In Defense Of Transactional Buying
It’s not often I disagree with my friend, Anthony Iannarino, but he recently wrote a great post, Transactional Selling To Avoid Conflicts Around Price. I don’t really disagree with his point of view, but I think there is a different way of looking at transactional selling, or rather, transactional buying.
We always tend to associate these with “priced based buying.” We tend to think the only value we can create is through pricing actions–discounting.
First, price is always a key consideration whether we are involved in a complex or transactional buying/selling process. As sales professionals, we have to create sufficient value to justify and defend our pricing in every sales/buying situation.
But, I think there is a huge misunderstanding of transactional buying processes. There are a large number of opportunities that are and should be a transactional process. These processes can be characterized along a number of dimensions: A highly knowledgeable customer, a customer who buys these products or services frequently, a situation where few people are needed to make a decision, possibly transactions that represent very low risk on the part of the buyer (though not always.).
There are lots of situations where this is the right process for the customer. Classically, we think of this for products and services that are highly commoditized (more on this later). So how do we create value in this type of situation? How do we defend our pricing, create meaningful differentiation, and win the business?
Typically the value we create is very different. The customer is well educated, so educating them on products and solutions isn’t necessary–in fact it slows them down and frustrates them (this is less important in today’s complex buying processes as well). The customer knows how to evaluate alternatives and make a decision–they have a very simple decision-making process. So often, in complex sales, the customer doesn’t know how to buy or can’t organize themselves to buy. The value we create is helping facilitate the buying process. This is probably one of the biggest areas of differentiation and value creation in complex buying processes, but it is unnecessary in the transactional buying process. In fact, again it slows the customer down. The “problem” is well defined, characterized and understood by the buyer, so we don’t create a lot of value or insight for the customer. Justifying the purchase is well understood, so our ability to create strong business justification adds no value.
So how do we create value in these types of situations? Basically, we have to make the process of acquiring these types of products very efficient. We have to look at the customer’s “cost of buying and acquiring the product” reducing this as much as possible. Ease of buying, ease of contracting, eliminating supply chain problems/costs/bottlenecks, reducing or eliminating delivery risk, quality risks, and so forth are all critical elements in creating value in transactional selling processes.
Sometimes, simplifying buying, consolidating purchasing, and helping the customer manage that process more effectively, eliminates huge acquisition and procurement costs. We see leading suppliers creating unified contracting, pricing, order consolidation, shipping/logistic management as powerful differentiation in these situations. Some have gone to the point of demonstrating how the customer can outsource the procurement/supply chain management process–creating huge amounts of value.
Sometimes, we see new technologies, e-procurement, and other things as being very important in helping our customers reduce the costs of acquisition. Sometimes, we have to rethink our routes to market, looking at how we reduce our costs of selling–to help the customer reduce their costs of buying.
So we have to understand the customers’ buying processes. Not every buying process is or should be a complex process. Many really are transactional processes and we can still create tremendous value, if we really understand the customer and how they buy.
If we have products and services that have become commoditized, we have a strategic choice. We have to become expert at creating meaningful and differentiated value in transactional selling processes, or we have to “de-commoditize” our offering moving them into a complex buying process and learning how to be experts at creating meaningful and differentiated value in complex selling processes.
Bottom line, we must always create value, and we can always create value for every sales situation. But before we can do this, we have to first understand the customer buying process, what they value, and how we can simplify their buying.
Price becomes an issue in every sales situation if we can’t create value that is meaningful to the customer.
As a sidenote, I wish my thinking on this was original, but Neil Rackham and John DeVincentis cover this and more in their 1999 book, Rethinking The Sales Force. If you haven’t read it, you must! It is one of the seminal works on creating and communicating differentiated value for every type of customer buying process.
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