Explain Business/ Industrial Buying situations.

There are three major types of buying situations depending on the purchase and its information. (Industrial Buying and Creative Marketing; Boston: Allyn& Bacon, 1967; Ch 2)

(1) New task – The purchase is done for the first time with no purchasing experience, and extensive search is done to evaluate options. The greater the cost or risk involved, more the expertise of decision making participants is needed. For example, an organisation buying raw materials to manufacture laptops for the first time.

(2) Modified rebuy – Due to change in preferences or entry of a substitute product in the market, organisations are forced to modify an existing product to suit the target market. The modifications can be change in product characteristics, price, quality, suppliers, etc. To meet these production requirements, marketers look for inventory or raw materials that meet the organisations objectives. The people involved in buying process have basic information and need to study the alternatives suiting the organisation’s needs. This process is less risky and less time consuming as compared to “New Task” buying situation. The information in this scenario is gathered on alternatives. For example, a school buying latest model of school buses with larger capacity to add to the existing fleet of mini-buses.

(3) Straight rebuy – in this buying the organisations rebuy products and services from the same suppliers. Suppliers usually proactively visit the organisations to take the orders in advance to maintain their market share. The people involved in the buying process have relatively good experience of buying and need no additional information on products and services. There is no risk involved because of past experience of purchasing the same products and services. For example, laptop manufacturer buying raw materials from the same suppliers to meet the production demand.

New task and Modified rebuy situations involve risk taking and hence poses big challenges for the organisations. More effort and time is required in these situations. The organisation has to involve expert participants from different departments to discuss the requirement. Straight rebuy doesn’t involves much discussion. The buying is mostly done by the purchase department as per the requirements from the operations/ production team.