What is Business Buying Behavior?
Business buying behavior refers to the action taken by any business or organization before making a purchase of any product, service, or raw materials. It is also called organizational and institutional buying behavior or simply industrial buying.
Businesses purchase products mainly for three purposes one is for consumption, the second is for reproduction for which they purchase raw materials, and the third is for reselling purposes.
In other words, business buying behavior is the study of how business organizations buy products. In fact, companies themselves do not buy products, they give specific employees the role of buying products for the company. And, such employees are known as business buyers or organizational buyers.
Characteristics of Business Buying Behavior
The following are some major features of business buying.
Business buying is a formal activity. While buying products for organizations, usually top management appoints employees for the purpose. Employees are responsible to report the process of buying, cost of purchase, and quality of the product to the top authorities.
Industrial buying is a lengthy process. It requires business buyers to look for different suppliers, businesses, distributors, and products before making a final purchase decision. During that, organizations have to put in more time and effort.
Rational as well as Emotional Activity
The presence of human beings in the process gives rise to the involvement of emotional elements in purchasing. While it is an organizational activity, business buyers have to logically evaluate and select the products and dealers.
Usually, the purchasing responsibility is given to a group of specialized personnel. They each have a specific task in the purchasing process. And, they all contribute to the successful purchasing activity of the organization.
Organizations usually purchase products in huge quantities. Purchasing in small quantities again and again and appointing employees increases companies’ costs, time, and efforts.
As compared to individual buyers, organizational buyers are fewer in number.
Business Buying Process
While buying the products, businesses usually follow the following six steps. They are:
Recognition of a Need
In the first step, organizations recognize a need for the products. Organizations should identify where the problem exists within the organization and what product it needs to be solved.
Determination of Product and Buying Specification
In the second step of the organizational buying process, companies should determine the product and buying specifications such as quality, price, quantity, payment method, delivery date & place, features, and design of products, etc.
Listing and Identifying Suppliers
In this step, industrial buyers identify the potential suppliers of the product the company needs. And, they list them according to the specifications of the desired product.
Evaluation and Selection of Supplier
In this stage, industrial buyers evaluate the suppliers they have listed in terms of product quality, service quality, price, features, and convenience they offer. And, they select the supplier who is the most capable and reliable and provides products as per the requirements of the organization.
After the evaluation and selection of the suppliers, organizations purchase the product in this step from the selected supplier.
Evaluation of Supplier’s Performance
It is the post-purchase activities of the organization. Here, the organization compares the quality of the service it received from the supplier with the expectation of the organization from that supplier. When the organization is satisfied with the supplier, it may go for future transactions with the same supplier and vice versa.
Types of Business Buying Behavior
Organizational buyers purchase mainly in three ways. They are:
As the name suggests, straight repurchase, in this purchase the organization purchases the products from the same business or supplier from which it has previously purchased. Businesses opt for this purchase for routine problem-solving as well as when they believe their suppliers.
Under this purchase, the organization may buy from the same supplier but it modifies or changes some of its requirements. The change may be in product specifications. In addition, they also switch suppliers.
Here, organizations buy new products from new suppliers. By applying this purchase decision, organizations have to go through all the steps we have explained above to purchase the desired products.
Factors Affecting Business Buying Behavior
Organizations buying decision is influenced by different internal and external factors. They are:
- Environmental Factors – This includes factors like level of demand, economic outlook, technological changes, political & legal change, social environment, competitive environment, etc.
- Organizational Factors – Include corporate objectives, purchasing policies, buying procedures, structure, production system, etc.
- Interpersonal Factors – Include interest of the buyer, income, education, status, job position, authority to buy, etc.
- Individual Factors – Include buyer’s age, income personality, job position, economic status, risk attitude, culture, etc.