Page 598 - Business Principles and Management

Chapter 22 • Pricing and Promotion

22.1 The Business Buying Decision

Goals Terms
• Discuss how businesses make their • business buying • modified rebuy
buying decisions. process • straight rebuy
• Describe the steps in the business • new task purchase
buying process.

Planning a Business Purchase

When planning a purchase, businesses actually make several specific decisions.
They must decide what to purchase, when to purchase, from whom to purchase,
and how much to purchase.

WHAT TO PURCHASE

To be successful, a business must keep the right kind of products in stock. Man-
ufacturers buy products to use in producing products to sell to their customers.
Wholesale or retail businesses purchase products for resale or for use in the op-
eration of their businesses. In all cases, the most important consideration in
making purchases is the customers’ needs. Businesses that do not satisfy cus-
tomers will not thrive. Businesses must consider both quality and assortment of
products in deciding what to purchase.
Some buyers try to sell more products than their competitors do by offer-
ing low-quality products at a low price. They believe that price is so important
to customers that they will accept lower quality to save money. This strategy
can backfire. Customers compare price and quality to make the best possible
decision. They usually do not select the absolute cheapest product if it is of
inferior quality, nor do they always pay the highest price even if quality is
superior.
Two factors influence a business’s selection of product assortment. The first
is competition. A new store will have a hard time attracting customers if it car-
ries only the same products or brands that are carried by local businesses that
are already successful. A business needs to emphasize the products customers
want but offer some differences from competitors’ products.
The second factor in choosing a product assortment is the financial strength
of the business. It costs a great deal to keep a wide selection of products avail-
able. Businesses can stock a limited variety of products while still offering cus-
tomers a good selection. Product variety is a difficult decision. Businesses need
to stock items that customers want, but their budget has limits.
Businesses have several sources of assistance in determining what to pur-
chase. Catalogs and salespeople are valuable tools. Trade associations and their
publications can also help. Businesses should listen carefully to their customers
in determining what to purchase. They should also review company records of
previous sales and regularly study what products sell well and not so well for
competitors.

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