What is decision making process in business? Who are the decision making unit players at each stage in the decision making process? For example, in the very beginning, awareness of the need to take action may be the end user who goes, this isn’t working for me, and they move to that next step of looking for a solution and finding your product. When you get to the next step of analyzing against the competition, that end user may not be the only one involved in the process.
They may call the contracts department, the purchasing department, their boss and other people in the organization.
Customer Decision Making Process
To understand the decision making process, we need to take a deep dive by looking at the critical questions:
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Who are the decision making unit players at each stage of the decision making process?
We could start seeing other decision-making units players involved at different stages, and we’ve got to look through this. I can hear it in your mind. This is a lot of work, and I know entrepreneurship is hard, but failure is harder.
It’s worth doing the preparation work well so that you can do it right for the first time, not doing trial and error, spending your hard-earned money and your valuable time figuring out it doesn’t work. Let’s figure all that out before you spend time and money.
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What is their budget authority level?
When you go to set your pricing framework, you set your product at $1,005 and their budget authority level for that manager is $1,000. What did you just do? You added another layer, another step to the sales process.
Now, they have to go ask somebody else for permission because it’s over their budget level. That means it’s going to take more time, time equals money, the longer it takes, the more expensive the sale becomes. Knowing their budget level is really important. As you start to look at your sales model, business model and your pricing framework.
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What’s the purchase approval process?
What do they have to go through to get a purchase approved? How much time does it take to complete each step of the process? Knowing the sales cycle time and how much time it takes to work through each step is really valuable information. This is because all that figures into your cost of customer acquisition.
You’re going to see how all of these pieces fit together and why we have to have this information now to be able to do steps wisely as we go through the process. As we get further through the process, we may have to come back and fix stuff here or change it because we realized out there it doesn’t work with that model. What is decision making process in business? How much time does it take to complete each step of the process? That’s your sales cycle time.
Then all of this feeds into sales and marketing.
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Who are you selling to at each stage?
At stage one, awareness of the need and stage two, looking for a solution you may be selling to the end user. At stage three, comparison of prices; you may be selling your product to the contract officer, and let me tell you, they can be worlds apart.
A program officer can love you; a contract officer is looking for the lowest price bid; two different worlds. You got to understand this whole process, how many people are involved in the sales process, that whole thing from end to end? What is decision making process in business?
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How long does it take to make a purchase?
The situations differ from market to market. For some clients it may take 6 to 12 months to work through a sales cycle. You need to know that because you’ve got a cash flow runway that you have to survive.
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Sales and marketing costs?
Then all of these things feed into the sales and marketing costs, which when we look at the cost of customer acquisition, it’s one of the most important numbers you’re going to know when you deal with entrepreneurship financials.
Decision making processes are a very important step, it’s a deeper dive into understanding the customer a little bit better.
The importance Of The Decision-making Process
Why is the decision making process important? Here are a couple of reasons.
- It shows any investors that you understand the customer’s buying cycle.
That is really important because if you’re trialing and erring, you could spend a lot of time and money learning the hard way.
- You can identify hidden obstacles in deal breakers before you get there.
Are there regulatory issues, compliance issues, things that you haven’t thought about, and you want those to come out when you walk through the decision making process; all of those should be coming out.
- All of this is going to impact your business model, pricing framework and your cost of customer acquisition.
These are entrepreneurship financials. This decision making process is very important information when we’re working through those issues.
4) Impacts cash flow requirements.
One of the greatest and painful challenges of a startup is surviving the cash flow runway. This information will help you more accurately calculate the cash flow requirements as you get your business up and running.
Summary
Decision making process combined with decision making unit is very important information in understanding how to sell to your customer. Understanding the customers’ decision making process reduces the time and money that you could spend trialing and erring, and learning the hard way.