Factors Affecting B2B / Industrial Buying Behavior
Industrial buying behavior is the understanding of how B2B organizations purchase goods and services. The buying behavior of each company or each industry might depend on its own set of priorities and norms but there are external factors also which affect all the industries as a whole. So, we try to address various factors, both internal and external, which affect B2B buying behavior.
We can broadly classify the factors affecting industrial buying behavior into the following 3 categories:
- Environmental Factors: This category includes all the external factors which have a considerable influence on the overall industry's buying process
- Economic environment: Economic conditions in the market affect the buying patterns of many companies as the economic environment directly changes the demand and hence affects the buying behavior of the companies. Factors such as consumers' purchasing power, income taxes, etc. change according to the economic environment. Also, if a particular industry is hit by economic recession then it hits the players on which it is dependent too. For example, if the electronics industry is hit, then it indirectly hits their suppliers hence the demand for raw materials also weakens.
- Physical environment/Natural Factors: Physical environment means the actual natural environment. The environmental changes also affect the industries. Suppose the crop of cotton is badly affected by heavy rainfall then the raw material for the clothing industry will automatically become expensive directly affecting the price of the end product or margins of the sellers.
- Political / Legal environment: Various countries have different rules and regulations for doing business. If your company is doing international business you need to know the local factors of the country with which you are doing business. Also, as the political leadership changes, the rules may change affecting your business sometimes in favor and sometimes against your interests. If the government emphasizes a specific industry then there are many benefits given to the businesses running in that industry to improve the overall industry.
The government acts as a regulatory body in exports and imports. It also controls taxes and interest rates. The government implements new rules and regulations from time to time to ensure that the general public interest is not compromised. These changes directly affect many international businesses as well as the local businesses.
- Technological environment: Technological developments directly affect the profitability of a business. Constant technological developments are being made specially in the electronics industry. Some of these are reducing the prices of components required in the final product while some are being made to make the size of the devices more compact. These directly affect the final product and hence many businesses can add new value propositions for their goods and services. Technologically advances products help the sellers also to charge a premium which directly affects the buying behavior.
- Social / Cultural Environment: Cultural traditions, norms, and customs influence the functions of an organization. For example, in India, more focus is given on the "Durability" of the products while in the USA more focus is given on the "Style" aspect by the consumers.
- Organizational Factors: Organizational factors are internal factors that affect buying behavior. These include the following
- Various Departments: These include the various departments of an organization that are part of the purchasing situation. Every department might have different goals, objectives and strategies.
- Organizations Positioning: A buying decision is also dependent upon how an organization positions that transaction. If an organization wants to make a profit then its priority of buying would be good quality, but if a government institution wants to buy, then its focus would be on choosing the lowest price among all as constraints on the budget might be there.
- Key decision-makers' behavior: There might be some retention between the key decision-makers on some of the features to be included in the goods and services you are going to buy while some might be on the same page regarding specific features. These people who are key decision-makers in the buying process play a very important role in how an organization buys.
- Individual's Behavioral Factors: During the buying process, an individual is influenced by a complex combination of personal and the organizational objectives which are constrained by the norms and are influenced by other organizational factors. Individual behavioral factors include both the Task and Non-Task motives. Task motives are the ones where the individual will think rationally while deciding among which seller to choose depending on the right quality at the right price. Whereas the non-task motives may kick in where there are two sellers which are offering a similar quality of product at a similar price then the personal choice of the individual will influence the purchase. It may be a bias towards the salesperson or even a gift from their side. Usually, non-task motives enhance task performance. For example, an individual's want for a promotion (Non-Task Motive) will enhance task performance.
Corey E.R. (1989), "Industrial Buyer Behavior", Harvard Business Review, 9-582-117.
Smriti Chand," Industrial Products: 5 factors Influencing Buying and selling of Industrial Products", yourarticlelibrary.com.
Anneli Stenberg & Annica Wallin Gyokeres "Industrial Buying Behavior in the Purchasing of Maintenance, Repair, and Operation Services", September 2005, pp 11-17
Frederic Webster JR & Yoram Wind, "A General Model for Understanding Organizational Buying Behavior", pp 12-19.