If you research “B2B buying process” you’ll come up with the steps that a business goes through in the B2B buying process. These include (1) Business need recognition (2) Developing specifications of what will meet the need (3) Request for proposals (RFP) (4) Comparison of proposals/bids and negotiate with suppliers (5) Purchase order placement (6) Delivery and receipt of goods or services (7) Evaluation of suppliers.
Sure, the above process occurs in some form but it is not sequential. Neither does it account for the marketing and sales efforts of vendors. This series of posts explains each step as it really plays out in organizations. We believe that understanding the B2B buying process helps everyone understand the customer’s context. We start with “Business Need Recognition”.
Here are three ways to think about Business Needs
Business needs are not whimsical. As a consumer we can buy small ticket items on a whim. We like something because we saw it on the shelf, saw an ad – we like it and buy it. In contrast , for more expensive products like cars, consumers put in more research friends and family members can be involved. Businesses are not whimsical even for small ticket items. As a business team leader you can buy cake with your P-Card to celebrate a team member’s birthday.Chances are that company policy encourages spending on team building activities and most teams at that location celebrate birthdays. Similarly if you are the manufacturing manager it is unlikely that you’ll pick up hardware spares for your main machine on your next trip to Home Depot. Why? Because a 10 cent hardware piece might be so critical that your factory might shut down in case of failure. The hardware will go through the buying process.
There is a business purpose. The business has its own customers. It’s success depends on its customers continuing to buy. Thus the biggest focus of any business is Direct Materials including equipment,software that goes to make the product. That finished product is what gets them paid by their customer. Then there is a lot of goods and services that support the main purpose of the business. These include buildings,furniture,stationery,travel and transportation etc. These supportive purchases are often called “indirect materials” where the Supply Manager or Purchasing Manager has the biggest role. Why? because these items are like commodities and are easier to compare on feature and price.
- When Business Purpose is Continuing – Repeat Buy. Imagine a cookie brand ( eg. Oreos) where consumers keep buying the same brand. The ingredient suppliers to the Oreo factory like flour, baking soda, chocolate powder are in a repeat buy process. See our Buy Task post. It’s hard for a new supplier to get in because the incumbent supplier is working for years and has deep relationships across the buying organization.
- When Business Purpose Changes- Modified rebuy. Modified rebuy can be thought of as a modification in the final product. Let us think of Oreo in a new flavor like strawberry. First the Oreo factory will ask their existing flavor suppliers if they can supply strawberry flavor. And most suppliers in B2B markets are eager to please and there is only a little chance for a new supplier to make inroads.
- When Business Purpose is New- New Buy. A “New Buy” happens when the Business is facing a challenge and needs to find new suppliers. For example, before the Coronavirus grocery stores and restaurants had no suppliers for face masks and sanitizers. Today, after eight months of the pandemic an entire industry has grown around Personal Protective Equipment (PPE). Any business or organization that has a physical place of business has PPE as a prominent”New Buy”. For many heavy PPE user businesses like facilities maintenance these items have become repeat buys. Just like the Coronavirus has (sadly) opened up the market for face masks and sanitizers, there is always some change in the lives of customers that compels businesses to go for a “New Buy”.
Startups and Innovators face an uphill task to inject their product or service into the buying process. The marketing process for such companies is made much easier if they place themselves in the shoes of a business in their target market. The target market frequently has their own marketing challenges. For persistent marketers of innovation, who truly understand their target markets problems – an opportunity to showcase success soon comes along.
How Strategic is the Purchase? Even among direct materials, some items are strategic and quite literally “the family jewels.” See Risk-Value Matrix. These are critical components or ingredients where even a minor variation can affect the end product quality adversely. When anything is strategic, the line managers have a big say on what will work. Supply Managers or Purchasing Managers always work closely with the user department to ensure that they buy what will really work.
In the next post we will discuss the second step of the B2B Buying Process of exactly how specifications are developed.
Wish everyone a Happy and Safe 2020 ThanksGiving!