Influences on Business Buying Decisions

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  • 0:01 Buying for Business
  • 0:37 Environmental Factors
  • 2:10 Organizational Factors
  • 2:47 Interpersonal Factors
  • 3:46 Individual Factors
  • 4:24 Lesson Summary
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Lesson Transcript
Instructor: Kevin Newton

Kevin has edited encyclopedias, taught history, and has an MA in Islamic law/finance. He has since founded his own financial advice firm, Newton Analytical.

If you thought that businesses just went with the lowest prices when making buying decisions, think again. In this lesson, we look at many of the common influences on business buying decisions.

Buying for Business

When you are purchasing for a business, it's quite different from buying for a family. As individuals, we go to the store and usually just get what we need. If it's a local store, we may have a standing relationship with some of the employees there. But it is really the exception rather than the rule when we are on a first name basis with anyone who works to sell us stuff individually. Businesses, on the other hand, tend to buy the same things over and over again. This means that a business will usually build substantial relationships with their supplier.

In this lesson, we'll look at the four primary factors that help shape business purchasing practices.

Environmental Factors

The most basic type of factor shaping a business buying decision are environmental factors. This refers to the environment of buying that is available to the customer. Think about it like this: let's say that you wanted to buy a good so you went to the mall. Obviously, the mall is a very crowded environment. However, you're looking for something specific. There may only be a couple of stores that sell what you're looking for. Or there may be dozens. In any event, you can only purchase a good if it is available in the marketplace. Just as you can't hope for a new shoe store if those in the mall don't meet your desires, you can't purchase from a supplier that doesn't exist.

The environment for business buying is always changing, just like a mall that is adding and renovating new stores. At the beginning, when a product first is released, only a few suppliers may exist that can sell a certain product. However, as the product becomes more established, more and more suppliers are able to sell the goods, and the marketplace becomes more crowded.

With this increase in crowding comes a new form of differentiation. By now, businesses have figured out which suppliers prioritize quality, which prioritize cost and which prioritize convenience. With this information, they can make the best decision for buying based off their needs at the time.

Let's go back to the mall and say you were looking for a shirt. There are plenty of stores in the mall that sell shirts, but all of them are different. Some have higher quality. Some are just more convenient and have just what you need in stock. And some are cheaper. Just as the stores in the mall are different, so too are the suppliers in the marketplace.

Organizational Factors

Of course, it's not just the business environment that affects if sales will be made with a particular supplier. Additionally, businesses need to look at organizational factors. Those are the factors unique to each individual supplier.

For example, a giant supplier may have minimum orders that are still too large for a new business to be able to meet, and therefore it's not practical for the new business to purchase from them. Suppliers may not be able to deliver goods to the business in a way that is satisfactory. If a supplier ships most of their materials via ocean shipping, that does relatively little for a landlocked potential business customer.

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