What is purchasing?

Purchasing refers to the act of procurement of products or services from a market of resources. The procedures used to accomplish the acquisition of the requisite resources are referred to as the purchasing process. Consumer behavior, customer strategy, product pricing, consumer necessity, and other variables are various parts of the process.

The various procedures necessary to accomplish a certain purchase are outlined below.

An image showing the 5 steps of purchase process.

Step 1: Examining the requirements

When a customer feels deprived of a particular item or is influenced by a particular marketing approach, the consumer’s psychology urges him to purchase the product, which may be of some benefit to the buyer. The marketing campaigns are tailored to target the focus group. Understanding the market's demands is how marketers advertise their goods. As a result, advertising and other marketing methods play a significant part in the product's sales.

Step 2: Preparing the budget for the purchase

The preparation of the budget is the next step in the procedure. In both B2B and B2C marketing, a complete report must be presented to the purchasing department. To examine all of the options, thorough marketing research is undertaken. Before making a large purchasing order, reference groups are contacted. The budget gives deep insight and serves as the ultimate guide for the purchase order. It focuses on the decision-making process, such as how much the goods will cost, which covers both the price and the opportunity cost of the purchase, as well as the problem-solving capabilities of the product.

Step 3: Review and approval of the purchase order

After a detailed study, the order is reviewed for defects and in-depth research is undertaken. The buyer researches the industry and looks into the social standing of each company. Typically, word-of-mouth marketing and the company's social status are the fundamental criteria for selecting a company. The supplier's marketing mix focuses on establishing a reputable brand and attracting new clients. Once the purchase decision has been approved, it is forwarded to the procurement team, who then submits a purchase request to the chosen vendor.

Step 4: Procurement

Once all of the terms and conditions have been agreed upon, the procurement process flow may begin, which involves the exchange of goods or services as well as payment. The group chooses how to obtain the commodities. E-commerce has made it possible for e-procurement of the services. According to a case study, the strategy drew a lot of attention during the coronavirus outbreak and is now being utilized more frequently in the post-pandemic phase due to its high feasibility. The method is a long-term solution, and the analytics show that it saves money tremendously.

Step 5: Receiving the commodities and post-purchase processes

The products are delivered in accordance with the guidelines set forth by the supplier. This is the point at which after-sales services begin. The parameters of how the services will be delivered if there are any defects after purchasing are already established. Large equipment, such as air conditioners and massive machines, are frequently accompanied by home inspection services in the event of a problem within the warranty term. These services prove to be the distinguishing factor between a good and a poor business. They aid in the development of high social status. The company that provides excellent service will have a larger target audience than the others.

Summarizing the concept

After evaluating the process, we can see how the supplier's marketing mix and marketing strategies may have a significant role in improving the company's sales. In this data-driven world, consumers try to gather information from a multitude of sources to make the best possible decision. Companies must ensure that they have a proper strategy for a diverse range of customers to meet the consumer's needs. The trend depicts how the world has evolved since the advent of E-Commerce. It has simplified market research. The procedure has been simplified and customers are now looking for the finest available resources to meet their needs.

Payment methods have also become easier since the emergence of digital currency. Whether you need to apply for a rocket mortgage loan or make a larger down payment, you can quickly accomplish so with the help of technology. When a vendor delivers such services, the customer experience is bound to improve. To keep its website up to date, the seller must perform search engine optimization regularly. Inbound marketing, also known as social media marketing, is a technique that affects a person's psychology and encourages them to make a purchase.

To retain and acquire new clients, new items that cater to the market's requirements must also be added to the portfolio. It proves to be a necessary criterion for achieving the company's short and long-term goals. The public relations staff make sure that customers are happy with the items they buy and the services they receive from the company. It informs the company's CEO of any flaws that customers are or may be complaining about so that they can be addressed as soon as reasonably practicable.

Common Mistakes

The students usually get confused with the steps of the purchase process. It must be understood that unless the purchase requirements are estimated, it cannot be possible for the organizations to place the order. The steps discussed above are to be strictly followed and cannot be interchanged.

Context and Applications

The concept holds relevance in various undergraduate and postgraduate courses. It is mainly inculcated in degrees courses such as Bachelors in Business Administration, Masters in Business Administration, Bachelors in Commerce, and Masters in Commerce.

Practice Problems

1. What is the written document instructing the supplier to modify the order in accordance with the contract's terms called?

  1. Change order/purchase order amendment
  2. Purchase order
  3. Contract order modifications
  4. Procurement document

Answer: a

Explanation: Change order/purchase order amendment helps when the contract needs to be changed or modified, only if modification is allowed in the original contract.

2. Bid Evaluation process is defined by the following activities except?

  1. Financial resources of the seller are assessed.
  2. Delivery schedule
  3. Competitor’s sourcing methods
  4. Cost factors

Answer: c

Explanation: Competitors' sourcing methods would not affect the purchasing company while evaluating the bids.

3. Which of the following does not affect the buying decision?

  1. Cost of the goods or services
  2. Sales volume of the seller
  3. Procurement of the goods
  4. Requirement of the goods

Answer: b

Explanation: All the options other than the sales volume of the seller directly affect the cost of the product for the buyer.

4. Which of the following work is not included in the purchasing operation?

  1. Marketing of the product
  2. Buying criteria of the product
  3. After-sales services that come with the purchase of the product
  4. Interest rate in case product is bought on loan

Answer: a

Explanation: It does not matter what marketing strategies such as social media marketing, inbound marketing, word-of-mouth marketing, or any other method the seller is using, it will not affect the purchase-related operations of the buyer.

5. What is known as a formal invitation to the supplier to quote the price of the goods and services?

  1. Quotation request
  2. Intention to bid
  3. Response bid
  4. Request for proposal

Answer: d

Explanation: Request for proposal is the document when the buyer wants to know at what price the sellers are willing to provide the goods and services to them.

  • Analyzing buying decisions 
  • Discovering and evaluating potential suppliers
  • Marketing strategies
  • Evaluating product alternatives

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