Recently one of our client who is into selling Auto component solutions wanted to know how to become the preferred supplier to some of their top tier vendors.
The challenge he said is the customers are defining the specifications and also giving an acceptable price range. The customers are inviting many suppliers who can match the specification the vendor has defined.
Client was keen to know how to handle these kinds of buyers? It is a large account and can give significant year-on-year revenue.
The general suggestion would have been to ask them to promote some new features or give a price which is lower than any vendors.
But in this situation, where the customer is specifying a feature list and indicating the price range he is acceptable, promoting features or aggressively pricing is not a good option.
What needs to be done then? In this blog we explain the same!
The B2B buying process for non-strategic purchases
Most B2B buyers do 2 kinds of purchases.
- Strategic Purchase:
- Non-Strategic Purchase
Are those that a business has decided to contribute significantly to differentiate its offerings.
For example, A Car company might want to differentiate from other car companies by promoting a Blaupunkt Music system. Blaupunkt music system provider is a strategic supplier. Similarly, for many laptop manufactures, Intel is a strategic supplier.
This is similar to the case of one of our client who is into one of general auto component solutions. The purchase doesn’t really differentiate to end customer. This can be internal cables, labeling solutions, in case of service, it can staffing solutions, security systems etc.
For most of the non-strategic purchases, most businesses prefer to develop a simple buying process. Evaluating criteria for the purchase will be standardized and purchase managers hold a lot more control. Know more about different buying process from our earlier blog here
The common process is to float an RFP asking for suppliers to comply with the spec and provide a competitive price.
When a salesperson is confronted with this situation, the most way to respond to differentiate from competitors is by adopting either of things listed below,
- Promote new features
- Offer lower price
Unfortunately, both the above options will not give good results.
Because as the buyers have prepared the spec listing the features, salesperson promoting a feature which is not part of spec will not generate any interest! Most purchase managers ignore new features being presented.
With regard to aggressively pricing, two possibilities can happen.
- This can trigger a price war and force other players to bid lower again. In this case, the price advantage immediately disappears.
- Purchase managers will suspect extreme pricing which is divergent from other vendors or their own price specification.
So what is best solution to handle these situations?
In an article on Harvard Business Review, the authors James C Anderson, James A Narus, and Marc Wouters discuss this.
B2B customers who are purchasing non-strategic are keen to know what is called “Justifier” or “Game Changers” from the supplier. Here is what justifier means,
When purchasing managers ask for something more, they are actually looking for what we call the justifier: an element of an offering that would make a noteworthy difference to their company’s business.
A justifier’s value to the customer is self-evident and provides a clear-cut reason for selecting one supplier over others, effectively breaking the tie among the final contenders.
How to discover the Justfier (aka Game Changers)
In the same article, the author gives 3 ways to discover the Justifier- which can make you stand out from the competition.
How customers actually are using the offerings/products
Many a times customers are using the products in way different from what the supplier thinks. Salespeople must talk to the customers and understand their concerns in complete usage cycle.
The simple open-ended question such as: “How can we be a better supplier to you?” encourages sometimes the customer’s managers to respond in an expansive fashion and bring up something they might otherwise neglect.
Sometimes even operations people or R&D persons must visit the customer’s site and understand in detail how their products or services are put in use. Or prepare a questionnaire and ask the customers to answer which gives deeper insights.
Understanding business priorities
Depending on market dynamics and external factors, businesses have to continually change priorities. A salesperson can try to understand the business priorities of the customers they serve.
If the customers are large listed businesses, then quarterly review or annual reports will list what are new priorities for the business.
If the customers are small or medium-sized, then occasionally asking the companies touch points about the goals, priorities will give insights. And based on those insights the supplier must align the benefits.
Identifying new Justifiers/Game Changers
By the very nature, most of the unique justifier features get replicated quickly by competitors and become one among many features.
This requires a constantly identifying Justifier which can help customers and also differentiate many ways.
Sales managers and sales executives can play a vital role here to uncover their needs. Refer our article to know what your customer wants from the sales team
Salesperson must move beyond thinking of only price discounts or promoting some new features that don’t matter to customers. Identifying a justifier requires time and working closely with the customers and investing in structure and process.
To persuade the purchasing manager and customer leadership of why they should work with a supplier requires hard work and determination to find new game changer/justifiers..