The Nature of Industrial

Buying
Industrial Marketing
Winter 2021
 Organizational Buying Activities
• Organizational buying activities center on the level of experience and
information that firms have in purchasing certain products and
services.

• Routine Purchase vs New Purchase.

• Buying activity requires different phases of decision making.

 The Buygrid Framework
• A conceptual model , referred to as the Buygrid , is quite useful in analyzing the
purchasing decision process over various buying situations.

• Developed by Robinson, Faris and Wind in 1967.

• Buygrid Model incorporates three types of buying situations and eight phases in
the buying decision process.
The Buygrid Framework

BUYGRID MODEL

Buyclasses/Buying Buyphases/Buyin
Situations g Process
 Buyclasses
New
Task

Buyclasses

Straight Modified
Rebuy Rebuy
 New Task

• Company is buying the item for the first time.

• Problem or need is considerably different from past

experiences.
 New Task
• The need for a new purchase maybe due to internal or external
factors.

• In the new task decisions

• The risks are more.
• Decisions may take longer time.
• More people are involved in decision making.
 Modified Rebuy
• Organizational decision makers enter into a modified rebuy situation when they
feel that significant benefits such as quality improvements or cost reductions may
be derived from reevaluating alternatives.

• Modified rebuy situation occurs most often when the firm is not satisfied with the
performance of present suppliers.
 Straight Rebuy
• The buying organization reorders/places repeat orders with the
suppliers who are currently supplying such items.

• Product, price, delivery period, and the payment terms remains the
same in the reorder, as per the original purchase order.
The Buygrid Framework

BUYGRID MODEL

Buyclasses/Buying Buyphases/Buyin
Situations g Process
Phases in Purchasing Decision Process
Evaluation of
Anticipation or
proposals and Selection of an
Recognition of a
selection of order routine
Problem (Need)
suppliers

Determination of
Acquisition and Performance
characteristics and
analysis of feedback and
quantity of needed
proposals evaluation
item

Description of
Search for and
characteristics and
qualification of
quantity of needed
potential sources
item
 Phases in Purchasing Decision Process
• Phase 1: Anticipation or Recognition of a Problem (Need)
• Purchasing decision process is triggered by recognition of a problem, need or
potential opportunity.

• Examples:
• Quality of material supplied by the supplier is not satisfactory.
• Machine supplied by existing supplier breaks down too often.
• Required material is not available.
• New product development.
 Phases in Purchasing Decision Process
• Phase 2: Determination of characteristics and quantity of
needed item

• Organizational members must determine specifically how the situation may be

resolved.
• What type of products or services should be considered?
• What quantity of the product is needed?

• Solutions are suggested by user department or engineering department.

 Phases in Purchasing Decision Process
• Phase 3: Description of characteristics and quantity of
needed item
• Phase 2 and Phase 3 are closely related.

• Influencers enter the purchasing process.

• Buying influencers' begin to look outside the firm for supplier product information and
for assistance in developing product specification.

• Solution is identified and precisely described.

 Phases in Purchasing Decision Process
• Phase 4: Search for and qualification of potential sources
• Obtain information on all available suppliers.

• Phase 5: Acquisition and analysis of proposals

• Request for specific proposals will be made.
• Contents:
• Product Specification
• Price
• Delivery Period
• Payment Terms
• Transportation Cost

• Phase 4 and Phase 5 may occur simultaneously in straight rebuy.

• Phase 4 and Phase 5 are separate and distinct in modified rebuy.
 Phases in Purchasing Decision Process
• Phase 6: Evaluation of proposals and selection of suppliers
• Various proposals of competing suppliers are weighed and analyzed.
• Make or Buy trade off?
• Comparison with cost of producing item

• Phase 7: Selection of an Order Routine

• Activities in this phase includes:
• Placement of orders with selected suppliers.
• Frequency of order placement.
• Levels of inventory needed.
• Order routines are established by forwarding purchase orders to the vendors.
• Purchase process is not completed until ordered item is not delivered and accepted for
use.
 Phases in Purchasing Decision Process

• Phase 8: Performance Feedback and Evaluation

• Consists of formal or informal review and feedback.

• This phase involves a determination by the user department as to whether the

purchased item solved the original problem.
 Supplier Choice and Evaluation
• Supplier selection in straight or modified rebuy is not
difficult.

• Supplier selection may involve extensive research in new

task.
Evaluating Supplier Performance
• Categorical Method

• The Weighted-Point Method

• The Cost-Ratio Method

The Cost-Ratio Method
Supplier Quoted Price per Unit

A $95.50

B $95.00

C $94.75

D $95.25
 The Cost-Ratio Method
Supplier Quality/Cost Delivery/Cost Ratio Service/Cost Ratio Total Cost Quoted Price Net Adjusted
Ratio Penalty per Unit Price per Unit
A 2% 1% -4% -1% $95.50 ?
B 2% 3% 2% 7% $95.00 ?
C 2% 1% 1% 4% $94.75 ?
D 1% 1% -1% 1% $95.25 ?
 Buying Center and Multiple Buying
Influences
• Those individuals who are in any way involved in the purchasing
decision process are part of decision-making unit.

• In industrial marketing these decision makers are referred to as the

buying center.

• Buying center is an informal ,cross-departmental decision making unit

in which the primary objective is the acquisition , impartation and,
processing of relevant purchasing-related information.
 Buying Center Roles
• Deciders
• Organizational members who have formal or informal authority of making buying decisions

• Influencers
• Those individuals inside or outside the organization who influence the decision process by providing information on criteria
for evaluating buying alternatives or by establishing product specifications

• Users
• Organizational members who use the products or services

• Buyers
• Organizational members who have formal authority in the selection of suppliers and in the implementation of procedures
involved with purchasing

• Gatekeepers
• Organizational members who control the flow of information into the buying center.
Identifying Buying Center Members
• Marketing:
• The perspective of marketing in purchasing process is: "Will it enhance salability?”.

• Manufacturing:
• Manufacturing is responsible for determining the feasibility and economic considerations of
producing products.

• Research and Development:

• This department is involved in initial development of products and processes and set broad
specifications for component and materials criteria , minimum end-product performance
standards and manufacturing techniques.
Identifying Buying Center Members
• General Management:
• Top management becomes involved in purchasing decisions when the firm is faced with
unfamiliar situations not related to day-to-day activities.

• Purchasing:
• Purchasing’s dominant sphere of influences falls within phases 4,5, and 6 of the purchasing
decision process.
• Purchasing agents are the dominant decision makers and influencers in repetitive buying
situations.
 Psychological Factors Influencing
Decision Making
• Usually purchasing , engineering , manufacturing, and marketing personnel are
involved both individually and jointly at various phases in the purchasing decision
process.

• Expectations regarding the potential of alternative suppliers to satisfy a number of

different purchasing criteria will differ.

• Two different factors account for these differences

• Differences in Role Orientation
• Differences in Information Exposure
 Differences in Role Orientation
• Each individual has a different perception of his or her role in the
decision process.
• Purchasing agents look for price advantage and economy in shipping.
• Engineers look for quality and pretesting.

• Organizations typically reward individuals for achieving their

respective departmental goals .
• Purchasing agents are rewarded for economic achievement.
• Engineers are rewarded for product performance.
 Differences in Information Exposure
• Expectations and objectives are further influenced by the
type and source of information exposure.

• Purchasing agents are exposed to greater amounts of commercial sources of

information.

• Personnel in engineering and production, typically have a disproportionately

smaller amount of information.