Buying has changed a lot since the Internet became popular, both for consumers and for B2B buyers. I’m looking at consumers in a separate article so here I want to answer the question…
What Do B2B Buyers Value When Making Buying Decisions?
To answer it, I’m summarising an excellent article in the Harvard Business Review:
The B2B Elements of Value by Eric Almquist, Jamie Cleghorn and Lori Sherer from the March–April 2018 Issue (You can read the original here).
Bain, the strategy consultants have produced 40 elements of value which they fit into five major categories. They have also look at what consumers value when buying.
The Main Categories of B2B Values
These categories are:
- table stakes – necessary to be considered, what I’ve called qualifiers in the past.
- functional – related to the main benefits of the product or service
- ease of doing business – a long list split into five additional categories – productivity, access, relationship, operational and strategic.
- individual – these are issues that relate to the buyer him-or-herself and are split between those that enhance careers and those that are more personal, and
- inspirational – these align with purpose.
They are arranged into a neat pyramid, in the style of Maslow’s hierarchy of needs. (Maslow is the motivation theory that says you need food, water and shelter first and needs get more complex further up the pyramid.)
Development of B2B Buying
It’s easy to think of B2B buying as all about finding the best price or finding the product with the best economic value added e.g. the fertiliser which can increase crop yields the most and can be demonstrated in solid numbers.
But it’s not true.
I was first told the saying (by an IBM salesman) that “Nobody every gets fired for buying an IBM.” It probably originated 20 years before then but it points to how a buyer has emotional needs that also have to be factored into any decision. Buying a new mainframe or mini-computer was a big, risky decision and, if it went wrong, the decision maker would 1) look stupid and 2) likely be blamed to the extent it was a career-changing decision.
Now buyers in both B2B and B2C have a huge amount of information available to them thanks to a few searches in Google and then some clicks. This has changed the dynamics of the buying-selling relationship.
Yes, some salespeople will still use prospecting techniques looking for potential customers who are getting ready to buy but haven’t started looking yet. These possible customers:
- Start to recognise a problem that is growing in importance, or
- Are getting unhappy with their current supplier in situations where there are regular purchases.
However the majority of contacts made with suppliers comes after the buyer has done research and narrowed down the selection. The role of marketing has several sides:
- To be found where buyers are looking.
- To present a value proposition strong enough to make the cut, normally by directly addressing the needs and values of the buyer.
- To pre-sell the buyer on the criteria which tilt the purchasing decision in their favour.
This work by Bain helps you to think through the reasons why different customer groups or segments are likely to have difference preferences for value attributes.
Back to their research.
The 40 Elements of B2B Value
1 Table Stakes
- Meeting product specifications
- Charging an acceptable price
- Complying with all necessary regulations
- Meeting the ethical standards of the buyer
These are order qualifiers. It’s a simple Yes or No decision based around a set threshold and “no” rules the product and supplier out of the game.
With these qualifiers, there isn’t scope for being much better than your competitors which is why they don’t become order winners. Even if there is scope, the category of customers doesn’t appreciate the extra “value” offered. It just adds to the supplier’s costs.
2 Functional Value
- Economic value through improving top line performance
- Economic value through reducing costs
- Performance value through better product quality
- Performance value through scalability
- Performance value through innovation
At this level, the values on offer can still be assessed objectively and fit into the rational buying decision.
So far so good but the next stage is where things get interesting because some of the values are subjective rather than objective.
3 Ease Of Doing Business Value
The authors split this category into five different sub-categories.
3.1 Productivity Values
- Saving time
- Reducing effort
- Reducing hassles
- Providing better information
- Providing more transparency
3.2 Access Values
- Improving availability
- Increasing variety
- Improving configurability
The top two help to explain why Amazon is so successful along with stationery superstores like Staples.
3.3 Relationship Values
- Faster responsiveness
- More expertise
- Increased commitment
- More stability
- Better cultural fit
3.4 Operational Values
- More organisation
- More simplification
- Better connection
- Better integration
3.5 Strategic Values
- Increased risk reduction
- More reach
- Better flexibility
- Better component quality
As you can see, there are a wide range of issues here, some which probably resonate strongly when you think of your business or someone else but others may leave you puzzled. Unfortunately the article doesn’t go into definitions of the factors so we’ll have to wait for the book to appear.
