May 14, 2011
— 1 Comment
I’ve not posted in 4 weeks as I have been travelling on a series of client engagements. These past 4 weeks have seen me involved with buyers, with technology manufacturers and with resellers. All on different projects, all based on different outcomes.
But one common theme permeated every one of these engagements. The way buyers buy is radically changing, and many are struggling to keep up and meaningfully add value.
The primary shift as described by one of my clients, which I thought was a very adept description, was the shift from rigidly defined requirements, to “loose problem descriptions”.
In the past buyers would highly define what they wanted then go to market for it. In very traditional “value chain” or “supply chain” fashion, suppliers would then compete on product and price to win the business. Who best met the defined needs for the lowest price.
Buyers have wised up though. With growing complexity and with technology now playing such a significant role in growth, productivity and differentiation initiatives, buyers don’t know what they don’t know. While they may loosely define their areas of need, they now let the suppliers battle it out on who will provide the MOST functionality, free consulting, value added services etc for the lowest price. In short buy loosely defining the problem buyers stop suppliers from limiting their offering to just the defined need. Now suppliers not only provide what is required, they throw in many other “value adds” (in their mind) to sweeten the deal.
Who is the winner here ??
In these (and other) engagements, I ask both the buyers and the sellers was demand created by the seller. Interestingly buyers almost never say yes. In fact most buyers believe they identified the need or problem, identified that technology could potentially address the need or problem and they went looking, albeit they may not have known what they were looking for in detail, they went looking. Sellers on the other hand believe otherwise. They are quick to point out that they created demand. Well the most common language is the “influenced” the solution. Really, influenced. While I don’t disagree that sellers may have influenced the buyer (given the buyer doesn’t know exactly what they want), the difference is that it’s not demand creation, as this is a tactic of the buyer. By not defining what they want the buyer forces the seller to go above and beyond what they might otherwise do. All competing sellers try to increase the scope, the offering, the services etc…the buyer simply lets them but remind them they have limited budget.
I’ve also recently heard a couple of terms:
1. Budget Creation
2. Budget Capture
Nice words for the age old activity of demand creation and demand reaction.
I hear people enthusiastically say we need to do more budget capture. This really disturbs me as it’s going to result in a product and price war that will yield lower margins, and prevent the supplier / seller from genuinely helping a customer achieve their outcomes, as rarely are outcomes achievement “priced” into the offering.
In addition however while buyers are changing their behaviours to extract more (for a lower price) from their sellers, but having them compete for a more fluid, more broad ranging, more loosely defined set of requirements, buyers themselves admit that at this stage they are still not fully aligned to outcomes. While old technology based ROI business cases no longer fly and will be decline out of hand by most boards, they do agree that highly aligned well structured business outcome based business cases are a new approach that is just starting to evolve.
Outcome based buying is here. It’s in it’s infancy, and buyer behaviour will continue to evolve in this area.
A shift to outcome based buying will seek to look at initiatives and invest in initiatives, where technology is but a bit player, a supporting cast in a bigger project.
For sellers moving to an outcome based, consultancy-led demand creation sales approach will help to;
1. Help buyers move to an outcome based buying approach – adding significant value to buyers
2. Help price in the relevant services required for buyers to achieve their outcomes, and for sellers to get paid for those services
3. Allow sellers to “charge” for the “influencing” they are doing today as it will be proactive rather than reactive
4. Move from a traditional “value chain” to a genuine partnership of mutual win win
In short are you changing your selling behaviours in line with, as fast as (or faster) than buyers are changing theirs ?
For an interesting perspective on this, join the discussion here