A modified rebuy is a buying situation in which a company reorders products from an approved vendor but wants to alter some elements: features, design, packaging, quantity, or delivery times. This change reflects the changes in the client's requirements or supplier's offering.
This type of buying situation can occur when a new competitor comes out with a new product that has better features. In turn, your company decides to change its products to stay relevant and competitive on the market.
What is the difference between a straight rebuy and a modified rebuy?
There are three types of rebuy purchases:
- straight rebuy;
- modified rebuy;
- new buy.
To understand the difference between the types of purchase, let’s review the features of each.
With this purchase type, a company reorders goods from an approved supplier. The reordered products are identical to those in the first order (the same product of the same quantity). In this type of buying situation, suppliers should maintain a high quality of products and provide an automated system to make the process of reordering fast and convenient. There is no post-purchase evaluation unless a client notices changes in product’s quality, delivery time, etc.
Sellers prefer straight rebuys as a buyer neither considers any alternative goods nor looks for other suppliers. However, a supplier should always be ready to provide the client with reliable and high-quality service.
This occurs when an organization is eager to purchase the same products but make changes in packaging, delivery time, or the quantity of products they offer. When companies aren’t satisfied with the previous products as an alternative, they can consider placing an order with a new supplier. To avoid such a situation, sellers try to find out whether products have met customers’ expectations. If not, they search for ways to let clients change elements of their order.
A new buy occurs when a company wants to order products for the first time. In this buying situation, a brand needs to conduct research and analyze the offers from various suppliers to choose the most suitable one.
Now that you know the difference between the types of purchases brands make, let’s review some examples of a modified rebuy.
Examples of a Modified Rebuy
If your company is dissatisfied with a supplier’s product and the procurement team makes changes to the order, you completed a modified rebuy. There are several reasons companies do this — new requirements, high prices, suppliers, product changes, etc.
Airlines offer more fresh fruits in the morning on particular routes. This decision is based on the feedback of clients who eat fruit for breakfast. So customers’ requirements influence what a plane crew serves during the flight.
Operating, or opex, cost refers to the ongoing cost for running a company. This includes ordering products or materials to create products If the spending on particular products are too high, the manager asks the purchasing team to decrease these costs.
Let’s take printer supplies, for example. The team has to search for other suppliers of printer cartridges and compare the prices. If a purchasing team finds out that their supplier charges higher prices, the company asks for a lower price.
Imagine that a company has three suppliers of office furniture, such as tables. The purchasing team compares the offers of all three vendors and finds out that one of them provides clients with better quality of products for a lower cost and offers an automated ordering process. As a result, the company cooperates with this new supplier.
Let’s imagine that a company has purchased cars from one supplier for 10 years. Suddenly the manufacturer stops the production of this model in favor of new eco-friendly electric vehicles. As a result, the company has to select a new model of the car.
A modified rebuy occurs when a company isn’t satisfied with a supplier, its team wants to check what’s new on the market, or it is considering using the service of the current supplier’s competitor. This allows other suppliers to offer their service instead of a company’s regular suppliers who haven’t met the expectations of their customers. At the same time, preferred suppliers can be 80% sure they will get the bid again as clients trust approved suppliers more because of the business relationship they have had for years.
- The article “Business Buyers: New Buy, Modified Rebuy, Straight Rebuy” on the Study.com blog explains three buying situations.
- The article “5 Examples of a Modified Rebuy” on the Simplicable blog provides a reader with 5 examples of modified rebuys.
Last Updated: 21.01.2021