Industrial Marketing: Buy Grid Model

Description
It explains buygrid framework, buying phases, buyclasses New Task, Modified Rebuy, Straight Buy. pros and cons of buy grid model

INDUSTRIAL MARKETING
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BUYGRID MODEL

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INTRODUCTION
? In 1967, the Canadian, American and Israeli

marketing researchers, Robinson, Faris and Wind, introduced a generic conceptual model for buying processes of organisations

? They saw industrial buying not as single

events, but as organisational decision-making processes where multiple individuals

decide on a purchase

? This purchasing decision process over various 1/20/13

? This framework consists of a matrix of

buyclasses (three types of buying situations) and buyphases (eight phases of
buying decision process).

? It provides a frame of reference for dividing

the overall decision – making process into distinct segments that are useful for recognizing critical decisions and specific information requirements
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Buying phases

Buy classes
New TaskModified Rebuy Straight Rebuy

1

2

3 4 5 6

Anticipation or recognition of problem ( need ) and a general solution Determination of characteristics and quantity of needed item Description of characteristics and quantity of needed item Search for and qualification of potential sources Acquisition and analysis of proposals Evaluation of proposals and

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BUYGRID Framework
Buy Classes

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BUYCLASSES: New Tasks
? The first-time buyer seeks a

information to explore alternative purchasing
solutions to his organisational problem

wide variety of

? The

greater the cost or perceived risks related to the purchase -> the greater the need for information ->

the larger the number of participants in the buying centre

? E.g. firm’s decision to

change in customer requirements may necessitate the purchase of new machinery to meet the 1/20/13

add a new machinery or

BUYCLASSES: Modified Rebuy
? The buyer wants to replace a product the

organisation uses

? The modified rebuy situation occurs most often when

the firm is displeased with the performance of present suppliers

? The decision making may involve plans to modify

the product specifications, prices, terms or suppliers as when managers of the company believe that such a change will enhance quality or reduce cost
1/20/13 ? In such circumstances, the buying centre proved

BUYCLASSES: Straight Rebuy
?The buyer routinely reorders a

product with no modifications
?The buyer retains the supplier as

long as the level of satisfaction with the delivery, quality and price is maintained
?New suppliers are considered only
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BUYPHASES
?Based on field research, Robinson,

Faris and Wind divided the buyer purchase process into eight sequential, distinct but interrelated BUYPHASES:
1. Recognition of the organisational

problem or need;

2. Determination of the characteristics of

the item and the quantity needed;

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1.RECOGNITION OF ORGANISATIONAL PROBLEM OR NEED
? Understand Company’s existing process ? Scout for problems/improvements

required

? Estimate the advantages of the

solution/improvements

? Such recognition may originate

within the buying organization , especially when
?Products become outmoded ?Equipment breaks down or
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Example
? Siemens Transformer factory required Glazed copper wires which are currently manually glazed.
? They wanted to added automated

glazing set-up.

? The Plant manager identified the

improvement, & he estimated the cost savings associated with it.
? This was Qualified as a New Task
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2. DETERMINATION OF

CHARACTERISTICS OF ITEM AND QUANTITY NEEDED
?Organizational members must

determine how the situation may be resolved
?Problem and solution alternatives

must be narrowed & analyzed
?User department tasks:
?prepare performance specs for technical

products

?Narrowing of the problem and

alternatives

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Example
?Siemens Transformer plant manager

understood the importance of automatic glazing & he along with R&D manager & Sr. Product Engineers determined the characteristics of the machine depending on
?Quality improvement due to automatic

glazing
?Time savings
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3. DESCRIPTION OF CHARACTERISTICS AND QUANTITY OF NEEDED ITEM
?Influencers who prepare or affect

specifications enter the purchasing process
?Influencers may change from

department heads to engineers or manufacturing department
?Influencers also begin to look outside

the firm for supplier and product information and for assistance in 1/20/13 developing product specifications

Example

?The machine will have to be

customized as no such standard machine exists
?The machine will be Abrasion

machine with draw wiring.
The characteristics will be defined
?The abrasive strength ?The product tensile strength ?The energy limitations ?Cooling & shielding specifications
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4. SEARCH FOR AND QUALIFICATION OF POTENTIAL SOURCES
?Once solutions have been identified

and precisely described, a buying organization begins to search for alternative sources of supply, which leads to qualifications of suppliers
?Qualifications sought will vary with
?The type of buying organization ?The specific buying situation ?The buying influencers involved
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Example
?The R&D manager & Plant manager

then scout for potential suppliers for such product (Abrasion machine with draw wiring)
?Such product provided by specialized

Product providers like
?L&T automation ?Aker Kvaerner ?Thyssenkrup ?Siemens I & S
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5. ACQUISITION AND

