Table of Contents |
These factors can be grouped into five major categories: external factors, internal factors, individual factors, interpersonal factors, and conditional factors (as shown in the figure below). Let’s take a closer look.
External factors at work in the B2B buying decision can be economic conditions, the political/legal environment, competition, and the social environment.
First, consider economic factors, such as the level of primary demand, the economic outlook, and the cost of money (i.e., interest rates). When the economy is strong, when unemployment is low, and when personal income is up, B2C demand increases, driving upward demand in the B2B market. Conversely, during economic recession, B2B buyers look for ways to cut costs, and buying is significantly reduced.
Political and legal factors also influence B2B buying decisions. Political factors include the political system, the political situation, and government policies. Legal factors include laws, rules, and regulations, including tariffs (which are taxes on imported goods) and exchange rates (the value of one country’s currency versus another.)
IN CONTEXT
To give you an idea of how such legal factors can negatively impact a firm, consider that in 2023, the Biden-Harris Administration in the United States proposed federal vehicle emissions standards designed to eliminate over 10 billion tons of emissions annually. This means that auto manufacturers that import to the U.S. will now face additional costs to reduce the emissions from their vehicles, which could include redesign costs.
Competition also affects B2B buying behavior. It stands to reason that when a competitor changes its product offering and garners more market share, a business will want to respond by going on the defensive and changing its product offering as well, triggering one or more B2B buying situations. The fast-food industry is just one example of this.
EXAMPLE
Wendy’s was the first national fast-food chain to introduce salads in response to consumers’ desires for healthier food options. Shortly thereafter, many other competitors, including Arby’s, McDonald’s, Chick-fil-A, and Burger King, followed suit.Finally, the social environment influences B2B buying behavior because each member of each social class will likely approach the situation armed with different information, different perspectives, and perhaps different personal agendas.
EXAMPLE
The vice president of the marketing department may want to spend money on a new customer relationship management software package, whereas the vice president of the finance department may be more inclined to reserve capital and forego the purchase.Organizational factors are those internal factors to the firm that affect buying decisions. Every organization has certain business objectives and goals, and goods and services should be purchased according to these objectives.
EXAMPLE
If a company experiences a period of poor sales performance, management might slow down or halt major purchasing decisions until the financial performance of the company improves. Conversely, a company with a strong track record of sales may push for more strategic purchases to gain or maintain a competitive edge.Consider how an organization’s technology such as hardware, software, and online platforms used for business applications are critical to a business. These influence B2B buying behavior, particularly if the purchases must be compatible with the technology that is already in place in the organization. When purchasing a new product or service, decision makers are often reluctant to change the existing technology and go with something new.
Finally, workforce skills are as important as the decision makers and the products or services themselves since the workers are the ones who are going to use the new equipment or service and (hopefully) will make the most of it.
Just as with consumers, B2B buying decisions are influenced by the characteristics of the individuals in the buying center, known as individual factors, such as age, education, job position, and personality. Consider just one factor: age.
IN CONTEXT
FINN Partners compiled its B2B Buyer’s Influence Report and discovered several interesting statistics. Millennials (i.e., those born between 1981 and 1995) are generally the most optimistic about purchase decisions. A whopping 83% are confident that they are paying a reasonable price, and 97% believed that the vendor would deliver as promised. This compares to only single digits for baby boomers (those born between 1946 and 1964).
The B2B buyer’s education also plays a role. A more educated buyer is assumed to select goods and services carefully and approach the buying decision rationally, whereas a buyer with less education may make the buying decision based on a hunch.
Job position typically conveys an individual’s status within the organization. Those individuals involved in the buying decision who are higher up in the organization’s hierarchy may have more influence than those with less formal authority within the organization.
Those involved in B2B buying decisions are, after all, human beings, so it stands to reason that personality will play a role. Personality refers to an individual’s distinctive patterns of thinking, feeling, and behavior, and these factors will play a role in making buying decisions. Examples of the many personality traits that B2B buyers and consumers have include things like self-confidence, aggression, and competitiveness.
EXAMPLE
Some risk-averse individuals may prefer to do business with a known supplier rather than a vendor they are not familiar with. Likewise, personal preferences play a role in the B2B buying situation. Some individuals in the buying center may favor products of a certain quality, brand, price point, and so on.Interpersonal factors are defined as influences related to person-to-person relationships. Business buying decisions are typically collective and follow procedures established by the organization. The buying center usually consists of several individuals with different formal or informal authority, status within the organization, and technical expertise.
If the buying situation involves a highly complex product or service, an individual with significant expertise will have and exert more influence in the buying decision. It’s also important to note that some individuals in the buying center may have more influence than others, whether due to their position within the organization or their personal persuasiveness.
Finally, organizational politics and culture may also impact who the decision makers are and the degree of power or influence they exert on the decision process. Companies with a strong hierarchical structure may foster a tendency for decisions to be made at a higher level within the organization. This may be particularly true in international B2B transactions.
Conditional factors are defined as the status, health of an organization, or context in its industry. It stands to reason that the present financial condition of the organization will play a large role in the buying decision. If the organization is financially struggling and cash is in short supply, it may decide to make a purchase from suppliers who offer credit or may choose to purchase a less expensive product that is within its budget. Conditional factors also include the competitive advantage a company holds in its industry, consumer preference for the brand, and other factors related to the firm’s investability.
Source: THIS TUTORIAL HAS BEEN ADAPTED FROM OPEN STAX’S PRINCIPLES OF MARKETING COURSE. ACCESS FOR FREE AT https://openstax.org/details/books/principles-marketing. LICENSE: CREATIVE COMMONS ATTRIBUTION 4.0 INTERNATIONAL.
REFERENCES
EPA Press Office. (2023). Biden-Harris Administration Proposes Strongest-Ever Pollution Standards for Cars and Trucks to Accelerate Transition to a Clean-Transportation Future. Retrieved from www.epa.gov/newsreleases/biden-harris-administration-proposes-strongest-ever-pollution-standards-cars-and
