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Better understanding B2B buyers – Part II – The shift in B2B buying steps

August 17, 2020 | Posted in: Grow your business | Tags: , , ,

In Part 1 of this series we looked at the three types of buying motivation with a focus on ‘Fear Buying’ and what this means for sellers. In Part II, we’ll look at the steps buying organisations are starting to employ around decision making and also some key purchasing trends.

Lessons learned from businesses who survived and thrived post-GFC

To understand what steps organisations will likely take we first need to look at what we learnt from the last major economic shock – the GFC of 2008.

Characteristics of the top performers during and after the GFC according to BCG) all took similar action. By analysing the actions of the top performers not only during and after the financial crisis but also before it hit, five key steps were identified that enabled these companies to rebound strongly from the economic crisis:

  1. Act proactively
  2. Increase innovation
  3. Stick to a clear vision
  4. Build resilience
  5. Streamline the organisation.

To support their businesses in the short term—and, ultimately, enable a recovery in the long term as the pandemic rolls on —organisations will need greater operational and financial flexibility. That will mean looking for opportunities both to preserve cash now and to be ready to reinvest nimbly for the future.

This requirement is driving leadership to rethink how they can manage their sales, general, and administrative (SG&A) activities to identify opportunities for realigning spending in a rapidly changing business environment.

A recent paper from McKinsey, also focussing on businesses that successfully performed through and thrived post GFC on sales, general, and administrative (SG&A) activities identified four phases:

  1. Resolve – some spending will naturally contract due to changes in customer and employee activity.
  2. Resilience – other spend categories will require choices to manage spend thoughtfully and relocate as the crisis continues to unfold.
  3. Return – recovery will present opportunities to reactivate operations, invest and relocate resources.
  4. Reimagine and Reform – lessons learned, and new capabilities can enable a healthier future cost base.

Leaders are also balancing immediate needs against the longer-term need to build and maintain capabilities critical for a recovery.
Since the pandemic started escalating early this year easy decisions, such as those relating as drastically reducing spend on travel, entertainment and events have already been made. By contrast, the majority of other business spending choices involve tougher decisions that require each business to manage new levels of risk, visibility, governance, and consensus to ensure alignment.

As we discussed in Part I; many buying decisions are now motivated by fear.

B2B buying drivers in the age of COVID-19

So what does ‘fear buying’ mean for the sales organisation?

To really understand it, and align with your customer you only need to look as far as procurement and the strategies they will now be engaging in.

Businesses will soon look up from crisis management and cost cutting will give way to a strong focus on risk management. How are their business models vulnerable? How do they build resilience? How must they adapt – both now and in future?

Signs will telegraph their thinking – spending cuts, lower staff ratios, stern business casing and slow investment curves.

A greater focus on managing new and emerging risks will mean a revised strategy for procurement including:

  • Refocusing on securing supply lines and balancing risk
  • Improving procurement responsiveness and agility
  • Managing demand & reducing non-essential spend
  • Turning FIXED cost into VARIABLE cost streams
  • Increasing spend visibility through eProcurement
  • Re-negotiating current agreements for better legal protection and remedies.

What do changes in strategy and procurement mean for B2B sellers?

This is where things will get interesting and sellers should be aware that against this backdrop:

  • Everything is up for grabs and loyalty kicked will be kicked to the door – the market will be tested and there will be little chance for those that are inflexible.
  • Decision making priorities will change significantly – securing the supply chain is the number one priority, the remainder will be aligned to ‘three-month sprints’, not an annual strategy.
  • Number of decisionmakers will decrease – office politics, unwarranted internal barriers will be removed and the agile team will have full pre-authorisation.
  • Innovative thinking – BAU no longer good enough, current suppliers must innovate and address the changed needs of their customers.
  • Speed and agility – turnaround times will be slashed.

How will this impact B2B buying methods?

These changes to procurement will impact every buying motion or ‘method’:

  • Transactional – where there is both familiarity and simplicity with the process.
  • Improvement buying – where the customer knows the solution they need however the internal process for decision-making is complex.
  • Transformational – where both the solution is fluid and the process highly complex.
  • Responsive purchases – where the solution is unclear but the process is swift.

All of these will be handled differently and will require a different channel.

Forrester reported in this year’s report ‘Winning the new B2B buyer’:

  • Increased demand for self-service and eCommerce options
  • Self-service B2B eCommerce sales increased from 14% in 2015 to 18% in 2019, while purchases through sales reps declined from 46% to 42% over the same period.
  • Add in rep-assisted eCommerce, and the total of all eCommerce purchases is now equal to those made through traditional vendor sales reps, at 42%.

Imagine what these numbers look like now!

Forced social distancing policies have radically shifted the balance of human and digital engagement in the buying journey from roughly equal to predominantly digital.

Afterwards, we are likely to see successful organisations have been those that focused on changing customer needs. They will have also amended business models, altered messaging and refined product propositions to suit a changed market – and most importantly meeting the customer where and how they want to buy.

Millennials at the forefront of eCommerce adoption now make more than half of all their B2B purchases through websites.
Progressive companies such as Amazon, HP, and Microsoft are starting to use digital collaboration platforms to bring buyers into the process of solution innovation, co-creation, and value measurement.

Buyer motivation and behaviour is changing rapidly, and the rate of change will continue to accelerate. Organisations need to realise that the best way to deal with market uncertainty is to take a proactive approach and that failing to take the first steps will already put them out of the race.

Over the past few years we have a seen a rise in omni-channel buying requirements and according to Paradigm B2B CEO Andy Hoar, “Yesterday, buyers wanted to buy either online or offline; today, they want to buy both online and offline; and tomorrow, they will want to buy anywhere, anytime — independent of channel or touchpoint.”

Channel-agnostic buyers expect compelling and interconnected experiences across all routes they choose throughout their journeys, but many B2B organizations lack the maturity to meet this advanced requirement.

In 2019, Forrester estimated that B2B eCommerce will reach $1.8 trillion and account for 17% of all B2B sales in the US by 2023. Forrester also forecasted compound annual growth rate (CAGR) of 10% in B2B eCommerce over the next five years.

Supporting this was IDC with a Five-Year Forecasts for Digital Commerce Applications Growth of 23.6% for B2B.

However, the current environment created by COVID19 will only accelerate this even faster and eclipse these numbers.
Productivity is the key to profitability, which is why B2B customers are rapidly turning to digital ecommerce and procurement. They’ll do whatever they can to make business purchasing more cost-effective, efficient and quick, so they can move on to more strategic and valuable tasks.

Increasingly, that will mean cutting the sales rep out of the process and consolidating their purchasing channels into a few online sources.
If you want to survive, you will have to adapt, change and transform – and do it quickly.

In Part 3 we’ll take a closer look at buying and selling methods, including the B2B omni channel boom, and in particular B2B digital commerce.

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