisingOpens in new window to ensure that their brands are in the buyers’ awareness set and are, therefore, considered when evaluating alternatives.

4.    Acquisition and Analysis of Proposals

Having found a number of companies that, perhaps through their technical expertise and general reputation, are considered to be qualified to supply the product, proposals will be called for and analysis of them undertaken.

5.    Evaluation of Proposals and Selection of Supplier(s)

Each proposal will be evaluated in the light of the choice criteria deemed to be more important to each DMU member. It is important to realize that various members may use different criteria when judging proposals. Although this may cause problems, the outcome of this procedure is the selection of a supplier or suppliers.

6.     Selection of an Order Routine

Next, the details of payment and delivery are drawn up. Usually this is conducted by the purchasing officer. In some buying decisions—when delivery is an important consideration in selecting a supplier—this stage is merged into the acquisition and evaluation stages.

7.    Performance Feedback and Evaluation

This may be formal, where a purchasing department draws up an evaluation form for user departments to complete, or informal through everyday conversations.

The implications of all this are that sales and marketing strategy can affect a sale through influencing need recognition, through the design of product specifications, and by clearly presenting the advantages of the product or service over that of competition in terms that are relevant to DMU members.

By early involvement, a company can benefit through the process of creeping commitment, whereby the buying organization becomes increasingly committed to one supplier through its involvement in the process and the technical assistance it provides.