Next we have
4 Individual Values
Split into two sub-categories.
- Network expansion
- Reputational assurance
The top two reflect the fact that few managers will see themselves staying long term with an employer so by strengthening the quality of their personal contacts and developing the latest “must-have” skills can tilt the balance.
In the last one, you can see the IBM factor. believe me it exists, even on what may seem to be smaller, simpler buying decisions. No one wants to look bad in front of their peers.
- Design and aesthetics
- Growth and development
- Reduced anxiety
- Fun and perks
It’s interesting to see that last one, fun and perks. Ill leave you to decide whether corporate entertaining (like tickets to a test match, football match or Wimbledon) could influence buying decisions in your business and whether you feel comfortable taking a step in this direction. Personally I prefer to see them as a chance to deepen relationships and get to know customers on a more personal level.
The final level is…
5 Purpose Values
These are considered to be inspirational values
- Improving the vision of the future.
- Providing hope for the future, either for the business or for the individual decision maker.
- Improving the business’s social responsibility.
I’m planning to talk more about how these apply to small businesses but it seems to me that the first two are particularly strong factors with business owners who inevitably have a merged identity between themselves and their business.
The Neat Diagram
I’m not sure if I’m allowed to bring across the neat diagram of the B2B values arranged in the pyramid but you can see it by clicking on the link below.
Is There Anything Missing?
Things that spring immediately to my mind are familiarity and habit along with convenience. When you’re selling to replace another supplier, there can be considerable inertia even though the buyer isn’t happy.
They do what they’ve always done because the purchase outcomes aren’t important and it’s the easiest thing to do. Does this fit into the time and effort categories in 3.1 productivity values? I’m not so sure because I thought they referred to ways to gain a benefit over the status quo and not to confirm the existing decisions.
What do you think?
Which Values Matter Most to Business Buyers?
This will depend on the particular customer and, more generally, the customer segment that best fits the customer.
Only in individual negotiations with a particular business can you finesse the value proposition to a unique fit. Marketers who don’t have the benefit of consultative selling techniques will work on buyer segments to develop value propositions that should attract a high proportion of potential buyers.
The HBR article looked at two sets of B2B buyers – IT infrastructure and commercial insurance and in total surveyed 2,300 decisions makers.
They also looked at how it fit with the Net Promoter Score, a very straightforward way of measuring customer satisfaction and for predicting loyalty.
This produced some interesting conclusions:
- The more values rated highly (8 or more), the higher the Net Promoter Score. Strong performers rated well for six or more elements had a 60% higher Net Promoter Score than the weaker suppliers who only rated highly for one to five elements of value.It’s hard to argue with the logic here. Buying is a multi-criteria decision although it’s arguable how many values really matter. You can take any decision and quickly see that there are normally a small number of critical factors.
- What the decision makers said didn’t necessary translate into higher Net Promoter Values. The article gives the example of the IT infrastructure buyers stating that cost reduction is the most important factor yet, when the numbers were analysed statistically, other values demonstrated a stronger positive relationship.This reminds me of the old saying that “people buy emotionally and justify rationally”. Decisions are made by the unconscious mind and then sense checked for logic so people don’t necessarily know why they made a decision.
I’ve given you my interpretation of the article along with highlighting the 40 elements of B2B value. I’m planning another article to talk about how a small business can use this information.
I urge you to read the original article.
The Harvard Business Review has been very kind and lets people have access to three articles for free and without registering.
In the meantime, get familiar with the list of values by thinking through some of your recent (or current) purchase decisions in your business. Try to be honest with yourself about the emotional factors that weighed heavily with you yet you wouldn’t want to admit their importance to anyone else, like that good-looking salesperson who kept taking you out for lunch.
Try different categories of purchases:
- Direct materials and components
- Consumables in the factory or office
- Repairs and maintenance
- Professional services
How do they compare and contrast. Which category is closest to what you sell and has your purchasing given you insights into how others might be buying your products and services?