Competitive Advantage thru' Non-strategic Purchase in B2B

'Do not overlook your Non-Strategic Purchase'

Traditionally, companies in B2B market follow a distinct operational approach in every sphere of business. I frankly speaking did not come across any specific reason accept the feeling given that the company to company business has a different conducting relationship? Is it true? Lets us examine it.

What happens in a business transaction between a buyer and a seller in B2C?  A buyer looks for a product and its inherent value, able to satisfying his extrinsic or intrinsic need & does try paying as less as possible so that the maximum possible price value he can be extracted from the transaction. The seller, in turn, tries attracting the potential consumer with the product features & his non-price value benefits for levying maximum possible charge on it. Inherent force application is maximum realization at both the end of the transaction.  Is it different in B2B?  As far as my understanding goes, only difference is, it becomes stronger for higher & higher benefits at lesser & lesser price. Rationale is that at both the ends, you see ‘Business Men’ vying for ‘what more’. At both the ends, you see professionals fighting to prove their mettle to their respective organisations. So, from business point of view, I do find same business relationship.

It is therefore not advisable to differentiate any of business decision as relatively less important whether in B2C or B2B. But, practically, you see it happening around us. Reasoning behind given is that we are in B2B business. One such differentiation in business decision making is seen in the area of purchase. It has been seen that organisations do differentiate between ‘Strategic Purchase’ and ‘Non-strategic Purchase’. Non-business purchase is seen as less value adding proposition in overall purchase department. But, the case is different today.

Today, companies in either of the businesses - B2C or B2B are under tremendous pressure to remain competitive on Price and Product Features. They have to look for ‘business partners’ in the form of suppliers who can meet their basic specifications and price. Mounting pressure has made companies to invariably ask for ‘what more’ besides price & product features from their suppliers.

It has been seen in a research that companies as a practice even strategies to ask for ‘what more’, primarily in strategic purchases and not in non-strategic purchases. Such a differentiation can be detrimental to a business if allowed, research says. Generally, it has been seen that whenever a supplier encounters ‘what more’ query; his innocuous answer is his re-emphasis on value of his products/services or at the best ‘price-cuts’. Re-emphasis here means supplier offering product features which go beyond the specifications of the buyer’s need and his seeking premium on it. Other thing which is seen is that ‘price-cuts’ being given ‘quire easily’ if the buyer persist on his demand of ‘what more’.

But, study reveals that if price-cut is the requirement, it can be easily achieved through ‘Reverse Electronic Auctions’. Moreover, supplier’s inability or hesitation on not reducing prices further is not believed by purchase managers and they on their part, put in contracts, stiff penalties or resort to cutting corners, compromising the quality. Leading finally to lose-lose for both the parties. Detrimental in nature!!!

However, it has been my belief for long that if both the parties come together and ‘collaborate’, perhaps each one shall be benefited out of it. My belief got long desired conviction when the recent research proved it.

It has been found that ‘exceptional suppliers’ can charge ‘premium’ on its products by laying down a process of finding, vetting and developing ‘justifiers’. These justifiers can be grouped into three distinct categories:

i.              Efforts can be made to identify how customers actually use the offering products or their features. In this category, suppliers generally do ask buyer companies, ‘how can we be better supplier to you?’ and do provide solutions.

ii.             Suppliers holistically look at entire purchase range in the non-strategic purchase category of the customer company and try combining them for value addition.

iii.            Suppliers at their end, align their products and services with the ‘priorities’ of the customer company.

But, take note of the fact, nothing comes free. Suppliers and customer companies have to be ‘collaborative’ in their dealings and be ready to bear additional cost.

At last, ‘Buyer Companies’ do not let ‘non-strategic purchase’ hurt their business objectives. It can very well help in giving highly sought after ‘Competitive Advantage’ a company may be aspiring for; just employ right people with right focus.