How to Analyze Business Markets and Organizations Buying Behavior
Business markets also termed as industrial markets consist of all the individuals and organizations who acquire goods and services that enter into the assembly of other services and products that are then sold. These goods and services might be rented, supplied, sold or delivered to others.
Examples are types of industries making up producer markets, they include the mining industry, transport and communication industry, banking finance insurance services, etc.
Industrial markets consist of specific characteristics that contract sharply with consumers markets; they may be described in the following paragraphs.
Industrial buyers often select suppliers who also buy from them. A practice known as reciprocity would appear e.g. paper manufacturers who decide to buy needed chemicals from a chemical company that is purchasing a considerable amount of its paper.
Leasing of industrial buyers
This happens in an increasing turning to equipment leasing instead of outright purchase examples shoes machinery packaging equipment, heavy construction equipment delivery tracks etc.
Industrial buyers more often purchase directly from the producers rather than through go-betweens whereas consumer most often buys from middlemen, e.g. items that are technically complex to expensive.
Business market goods are purchased by trained professionals who spend their time learning how to buy better. The more complex the industry purchase, the more likely that several persons will participate in the formal decision-making process.
This means that industrial markets will have to rely heavily on well-trained purchasers to deal with well-trained buyers.
The total demand for industrialized services and goods is not afflicted to any great extent by price change; demand is especially inelastic in the short run because many producers cannot make any changes in producing process (methods).
Demand can also be inelastic in industrial goods that represent a small percentage in, e.g. an increase in the industry price of eyelets for shoes will barely be affected by demand level.
Shoe manufacturers are not going to buy much more leather if the price of leather falls unless leather is a high cost in shoe manufacturer.
Industrial markets deals typically with far fewer buyers than does the consumer marketer e.g. YANNA tires companies fate in industrial market depends entirely on its getting an order from one of the four auto companies; GM motors, Ford, Chrysler & American motors, but when the YANNA sells to consumers it has a consumer market of 10 million Canadian automobiles owners.
Geographically Concentrated buyers
71% of the manufacturing establishment in Canada are concentrated in Ontario (41%) and Quebec 30%. Even a more geographic area within these two provinces referred to as Quebec comindop contains most for the manufacturing plants.
Demand for manufactured goods and services are derived from the market for consumer services and goods, e.g. the hides purchased because consumers buy shoes pursues and others leather goods .
Even in the industrial markets consisting of many firms, a few of them usually accounts for most of the purchasing and in such industries as motor vehicles telephone and telegraphic cigarettes, aircraft engines and engine parts and organic fibers. The top four manufacturers accounts for over 70% of total production.
Complex Nature of the Production
Generally, more complex in their technical nature and cannot be evaluated by an ordinary consumer.
Buying is a group process
o i.e users, buyers, influencers, gatekeepers, deciders etc, imitations.
- Rational buying
o There is greater planning
· m) Awareness of the marketing process
o The buyers have the knowledge of what they are buying.
· n) Price-quality - service mix
o Industrial products must have the price quality service mix.
Organizational Buying Behavior
One of the decisions involved is a particular buying project varies with the type of buying situation having the fewest in the case of a job whereby it does not require technical skills.
The marketer's task is to anticipate the full range of decisions facing the buyer and other attractive and convenient total solution if possible, suppose the buyer wants to build a fertilizers plant. At one extreme the buyer can make all the separate decision and hire its own architect's engineers, constructors, legal state and so on.
At the other extreme, the buyer can hire one trucker operation because all the buyer has to do to turn the key when the plant is ready to start the operator.
The Buying Centers
Defined buying centers are also termed as decision-making units and consists of all those individuals participant who do the purchasing decisions making process and who share some common goods and the risks arising from the choices.
The buying center may include all members of the organization who play a role in the five decision-making process. The functions include:-
(v) Gate Keepers
Are the members of the organization who will use the services or products. Users are the initiators of the buying process and play an essential role in defining the purchase speculations in the project.
Our members either inside or outside the organization who directly or indirectly influence the buying decision. They can often help define speculation and also provide information for evaluating alternatives. Technical person personnel is particularly crucial as influencers.
These are organization members with formal authority for selecting the supplier and arranging all terms of purchase. They may help to shape the product specification and also play a role in selecting renders and negotiations. In complicated purchase, the buyers might include higher level officers of the company participating in the talks.
In more complex buying, the officers of the company are often the deciders. In the routing buying of standard items, the buyers are usually the deciders. Both the officers and the buyers should be members of the organization who either formal or informal powers to select or approve the final supplier.
Include members of the organization who control the flow of information of others, e.g. purchasing agent often have ability to prevent sales people from seeing deciders or users. Notably, Others include technical personnel, switchboard operators among others. Their primary influence of gatekeepers is to influence the inflow of information on buying alternatives.
Buying centers will vary in size and composition for different classes of products; more decision participants will be involved in buying a computer for example than in buying paper clips. The challenge to the industrial market is to figure out who are the major participants and what the relative degree of influence seen a buying center may include anywhere from one to 1000 persons. The industrial marketers may have time / resources to reach them all therefore; smaller companies try to determine the critical buying influence and concentrate on their limited advertising.
Larger companies go for multi-level in-depth striving to reach as many decision participants as possible their salespeople virtual live with their customers when it’s a significant account with recurrent sales.
Factors Which Influence Organizational Buyer Behavior
The primary influence may include the following, and marketers should focus on trying to understand the buying situation.
Major Influences on Business Buyer Behavior
Industrial buyer is influenced by their company's current and expected environment of particular interest are economic factors such as divisions in the levels of main demand the economic position and the total cost.
As the level of economic risk a certainty rises, industrial buyers see making the new investment, for instance, investments in plant and equipment and refrain from adding raw materials to the inventories.
There is little that the industrial marketers can do except to cut prices to a level where the buyer s are willing to take some risk. Industrial buyers also watch technologically, politically, and competitive developments in the environment .
It is the job of the industrial marketers to monitor the same factors determines how they will affect the buyer and prepare to turn this problem into opportunities.
Each buying organization has its own objective policies procedures and organizational structure and systems; it’s the job of the marketers to know this as well as possible such questions that arise as:-
How many people will be involved in the buying:-
Whom will they be?
What are their evaluations criteria?
Suppliers are limited in who much they can find out and must work patiently in trying to accumulate information.
The industrial marketer should be aware of the following organization developments occurring in the purchasing area.
(i) Purchasing department upgrading
(ii) Centralized purchasing
(iii) Long-term contracts
(iv) Purchasing performance evaluation
Purchasing department upgrading
Departments have typically occupied low positions to management hierarchy; usually organizations costs is responsible for managing more than half of its location. The new combination of inflation and shortages has made many companies upgrade their purchasing departments.
Elevations and head of purchasing of vice presidential levels in large corporations practice purchase evaluation. Therefore the many purposes of department upgrading as an influential factor may be brought about in any organization