Tiebreaker Selling

Customers in B2B markets are becoming increasingly sophisticated about purchasing. Recognizing that most products and services they buy are not strategic to their businesses, they begin by simply seeking suppliers that will meet their basic specifications at a competitive price. Then, after they’ve winnowed down the contenders, they often ask the finalists to offer “something more.”
 
Many suppliers misunderstand this request. They’ll respond with the well-worn tactic of stressing features their offerings have but competitors’ lack, and when that doesn’t work, they propose price concessions. But it turns out that customers are looking for neither of those things.

During a three-year research project, we discovered that 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.
A car-leasing company, for instance, might give customers the option to cancel a certain number of contracts prematurely without penalty. A construction company might offer to assign a client a senior project manager with whom it’s had a successful experience, so the client would feel assured that the work wouldn’t need to be audited and would be done on time and safely. A distributor of standard technical parts might put labels with the customer’s own part numbers on packaging, eliminating the hassle and cost of translating the distributor’s numbers to the customer’s inventory system.
 
The justifier, or tiebreaker, helps the purchasing manager demonstrate to senior leadership that he or she is making a contribution to the business. That is no small thing. People responsible for nonstrategic purchases have difficult, often thankless, jobs. They’re under pressure to complete these transactions as quickly and efficiently as possible. Whenever anything goes wrong with what they’ve bought, they get blamed. But their diligence and understanding of the business typically get little recognition.
 
To put it simply: Helping purchasing managers break out of this rut by giving them a visible “win” is how suppliers win. They gain a larger share of customers’ business—and, potentially, the ability to price their offerings at or near the upper end of each customer’s acceptable range.
 
Why Suppliers Misunderstand Customers

  Strategic purchases are those that a business has decided contribute significantly to differentiating its offerings. Most purchases are not strategic. Nonetheless, nonstrategic purchases can be consequential, considering the large amount spent on them. Because companies need to make so many of them, the process for nonstrategic deals tends to be relatively simple, and the criteria for evaluating each decision are cursory: that it didn’t consume too many resources and that there are no complaints or problems with the item selected.
 
We found that suppliers of nonstrategic products and services don’t fully appreciate this purchasing task. So when they try to land a deal, they make two common mistakes.
 
They focus doggedly on their offerings’ distinctive features even when customers don’t want or need them. The hope is that features that go beyond the specifications will win over the customer and get him or her to pay a premium. But trying to persuade a skeptical customer that such extras will add value is no easy task, as a story we heard from the director of supply management at a U.S. teaching hospital shows. She related to us how the salesperson for a supplier that had developed an antimicrobial coating for its sutures always pitched her that premium-priced product, even though ordinary sutures are fine for most surgical applications.

by James C. Anderson, James A. Narus, and Marc Wouters