How People Buy

Nearly every major decision we make is the result of a buying process. This is not just about purchasing goods or services but accepting ideas, making career choices and even who are life partners are going to be. Think about how many buying decisions you have made in the last month. Do you know what steps you went through? Do you really know why you made a particular choice? Could you have made a better decision? What have you sold in the last month? Remember this includes ideas so trying to persuade someone to your point of view is still a sales pitch. Were you successful?  Could you have done a better deal, been more effective, closed faster?

Every purchase goes through the same four phases and there are four key elements to be considered. As the purchase goes through each phase, the different elements assume varying levels of importance. This is true of the Government organisation that took ten years to place a contract to build a nuclear power station, to you buying a sandwich for lunch. Yes, the government process had more people involved and the procurement process was very formal and involved, but the phases of the purchase were the same, the considerations were the same and the core underlying reasons why someone was awarded the business was exactly the same.

At the beginning of the buying cycle it is the pain or perceived need of the buyer that is the most important factor. This will lead the buyer to gather information and draw up a short list of potential solutions. Cost will then be considered and the Return on Investment (ROI) identified. The final and deciding element is Risk and it is understanding this that will make all the difference.

An example that we are probably all familiar with is deciding that we are going to buy a sandwich. The impulse that starts this buying process is probably hunger or it might be our allotted lunchtime and we know that if we don’t buy a sandwich now we will be hungry sometime later. This hunger or the prospect of being hungry is described as our “pain” and it is the reason why we will start the buying process. This then leads us to immediately consider a couple of other factors. Do I have money in my pocket (at this stage a rough calculation that there should be enough to buy a sandwich), do I have enough time to complete a purchase and then where will I buy my lunch?

This exact same process occurs at the start of every buying cycle. There has to be a pain that will cause the Buyer to spend time and effort going through a purchasing process. The Buyer has to believe that this process is likely to have a successful outcome (i.e. funding and time are likely to be available). The same would be true if we were discussing “buying an idea”. Will you invest enough time and effort to decide whether an idea has value or will you reject it out of hand and not enter the buying process?

The next stage is all about finding possible solutions. You might start a buying cycle with fixed ideas about what you are going to purchase or perhaps just a desire to solve a basic need (like hunger). Perhaps you will compromise or something will deflect your original intentions, but you need to decide whether it is possible to find a solution. The first action is finding out what your options are. This might be “Googling” some possible vendors, it might be asking a shop assistant what flavour of sandwiches they have, or it might be a formal Request for Information (RFI) document that is sent to prospective suppliers. The time taken can be seconds or months…The purpose is the same. Are there solutions out there?

Often the process of investigating possible solutions will modify the requirements. The original pain is still important but when drawing up a short list of suppliers it is entirely possible that solutions that could solve the original pain will not be considered further, because of how they compare with others on the list. So at this stage, roughly one third of the way through the process, the solution is the most important factor. If you are selling, then this is the second hurdle for you to jump and failing to compare favourably with other potential offerings might lead to your dismissal.

The next phase is all about cost. This can be money or it could a commitment of time (and yes, time is money!). The first question is “how much?” but the key question is “What is the Return on Investment?” (ROI). Before this can be answered you need a clear understanding of what sort of return the buyer is looking for and what has to be invested. In addition to time and money we could be looking at more subjective elements like someone’s reputation (you are a rising star if the purchase you recommend is successful but one step nearer the exit if it fails). I remember trying to sell an ERP system to a Production Director who told me that he understood that the ERP system would benefit his company but he was struggling with the ROI calculation. “You see when I buy a machine for the factory it is really simple. I take the output per hour, work out the gross profit on that output and then divide the cost of the machine by the hourly gross profit to see when the ROI kicks in. With your ERP solution I can see that there are benefits that will yield returns but it is reliant on my staff using the information from the system and how do I calculate that?”

The decision is not yet made but we are around two thirds of the way through the buying cycle. All the technical specifications are known, it is reasonable to assume that the pain can be solved and the solution is viable and we now know the cost and ROI. At this stage some sales people relax because the purchaser has told them that they meet all the requirements and may have the purchasers recommendation. But the deal is not done and the final factor that takes importance in the final third of the buying cycle is Risk. This is the overriding element that will determine what is purchased, who is awarded the contract and even what you might think or do. Risk is a complicated subject but to start with perhaps we should return to our sandwich.

When going into the sandwich shop we might look at the shelves or ask the assistant what flavours they have and look to see what the price is. Assuming we have enough money we might think which sandwich will satisfy our hunger the most and so this will determine whether we get an acceptable return on our investment (or do you buy a cheaper sandwich and a chocolate bar?). We will then also consider whether there is any risk. Do you suffer from any allergies? How long has that prawn sandwich been sitting there? Will this sandwich really satisfy my hunger? Is there too much mayonnaise that might ooze down my tie?  (A short term or immediate risk) Will it make me fat?  (A slightly longer term more nebulous risk).  Do I think the shop is clean? Do I have time to buy a sandwich? Etc….These thoughts will probably take seconds, you might always buy the same sandwich (low risk…less thought process…less hassle) or you might decide that today you will take a risk and the curried ostrich on banana bread gets your vote! The Risk factor does not mean you will always buy the lowest Risk and that is one of the reasons it is complex.

So how can you use this information? If you work for an organisation that deals with the public or has customers (and who doesn’t?) then you should consider that everyone in your organisation becomes aware of this knowledge. Why? Well if you accept the fact the risk is the deciding factor then everyone should understand this. You should do everything you can to eliminate unneccessary risk. Every interaction with your organisation has with your customers is building or changing your Risk Adoption Profile (RAP). Good service and products doing what was promised will mean your organisation gets a positive RAP and is likely to get future orders even when it might be lose out on technical specifications or not offer the best ROI. Conversely if you offer poor service and your products don’t perform then you will have a negative RAP and however good your new products might be, you are going to struggle to sell them because your reutation as a supplier will be viewed as an unacceptable risk.

The knowledge of How People Buy will make a huge difference to how people manage their time, their effectiveness and the quality of their decisions. It will improve your sales, help your purchasing decisions and help with your strategic planning. But, as with any good idea, the key is now implementation. Will you think about your purchasing or sales Pain?, consider solutions? work out your ROI? and think about the Risk of doing nothing? Please review other papers in this How People Buy series for more in depth information or contact Roger Puttick now at rogerputtick@yahoo.co.uk to arrange your own How People Buy consultation and workshop. 

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