MODULE 2 UNDERSTANDING THE CONSUMER

10.1 BUYER BEHAVIOR BUSINESS BUYERS

Definition of Business Buyer: Business buyer is one who buys goods &
services for any or all of the following purposes:
For making other goods & services
For reselling
For use as consumables in the organization
In marketing to business buyer, as against marketing to ultimate
consumers, the marketer has to size up the motives & attributes of the
business buyer.
Classification of Business Buyers: The business buyers can be grouped
in different ways. One popular grouping classifies them as follows:

Buyers in the agriculture sector

Buyers in the industrial sector
Buyers in the services sector
Resellers
Buyers in the government sector
Buyers in the non-profit sector

Definition of Business Goods: Business goods are differentiated from

consumer goods on the basis of their ultimate use. Business goods that
are intended for use in making other products, or for use in the
operation of a business or institution. The buyers here are called
business buyers as contrasted to individual consumers, who buy &
consume goods for personal consumption. The buying motives & habits
of business buyers as a category are different from that of individual
consumers.
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10.2 BUSINESS BUYER: BUYING HABITS & PATTERNS
Goes through long negotiations: The time taken in a business/industrial
purchase is usually much longer than the time involved in the purchase
of a consumer item. Some of the reasons for this are:
Several managers are involved in the buying decision; several tiers of
decision-making are also involved in reaching the final purchase
decision.
Size & value of the purchase is often large, demanding more care in
the buying decisions.
Industrial product sometimes is made to order & considerable
discussion is involved in establishing the exact specifications
Bids are often involved & the business buyer needs time for
evaluations.
Frequency of purchase: In the business market, frequency of purchase
varies depending on the product involved. While products like
stationary items are bought very frequently, products like plant &
machinery are purchased only once in several years. Because of this
buying pattern, a great burden is placed on the sellers of business
products. They must keep their companys name & products constantly
before the business buyers so that when a purchase comes up, the selling
firm & its products in the reckoning by the buyers. Also, their sales
force has to call on business buyers often enough to know when the
buyer is considering a purchase.
Size of order: The average industrial order is considerably larger

compared to a normal consumer buying situation. This makes each

buying event in the case of industrial buying significant. Also, the
infrequent nature of purchase makes the buying event all the more
crucial to both parties. Given such conditions, the industrial buyer
cannot afford to tolerate non-competitive pricing, uncertain delivery or
defective products.

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10.3 BUSINESS BUYER: BUYING PATTERNS (CONTD)

Several participants in the buying decisions

In the business market, different tiers of the management frequently
influence the purchasing decision. It is also influenced by different
departments/specialties.
One department may initiate a purchasing project, another like
engineering department, may determine product specifications, the
purchase department may select suppliers & a committee of executives
from these departments as also the finance department may evaluate
the bids & a still different group may finally decide on the order.
This buying pattern throws heavy burden on the firms marketing such
products, because they have to size up the buying process & be clear as
to who occupies the central position in the process.

Distribution channels
In the matter of distribution channels too, business buying differs from
the consumer buying situations. In most cases, the selling firms directly
access the business buyer, as the sale is direct from the producer to the
user.
To better understand the specialty of business buying, one has to
understand the special characteristics of business markets/products.
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10.4 SPECIALITY OF BUSINESS BUYING
Buying Clout
For many business products, there exists only a small # of users. For ex,
for a product like automobile testing equipment, only a few large
buyers, like Telco, Bajaj, Ashok Leyland etc., are there.
This enhances the business clout of the business buyer as a class. The
seller has to cultivate every buyer in his product category & maintain
close & continuous contact so that no sales opportunities are
overlooked.

Concentration of Buyers
The buyers for a given industrial product are not only few in #, they are
also usually concentrated in certain geographical areas. It gives them a
special bargaining power over the sellers.

Direct, one-to-one Relationship with Seller

In the consumer market, direct contact between the producer & the
consumer is rare, whereas in the business market, one-to-one contact
between producer & the buyer is the normal practice, especially when
the products involved are special & technology based.
While the individual consumer is usually reached through mass
communication means, the business buyer is mostly approached
through personal selling by executives at different levels, which can
range from the sales representative to the CEO.

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10.5 SPECIALITY OF BUSINESS BUYING (CONTD)

Technical Support for Buying

The business buyer needs considerable technical service & assistance
throughout the purchase process, especially when the purchase involves
complex products. Any error the business buyer makes can prove to be
very costly for his firm. This makes his task very responsible as well as
sensitive.

New Product Diffusion is Slower

Earlier, we discussed the subject of new product diffusion/adoption in
the context of the individual consumer. In business buying, the length of
time required to introduce the buyer to either new uses of existing
products, or to altogether new/substitute products is longer than in
individual consumer buying situation. This is because the new product
adoption may impact the buyer firms process, assembly & end-product
specifications. The business buyer, therefore, moves cautiously in this
matter.

More of a Rational Buyer

The business buyer is governed mostly by rational motives & very little
of emotional & subjective ones. He is guided by norms of utility, costs,
quality etc., He does not seek variety for the sake of it. Organizational
requirements, rather than individual whims & fancies, have the upper
hand. It is professional buying; buying decisions are made on the basis
of specifications, vendor analysis etc.,

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10.6 SPECIALITY OF BUSINESS BUYING (CONTD)

Business Buyer may also buy through Intermediaries

Though in most product categories, direct producer-to-user
distribution is the practice, there are situations in business
buying that need intermediaries:
Sometimes the buyers are widely distributed geographically
demanding a relatively large sales force, which may be
uneconomical for a producer. Some manufacturers may not
have enough financial & manpower resources to perform all
the distribution tasks; such situation requires the
involvement of middlemen.
Sometimes, the business market is a thin market from
both geographic & sales angles. In order to save costs,
manufacturers use wholesale middlemen. The middlemen
may be handling competing or non-competing lines of
products.
There are situations where the business buyers place
frequent orders consisting of many items needing rapid
delivery service. Such situations are better handled by
middlemen.
Sometimes there exist large numbers of small business
buyers who place smaller orders more frequently. Such
situations too are better left to intermediaries.

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10.7 SPECIALITY OF BUSINESS BUYING (CONTD)
Closer Monitoring of Supply Sources/Prices of Products
Business buying involves bulk purchases accompanied by considerable
inventory holding. Today, every buyer is concerned about cost
reduction. They have to closely monitor the different sources of supply,
national & international, watch the movement of prices/availability &
secure best bargain for their firm.
The timing of the purchase, the price & the quantity to be ordered are
all crucial decisions affecting the final cost of output & profitability of
the firm.

Derived Demand
The demand for business products consists mostly of derived demand.
Accordingly, it is influenced by economic cycles. The business buyer has
to keep the sales forecasts of his firm in focus while deciding his
purchases.

Business Buying is Partnering

Today, business buying has become a crucial management task. For any
firm, the stakes here are quite high. The funds involved are huge & any
saving is precious. From the quality/end-product performance angle
too, it is buying that attracts full attention. The best raw-material,
equipment & other inputs have to be obtained at most competitive
prices. That is why supply chain management has emerged as a key
concept today. Closer relationships between the buyer & supplier are no
longer enough; it has yielded place to integration of the resources &
facilities of the buyer with those of the supplier. The concept that is in
vogue in business buying is partnering, i.e., partnering between the
buyer & supplier.
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