Organizational Buying Decision Process Stages

The Buying Decision Process: Stages

These are the operating phases involved in a new buying situation. In repurchase scenarios, whether modified or direct, some of these stages are reduced or omitted.

1. Identification of the Problem

Someone within the company becomes aware of a problem or need that can be met by purchasing a good or service. This realization occurs through internal or external stimuli.

2. General Need Description

This stage involves describing the general characteristics, required quantity, and timing of the need.

3. Product Specification

The buying organization decides and specifies the optimal technical features of the product. Sometimes, a team is assigned to conduct a value analysis, carefully studying the most important components of the product to determine if they can be redesigned, standardized, or produced using more cost-effective methods. Suppliers can also utilize product value analysis to inform their proposals. Based on this analysis, the team determines the best product features and finalizes its specifications.

4. Supplier Search

The buying organization identifies the most appropriate vendors through various channels, including business directories, direct mail, magazine articles, catalogs, and exhibitions.

For suppliers, key tasks include:

• Appearing in as many directories as possible.
• Developing strong advertising and promotional programs.
• Building a good reputation within the market.

5. Request for Proposal (RFP)

The buying organization invites qualified suppliers to submit proposals.

• For simple products, a catalog or a sales representative's visit might suffice.
• For complex and expensive products, detailed, formal written proposals are requested from each potential supplier.

Proposals should be marketing documents, not just technical documents.

6. Supplier Selection

The buying organization specifies attributes for suppliers and indicates their relative importance.

• The importance of different attributes varies by the type of purchase.
• For routine product orders, the selection process may be streamlined.
• Buyers must decide on the number of suppliers to engage. It is often advisable to have multiple suppliers to minimize risks and facilitate price comparison.

7. Order Routine Specification

The buyer places the final order with the chosen supplier, detailing technical specifications, required quantity, delivery time, return policy, guarantees, and other terms.

8. Performance Review

The buyer reviews the performance of the chosen suppliers.

• Suppliers are evaluated against various criteria, often using a weighted scoring method.
• Feedback is gathered from end-users regarding their assessments.

This performance review may lead the buyer to continue, modify, or discontinue working with a particular vendor. Suppliers should also assess the performance of the buying company and its users.