Consumer Buying and Corporate Procurement are Different! Why?
Buying behavior varies greatly between consumers and businesses. That’s because while consumers purchase goods and services for personal use, businesses buy these things either to manufacture other goods or to resell them to other businesses or consumers. It’s no surprise then that the participants, characteristics, influences and the buying processes will be different for both groups.
Corporate Procurement: Simple Points to Streamline the Process
Do you manage the procurement for your company? Do you face challenges in reaching the right buying decision and a win-win relationship with your supplier? These are obviously sophisticated challenges that may not have a single straight-forward “one cap fits all” solution. However, there are some simple things to pay attention to that can really demystify the sophistication.
In this article we’d like to share some of those considerations. Please read on and like and share this post if you find it helpful.
1. The First Difference:THE NUMBER OF PARTICIPANTS
Consumer buying is usually limited to one or two participants, including the final user of the product: Buying groceries and basic home supplies is a one man show.
Corporate buying usually involves multiple participants, such as the final users of the product, influencers who establish the need for certain products, gatekeepers who screen potential suppliers and purchasing managers and senior management who approve the funds for the purchases.
Punch Line: So, persevere and don’t loose it if your choice is not accepted. Even better, always identify stakeholders and include their opinions -even if it’s informally- very early in the procurement process.
2.The Second Difference: DIFFERING BEHAVIORAL CHARACTERISTICS
The consumer market consists of thousands of customers located in different geographies and with different buying habits. However, their needs are usually the same for the same product: Everybody uses washing machines in the same way, right?!
On the other hand, different businesses might use the same product differently: A retail business might install computers to track its inventory, while a technology company might use them for product research.
Added to that: The corporate buying environment sometimes consists of a few large buyers who specialize in procurement from specific geographic markets.
There is also another point that may influence buying behavior here: Businesses generally form close and long-term relationships with their suppliers; which are sometimes more valuable than getting a 5% discount from a new supplier.
Punch line: Understand the peculiar behavioral nuances at your company early in the procurement process and let those guide you. Beware of falling for your end-consumer instincts when buying for your company. It doesn’t mean if you like a product as an end-consumer, it’s the best option to fulfil the purpose of your company.
3.The Third Difference: INFULENCING FACTORS AND MOTIVATIONS
The things that influence consumer buying behavior include basic needs, the need to belong to a group, family requirements, occupation, age, economic situation and lifestyle choices. The psychological influences include perception of certain products and brands, beliefs and attitudes.
On the other hand, there are 2 main types of factors that influence corporate buying behavior: environmental and organizational. Environmental factors include: Competitive pressures, technological evolution and changing macroeconomic conditions. Organizational factors include: corporate objectives, policies and procedures.
Punch line: Be sensitive to what your company is sensitive to.
4.The Fourth Difference: THE BUYING PROCESS
The consumer buying process consists of five stages (Please bear with the jargon. That’s how it’s used in the text books): need recognition, information search, evaluation of alternatives, purchase decision and post-purchase outcomes. Marketing stimuli can generate need, which leads to a search for information from different sources. Consumers evaluate alternative products based on brand name, features, quality and price. Possible post-purchase outcomes include delight, satisfaction and dissatisfaction. Critical success factors in the consumer market include quality value and customer service.
Now, the business buying process also starts with need recognition, followed by development of product specifications. The company prepares a request for proposal to elicit expressions of interest or bids from potential suppliers. It selects one or more suppliers, issues purchase orders and monitors the quality of the products supplied. Critical success factors in the business market include customization capabilities, quality, performance, ease of use and personal relationships.
Punch line: Pre-empt reactions of the different people in this process right at the beginning and act accordingly.