Segmenting logistical service offerings using the extended buygrid model.

The message of The Discipline of Market Leaders is tha no company can succeed today by trying to be all things to all people. It must instead find unique value that it alone can deliver to a chosen market...Its adherents focus on delivering not what the market wants but what specific customers want. Customer-intimate companies do not pursue one-time transactions; they cultivate relationships. They specialize in satisfying unique needs; which often only they, by virtue of their close relationship with - and intimate knowledge of - the customer recognize. (Michael Treacy and Fred Wiersema (1995), The Discipline of Market Leaders)

Introduction

In most firms, the logistical service offerings tend to select and measure a single set of performance standards (for example, 98 per cent fill rate, two day order cycle time and a maximum of other service failures of 2 per cent) in order to meet customer needs. This paper will present the buygrid model, taken from industrial marketing and then extends it to include logistical service operations. Specific service standards will be developed which are consistent with the extended buygrid model. The extended model will then be applied to selected logistical research literature, to show the richness of this perspective in understanding customer service in the context of the extended buygrid model (EBM). The effect of this perspective is to recognize multiple sets or segments of service offerings and performance levels. This approach allows for and provides explanation for, categories of customer service packages in order to meet the diverse needs of the firms' customers.

Historically, most firms have operated with a single set of logistical customer service standards. A typical example would include measurement of the major service attributes and then a composite measure of all other service-related attributes. For many firms the major service attributes are order fill rates and the time to deliver the order to the customer. A composite score for all other service-related performance measures is often called service failures. This would include service issues such as customer complaints, damaged shipments, shipping errors and other relevant service measures (if any of these service failures are exceptional they would typically be reported individually). For this particular example minimum acceptable service standards might be: an order fill rate of 98 per cent of all items ordered; a 48-hour order cycle; and a maximum service failure rate of all other relevant service measures of 2 per cent.

It is the exceptional firm today that has logistical service performance standards that are not in most ways similar to this example. At the same time, many firms will provide variants of the single set of standards by attending to a select group of customers on an exceptional basis (by serving them first, or giving them priority to inventory, or shipping their orders in a manner which might offer greater control and speed).

It is the purpose of this paper to demonstrate that the buygrid model can be extended to include characteristics of logistical customer service. Consistent with the original buygrid model, this extended model, will provide for three categories of customer service needs. Each category, or segment of customers may expect different levels of performance and in fact, they may require different service attributes from the firm.

The buygrid model from industrial marketing

The Robinson et al. (1967) (RFW), buygrid framework has been referred to by Morarity as "one of the most useful analytical tools for both academics and practitioners interested in organizational buying behavior". Others, such as Sheth and Garrett (1986) and Haas (1986) have simply referred to the research as a "classic".

In general, the buygrid framework compares the three buyclasses, or buying situations, with eight progressive stages in buying, or buyphases. The buyphases are an expression of the progression of thoughts and activities that a buyer goes through in the sequence of activities leading to a purchase. These sequential steps are: problem recognition; description of needs; specify product; search for suppliers; solicit proposals; select supplier; specify the order routine; and review supplier performance. In the model these stages in buying are compared with three types of buying situations, referred to as buyclasses.

The three classes of buying are new task, modified rebuy and straight rebuy. Kotler (1984), provides an excellent managerial description of each buyclass and the operational implications of each classification, ranging from the routine purchase situation to the exceptional purchase:

* Straight rebuy. The straight rebuy purchase describes the buying situation where the purchasing department reorders on a routine basis (e.g. office supplies, or wood pallets). The buyer chooses from suppliers on its "approved list", giving weight to its …