Academic journal article Review of Business

Importance of Price in Industrial Buying: Sales versus Purchasing Perspectives

Academic journal article Review of Business

Importance of Price in Industrial Buying: Sales versus Purchasing Perspectives

Article excerpt

This study looks at buyers' and sellers' perspectives in attempting to determine the importance of three sales knowledge bases: product, service, and price. Organizational buying behavior literature addresses the notion that buyers go into a buying situation having evaluative criteria and decision rules. This study attempted to determine if buyers and sellers similarly categorize attribute information. It appears that buyers and sellers have different perspectives when categorizing attributes. The sample of buyers in this study clearly indicated that service and product attributes were more important than the pricing attributes.

Salespeople have been looking for the magic formula to present to buyers for decades. What types of knowledge must be possessed to adequately diagnose a situation, and then using this knowledge, find the attributes to match a particular buyer's needs?

It has long been assumed that price has been the most important attribute in a buying decision (Reichard 1985), but how large a role does price play in industrial buying decisions? Lambert (1981) pointed out that purchasing agents rely on their expert perceptions of quality rather than price. White and Cundiff (1978) assert the normative belief that the organizational buyer makes an assessment of product quality independent of price, and then selects a product of acceptable quality with the lowest price. These past studies suggest that product and service attributes may be more important than the price attribute. The importance of sales knowledge for effective selling performance has been recognized by both researchers and practitioners. Weitz, Sujan and Sujan (1986) proposed that salespeople's knowledge about their customers and selling strategies critically affect their performance. Salesforce knowledge has been declared as an integral part in measuring potential sales success, performance evaluation and the effectiveness of training programs (Weitz, Castleberry and Tanner, 1992; Ingram and LaForge, 1989; Jackson, Keith and Schlacter, 1983; Szymanski, 1988; Sujan, Sujan and Bettman, 1988; Avila, Fern and Mann, 1988). This study investigates buyers' and sellers' perspectives in attempting to determine the importance of three types of knowledge bases: product, service and price. The study also attempts to determine if buyers and sellers similarly categorize information about attributes.

Background

A number of research projects address the issue of how buyers generate a list of attributes and weigh them. Weitz, Castleberry, and Tanner (1992) suggest that buyers will generate a list of attributes or characteristics for each product they purchase and place importance weights on each of these attributes. Many others have made similar statements that buyers do evaluate particular criteria, and determine which attributes will be used in decision making (McQuiston and Walters, 1989). The organizational buying behavior literature also addresses evaluative criteria and decision rules used by buyers to make purchase decisions (Leblanc 1987; Crow, Olshausky and Kammers 1980; and Vyas and Woodside 1984). Another theoretical position can be found with the multiattribute model. This model arises from the idea that buyers view a product as a collection of characteristics or attributes. Buyers evaluate a product by considering how each characteristic will satisfy the firm's need and perhaps their individual needs (Zenz 1981). In making an overall evaluation, each buyer will consider the importance of each characteristic (Weitz, Castleberry and Tanner 1992).

Salespeople bring to the table a product that has a set of attributes that may be of value to the buyer. Buyers complain that salespeople assume all of their product attributes are important, which results in information overload for the buyer, and then sell the entire package. Salespeople thus run the risk of discussing characteristics that are of no value to the buyer. A second issue with buyers is that salespeople place too much importance and weight on price as a key decision attribute (Reichard 1985). …

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