ANALYSIS OF PROPOSALS
?After identifying suppliers, requests

for specific proposals are made
?In case of straight rebuy, buyers

check a catalog or contact suppliers to obtain up-to- date information about prices and deliveries
?For complex situations, need for

information is intensive
?Great deal of time is given to
1/20/13 analyzing proposals and comparing

Example
? Enquiries will be conducted by product

engineers with the potential sources

? From the appropriate responses & product

considerations, RFP/RFQ will be sent across all the suppliers
? The proposals from the suppliers will be

analyzed by the Product Design Team led by Product engineer

? This task will be qualified as Modified Re1/20/13

6. EVALUATION OF

PROPOSALS AND SELECTION OF SUPPLIERS
?Proposals of competing suppliers are

weighed and analyzed
?In case of make – or – buy decision,

proposals are compared to the cost of producing the needed item within the buying firm
?In other instances, one or more

offers are accepted from competing suppliers
?Negotiations may continue 1/20/13 on terms,

Example
?A comprehensive analysis from the

proposals will be submitted to a plant manager with recommendations purview of Plant engineer alone, evaluation of the proposals will be done with plant management meeting evaluation

?Since it’s a Big Budget buy outside

?Various parameters will be used for ?This task qualified as Straight Rebuy
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7. SELECTION OF AN ORDER ROUTINE
?Order routines are established
?by forwarding purchase orders to the

vendors and status reports to the user department that will be needed over various time periods

?by determining the levels of inventory

?The purchase process is actually not

completed until the ordered item is delivered and accepted for use 1/20/13

Example
?After finalizing the Supplier, the Product

manager & the Design Engineer sit with the supplier’s engineer to discuss the order routine becomes the part of the team

?The procurement manager also ?Appropriately the logistics is worked out ?Also the servicing & maintenance

schedule is worked out

?Qualified as Modified Rebuy

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8. PERFORMANCE FEEDBACK AND EVALUATION
?The final phase in the purchasing

process consists of
?a formal or informal review ?Feedback regarding product

performance and vendor performance.

?This phase involves in assessing by

the user department whether the purchased item solved the original problem
?
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Example
?The machine performance is evaluated

on various parameters

?The machine’ s performance

conformation to the agreed upon parameters is checked made

?If any changes are required they are ?Service & maintenance issues if any are

sorted & appropriate feedback is conveyed to the company

?Can be a straight Rebuy

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Buying phases

Buy classes
New TaskModified Rebuy Straight Rebuy

1

2

3 4 5 6

Anticipation or recognition of ? problem ( need ) and a general solution ? Determination of characteristics and quantity of needed item Description of characteristics and quantity of needed item Search for and qualification of ? potential sources Acquisition and analysis of proposals Evaluation of proposals and

?

? ?

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BUYPHASES (CONTD.)
? As buyphases are completed, the process of 'creeping

commitment' occurs and reduces the likelihood of new suppliers gaining access to the buying situation.

? During the performance feedback and evaluation

phase, the relationship between the seller and buyer can develop into a longer term engagement.

? Buyer loyalty and customer satisfaction are primarily

determined by the sales activities during this last phase.

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? The model explains the interaction between

PROS

buyer and seller activities given the needs of an organisation message at the right time

? It helps sales personnel deliver the correct ? The buying side of the model can be used for

both consumer & business related buying processes

?  The model is based on the observation that

buyer's expectations and behaviour change according to whether the purchase is new, a modified rebuy or a straight rebuy
?  The model can provide the basis for a formal

selection process (e.g. request for

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CONS
? The organisational buying model focuses

mainly on products and not on services.

 
? Negligence the supplier's side influences the

customer's organisational decision process.

 
? The model neglects the importance of

acquisition in sales processes.

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Buy grid model - extended
Buying situation Characteristics New task Modified rebuy Straight rebuy Buying stages 1. Recognition of a problem/need Always Always Always 2. Determination of characteristics & quantity Always Sometimes Never of products/services needed 3. Determination of the product/service Always Always Always desires and quantities needed 4. Search for potential suppliers & preliminary Always Sometimes Never evaluation of their sustainability 5. Acquisition and initial analysis of Always Sometimes Never proposals (samples) from suppliers 6. Evaluation of proposals and Always Sometimes Never selection of supplier(s) 7. Selection of an order routine Always Always Always 8. Performance, review, feedback Always Always Always and evaluation Importance of buying decision High Low Degree of interaction between High Low buyer and seller Number of criteria used in Many Few 1/20/13 supplier selection

References

? http://www.provenmodels.com/549/buygrid-framew ? Industrial buying and creative marketing

Patrick Robinson, Yoram Wind and C. W. Faris,  1967   paperMichele D. Bunn, 1993

? Organizational buying contexts and the procureme

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THANK YOU
1/20/13



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