Industrial Marketing_ Buy Grid Model_121342957.pptx

Basics of industrial marketing

1. INDUSTRIAL MARKETING BUYGRID MODEL

2. 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 buying situations can be analyzed by a conceptual model referred to as BUYGRID

3. 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

4. Buying phases Buy classes New Task Modified Rebuy Straight Rebuy 1 Anticipation or recognition of problem ( need ) and a general solution 2 Determination of characteristics and quantity of needed item 3 Description of characteristics and quantity of needed item 4 Search for and qualification of potential sources 5 Acquisition and analysis of proposals 6 Evaluation of proposals and selection of suppliers 7 Selection of an order routine 8 Performance feedback and evaluation

5. BUYGRID Framework Buy Classes

6. BUYCLASSES: New Tasks The first-time buyer seeks a wide variety of information to explore alternative purchasing solutions to his organisational problem 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 add a new machinery or change in customer requirements may necessitate the purchase of new machinery to meet the changed need Hence, buyer and influencers enter into extensive problem – solving activity and obtain a variety of information before a purchase can be made

7. 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 In such circumstances, the buying centre proved to require fewer participants and allow for a quicker decision process than in a new task buyclass

8. 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 when these conditions change The challenge for the new supplier is to offer better conditions or draw the buyer's attention to greater benefits than in the current offering

9. BUYPHASES Based on field research, Robinson, Faris and Wind divided the buyer purchase process into eight sequential , distinct but interrelated BUYPHASES : R ecognition of the organisational problem or need; D etermination of the characteristics of the item and the quantity needed; D escription of the characteristics of the item and the quantity needed; S earch for and qualification of potential sources; A cquisition and analysis of proposals; E valuation of the proposals and selection of suppliers; Selection of an order routine; P erformance feedback and evaluation.

10. 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 Existing materials are unsatisfactory in quality or availability

11. 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

12. 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 Making critical decisions and meeting information needs Influencers from outside the department may be used as additional sources of information

13. 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 Labour savings Cost implications Trained labour requirement Maintenance limitations Energy consumption This will be classified as New Task

14. 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 developing product specifications Because of the opportunity to develop a close working relationship with influencers prior to other competitors, marketer who triggered the need has an advantage

15. 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 Abrasion maintenance levels Qualified as New Task

16. 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

17. 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 This information about suppliers can be found out from previous products bought, references, trade fairs like Elecrama This can be qualified as Modified Re-Buy

18. 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 analyzing proposals and comparing products, services and costs

19. 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 Re-buy

20. 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 on terms, delivery, prices, or other aspects of suppliers’ proposal

21. Example A comprehensive analysis from the proposals will be submitted to a plant manager with recommendations Since it’s a Big Budget buy outside purview of Plant engineer alone, evaluation of the proposals will be done with plant management meeting Various parameters will be used for evaluation This task qualified as Straight Rebuy

22. 7. SELECTION OF AN ORDER ROUTINE Order routines are established by forwarding purchase orders to the vendors and status reports to the user department by determining the levels of inventory that will be needed over various time periods The purchase process is actually not completed until the ordered item is delivered and accepted for use

23. Example After finalizing the Supplier, the Product manager & the Design Engineer sit with the supplier’s engineer to discuss the order routine The procurement manager also becomes the part of the team Appropriately the logistics is worked out Also the servicing & maintenance schedule is worked out Qualified as Modified Rebuy

24. 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 If it did not , suppliers that were screened earlier may be given further consideration Negative feedback for the chosen vendor can cause the various members of the decision – making unit to re examine their decision

25. Example The machine performance is evaluated on various parameters The machine’ s performance conformation to the agreed upon parameters is checked If any changes are required they are made Service & maintenance issues if any are sorted & appropriate feedback is conveyed to the company Can be a straight Rebuy

26. Buying phases Buy classes New Task Modified Rebuy Straight Rebuy 1 Anticipation or recognition of problem ( need ) and a general solution √ 2 Determination of characteristics and quantity of needed item √ 3 Description of characteristics and quantity of needed item √ 4 Search for and qualification of potential sources √ 5 Acquisition and analysis of proposals √ 6 Evaluation of proposals and selection of suppliers √ 7 Selection of an order routine √ 8 Performance feedback and evaluation √

27. 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.

28. PROS The model explains the interaction between buyer and seller activities given the needs of an organisation It helps sales personnel deliver the correct message at the right time 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 information/proposal)   The buygrid framework proved its worth to the scientific community as one of the few industrial marketing models

29. 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.

30. 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 supplier selection

31. References http://www.provenmodels.com/549/buygrid-framework/robinson-wind-faris Industrial buying and creative marketing Patrick Robinson, Yoram Wind and C. W. Faris ,  1967   Organizational buying contexts and the procurement process: working paper Michele D. Bunn, 1993

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