(1) Problem Recognition
The buying process starts when someone in the organization or company recognizes a problem or need which can be met by purchasing a good or service. The problem can arise as a result of internal or external stimuli. In case of internal stimuli, which can trigger off a problem recognition situation are:
* the company decides to launch a new product and requires new equipment and materials for manufacturing the new product.
* The breakdown of a machine which requires replacement or new parts immediately
* the material purchased from a vendor proves to be unsatisfactory and the company is urgently looking out for another vendor
* the purchase department head notices an opportunity to obtain better prices or quality materials.
The various factors which can act as external stimuli are:
* The buyer comes to know or gets new ideas at a exhibition or trade show or by seeing an advertisement in a technical magazine or from a sales representative who offers a better product at a lower price, the buyer becomes aware of the availability of a better product at a reasonable price.
So the industrial marketer has to act as the stimulant for problem recognition by developing informative and attractive advertisements, mail literature to industrial buyers about the availability of technical products, direct their sales personnel to call upon the buyers/prospects and so on.
(2) General need description
having recognized the problem, and realizing the need for fulfilling the need, the buyer will now be involved in identifying the characteristic features and the quantity of the product which is required. Very much unlike the ultimate consumer, the industrial buyer will be motivated by budgetary considerations, such as profit goals, expense quotas and cost benefit analysis. He is conscious of justifying the purchase based on some measurable parameter. Very often, hence, the buyer will select the vendor/supplier based on the sellers/marketers quality, service and price – generally in this order. Firstly, the industrial buyer tends to define product quality as that combination of properties which fits the product for its use in the future. Related to this is the supplier’s capability to deliver materials, components and supplies consistently in the required standard of quality. Secondly, the supplier should provide a variety of services in the form of technical, replacement parts, delivery, information and sales. And lastly, the industrial buyer will work out the evaluated price, worked out on the basis of the amount of scrap or waste resulting from the use of a material, the cost of processing the material, the work required to be done by the machine, the power it consumes, the damage or loss liability, and many other factors which should help in minimizing costs.
The above are parameters generally considered, and then the buyer will rank the attributes in a sequence of importance or order of importance like reliability, durability, price, etc., required in the item to be purchased.
So here the marketer must take care of the product characteristics desired by the buyer and then interact with the industrial buyer and, communicate about the availability of the same with him.
(3) Product specification
the buying organization will now proceed to the item’s technical specifications. For this the buyer will do value analysis to appraise a supplier’s effectiveness. Value analysis involves the review of product specifications in relation to requirements, the identification of unnecessary cost elements and suggestions for their elimination. This method requires participation by several groups of functional area specialists, such as engineering, manufacturing and production, and accounting. These groups will be required to look for optional product characteristics and specify them accordingly. Moreover the buyer has also got the choice of refusing merchandise that fails to meet the intended standards. In turn, value analysis can be used by the marketer as a tool for opening a new account with an industrial buyer.
(4) Supplier search
the buyer now tries to identify the most appropriate vendors. The buyer has to be certain that their suppliers meet the standard of performance and quality for which they have worked out their operational plans. They will find out ways to accurately assess vendor capabilities, mainly in the areas of technology, production, financial strength and management. So, at times the vendors will be dropped from the list of considerations because they may not be able to supply the needed quantity or because of a bad reputation in the market. And ultimately the buyer will be left to choose the supplier from the ‘finally approved list’ of qualified suppliers.
(5) Proposal solicitation
the next stage requires qualified suppliers to submit proposals. Generally the supplier will furnish information in the form of a catalog or send their sales representative to the buyer with the necessary information. In case of more complex or expensive item, the buyer will prefer to have detailed written proposal from the supplier.
The proposals must be marketing documents and not merely technical documents. In case of oral presentations, the supplier must be able to generate confidence of the buyer in case of the company’s capabilities and availability so as to be able to stand out in the midst of competition.
(6) Supplier selection
now the stage is set whereby the members of the buying center will review the proposals and take a decision for the final selection of the supplier. This buying center will generally draw up a list of the desired supplier attributes and their relative importance. A few of the attributes looked out for in a prospective supplier are:
1. Technical support services,
2. Prompt delivery.
3. Quick response to customer needs.
4. Product quality.
5. Supplier reputation in the market
6. Product price
7. Extension of credit and so on.
In this stage the buyer will do vendor analysis so as to ascertain not only the technical competence of the various suppliers but also their ability to deliver in time and also provide the necessary services. The buyer will rate the suppliers against the desired attributes and then identify the most attractive suppliers. The buyers will negotiate with the preferred suppliers for better prices and terms before making the final selection. Usually, buyers prefer multiple sources of suppliers and prefer not to be totally dependent on one supplier in case of anything going wrong and also to be able to compare the prices and performance of various suppliers.
(7) Order routine specification
this requires the buyer to specify and write out the final order in terms of technical specifications, quantity to be ordered, expected time of delivery, terms on goods returned, warranties and so on. Since placing a new order each time the stock is required is a costly affair. Similarly neither would the buyer want to stock extra materials or items because it indicates carrying more inventories, which is also not a healthy sign… To avoid the above problems, the buyer very often goes for ‘blanket contract’ with the supplier. Under this contract, the supplier will agree to resupply the buyer as and when required on certain price terms over a certain specified period of time.
(8) Performance to add to customer ‘value’
in this stage, the buyer will review the performance of the supplier. Today all industrial marketers suffer from the problem of product parity. So they are trying to build relationship with the buyers by adding value to the transaction. Suppliers are customizing by knowing not only their own customers but also their customers customer.