Industrial Buyer Behavior

Industrial Buyer Behavior
Economic Factors
Return on Investment
Impact of cost on price of the end products
Quality of purchased materials
Consistency of purchased Materials
Avoidance of Manufacturing Risk
Suppliers technical contribution
Cost Benefit of the supplied products

Behavioral Aspects
Personal Needs of Industrial Buyers for recognition and
advancement and their social needs to satisfy using
departments
Personal and social needs will determine
A) Whether a prospect grants an interview to the salesman
B) Which parts of the presentation he really listens to
C) The information he will remember
D) Influence of sales presentation on his decisions to buy
In Psychological terms, these are process of
Selective exposure, selection attention and selective retention
Behavioral Aspects
Levitt stressed on

A. Source effect
B. Sales message
C. Presentation Effect
D. Role of decision maker
E. Relative degree of risk
Organizational Role Played by Each DMU
A. Perception of each department
- Engineering ( more interested on sales message, source
effect, presentation effect than other non technical
persons
B. Performance Measurement System

Purchasing Measurements
On a day to day basis, purchasing is evaluated in terms of the
extent to which it
1. Facilitates the missions of the user locations by assuring on
time deliveries of the purchased parts and materials of the
required quality
2. Negotiates acceptable price
3. Conforms to purchasing rules and regulations
4. Manages purchasing overhead expense
5. conforms to corporate policies
Other considerations
1. Does it have good follow up with vendors
2. Can they handle problem
3. Do they have good relation with other departments
4. Do they check regularly suppliers management capacity,
financial status, technical know how, etc
5. Do they conduct periodic review on
- orders, Patterns of order, defect, etc
Influence of Functional Management on Buying Decisions
Depends on stage of Product life cycle
In Early stages three vital questions

1. What will be products specification

2. Will we make it or buy it?

3. What vendors are qualified to supply it?

Engineering Influence
- Establishing product performance requirements
- Formally qualifying vendors
Normally engineers are not price buyers
Delivery is a major factor

Manufacturing Interest
- Influential in purchasing parts
- Influence order pattern
- Level of employment
Marketing Influence
- Design
- Promotability
- Serviceability
They will be bothered if it affects sales volume, price and profit
General Management Influence
- Make or buy
- Strategic positioning of supplier
- Company norms

Ego Factors
In the language of Marketing Vice President of a large chemical
Company
For some reasons we could not understand all of a sudden we
lost one of our major accounts for PVC ( polyvinyl Chloride). I
persuaded Mr X, our president to make a trip to its factory.
So the president went on to meet the plant on week end.
The following Monday , the customer telephoned to
reinstate a large which they have cancelled earlier. Then I ran
into him several months later at a plastic industry trade
show. He greeted me with Hi, how is Mr X? He then turned
to other molders standing with us saying Do you know Mr
X? He is a great fellow ; visits my plant all the time.

The Negotiating process

A. Preserving Options

B. Using Information

C. Building internal support
Practicing the art of Negotiation
Power is defined as the ability of the negotiator to influence the
behavior of an opponent. The following principles are
applicable to most transactions.
Power is relative. Rarely one enjoys complete power
Power may be real or apparent
Power may be exerted without action ( New York post, Daily
News)
Power is limited to situations
Power exists to the extent that it is accepted
The exercise of power always entails cost and risk
power relationship changes over time

The Negotiating Skills
We need to remember three important things in negotiation

A. Be sure that your rival is fully aware of what he can gain if he cooperates
and what it will cost him if he does not

B. Avoid any action which can arouse his emotions, since it is essential that
he behaves in a logical reasonable fashion

C. Convince your opponent that you are emotionally dedicated to your
position and are completely convinced that it is reasonable . Your
Conviction is high ( Chemical Company, Job Interview)
D. Disagreeing to agree

Industrial Buyer Behavior

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