Transaction buying and relationship buying – which is better?

2019-04-12 Real Estate No comment

Doing business in today's vibrant world is becoming more complex and competitive. This is mainly due to the wide selection of companies in all aspects of their business. If the size of the company increases as the size of the company increases, the decision-making process becomes much more complicated.

Cost considerations and choices are cost-effective options that are important to ensure business profitability. Even on the purchase side, various parameters need to be considered before finalizing the type of purchase of the company's decision-making body.

Procurement is an important aspect and the requirements for the company must be determined in the most cost-effective manner. The new buying school divides the buying process into two categories – transaction purchases and relationship purchases – based on the relationship and terms between the buyer and the seller.

What is a transaction purchase?

As the name suggests, transactional purchases are limited to one purchase at a time. In this type of purchase, the purchasing manager focuses on the “today” purchase, where the buyer is thinking and acting at the moment. Pricing and sales terms drive the buying process. The buyer actively negotiates with the service provider and tries to get a better deal for himself. My purchasing team asked for more offers and decorations. After the transaction is over, the contract between the seller and the buyer is terminated.

From the seller's point of view, the only exciting thing is that the service period is limited. However, this type of purchase is not profitable for the seller because the negotiation is difficult and the salesperson may end up giving many concessions than originally determined. In the case of pure transaction purchases, complex/critical tasks should be avoided.

There is another transactional purchase called "pseudo-transaction purchase." Here, the service provider expands the service of products sold over a longer period of time. They temporarily maintain the product according to the buyer's needs. Here, the contract is limited to a single task, but the buyer will use the service for a predetermined period of time.

What is a relationship purchase?

The purpose of such purchases is to maintain a strong relationship with the seller for a long time. Buyers and sellers tend to enjoy mutually beneficial relationships. The seller is considered a buyer's business partner. The buyer’s trust and confidence, as well as the seller’s delivery and display expertise, are key to the success of the purchase. Both parties seek a win-win situation before entering the partnership. Since this relationship is a long-term relationship, the buyer should ensure that the seller obtains a substantial profit from the partnership and provides assistance and support to the seller.

We have already said that a large, complex company should not conduct a transaction purchase process. Does this mean that large companies and even medium-sized companies should buy relationships, and small companies should buy transactions? No, the decision on the procurement process depends not only on the size of the company. The criteria adopted under these decisions are yet to be considered.

Several criteria are as follows:

Relationship purchase transaction purchase

Work is complex and simple

Work volume

Working frequency daily / weekly / monthly [regular] ad hoc

Buyer involved in High Low

Transaction buying and relationships – which is better?

All in all, whether it's a large, medium or small company, you can choose to buy a transaction or buy a relationship or even a fake transaction. Considering the hassle of the contract creation process, many companies generally prefer relationship buying. The frequency of contract creation is more related to the relationship purchase process during the transaction purchase process. However, due to continued pressure to reduce costs, transactional purchases are also under consideration. This type of purchase is saved when there are cost constraints. This is a boon for small/sole proprietorships because they are easier to follow. Even large companies will not lag behind the trial of this type of purchase. Larger companies either float a separate unit/company so they can use the transaction to buy. Both transactional purchases and relationship purchases have their own strengths and weaknesses. A good business manager should choose the procurement process based on the company's requirements. It should be considered according to whether the product to be purchased, whether it is periodic, whether the company wants to participate and whether the maintenance is complicated or simple.

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