With more sellers chasing fewer customers these days, do B2B buyers have the upper hand? Well, according to buyers themselves, the answers is yes. However, it’s also apparent that some B2B sellers are leaving themselves vulnerable to manipulation from increasingly aggressive buyers. In this article we look at what this means, as well as offering some advice on how to maintain the balance of power.
A Shift in The Balance of Power
“Salespeople are easy prey at the moment…”, revealed a global procurement manager working for a major pharmaceutical company. The same manager went on to remark that “sometimes it can be a bit like taking candy from a child.”
In a chest-thumping manner, he also boasted of dominating unwitting salespeople, pitting sellers against each other and relentlessly pursuing the best possible deal. His message was clear: “Buyers now have the upper hand!”
Echoing the general sentiments of others we have talked to, the experienced procurement manager made it clear that the balance of power has now shifted, and that today’s sellers are no match for the new breed of highly-empowered professional buyers.
Buyers Have The Upper Hand
But do buyers really have the upper hand in today’s tough market conditions? Clearly, more and more buyers believe that they do. They commonly tend to cite the following factors by way of explanation:
- Sellers being caught off-guard by the appearance of procurement during negotiations
- Sellers collapsing in the face of pressure on price and terms
- Sellers becoming perturbed by seeing long-standing supply contracts going out to tender
- Sellers exhibiting clear signs of frustration at having to surrender to a particular buying process
- Sellers attempting to rely on past relationships to ensure future survival, as well as making feeble attempts to go around, or over, to gain access
In other words, buyers believe that sellers are struggling to get to grips with the new realities of professional buying – and they are happy to take full advantage of this fact. It would seem they are intent on making the most of their new-found power in order to achieve major savings.
Buyers Flex Their Muscles
With all the timidity of salespeople bragging about deals made during the boom years, procurement managers and directors have been taking to the stand to boast of their accomplishments, such as:
- Cutting supplier costs in respect of management consulting services by 25-35%
- Cutting marketing costs by upwards of 35%
- Reducing capital spend from 7.5% to 3.5% of turnover for a multi million-dollar organization
Over the course of just one afternoon, we heard of savings totalling in the region of $4-5 billion being achieved in supplier costs by just a handful of buyers. These savings – the equivalent of the entire national output of several African economies combined – were the manifest result of buyers gaining the upper hand. With each dollar, pound or euro that is saved, the power and influence of procurement is further strengthened.
“It is either their profit margin or yours… Any money you leave on the table is the supplier’s profit.”
Buyers have grown increasingly aggressive in their pursuit of savings from suppliers. Many managers talk of the savings they manage to achieve as if they are a divine right, or even an obligation. As one manager puts it: “It is either their profit margin or yours… Any money you leave on the table is the supplier’s profit.” Clearly, increased power for the buyer means lower profit for the seller – it quickly becomes a win/lose situation.
How Can Sellers Redress The Balance?
Buyers may indeed now have the upper hand, but for how long is this likely to last? And more importantly: how can sellers go about regaining their lost power and ensuring they don’t remain easy prey for the aggressive buyer? Well, we asked several sales managers for their views, making note of their suggestions vis-a-vis redressing the buyer/seller power balance. Some of these suggestions were as follows:
- Step into the buyer’s shoes. Seek to better understand how he/she thinks, what is driving him/her and how the decision is likely to be made. Salespeople ought to be capable – if they put their minds to it – of anticipating much of what buyers will do.
- Be more prepared for all interactions with buyers – and especially for dealings with procurement
- Revise all aspects of your sales approach – from pre-qualification to closing – to reflect the new realities of buying
- Manage opportunities in the pipeline better. As a seller, you need to start thinking two steps ahead; you must be on the lookout for early warning signs, and should always be looking around the next bend. That way you won’t be caught off-guard so easily or often.
- Get involved earlier, always with a view towards influencing the specification or shaping the purchase (as opposed to simply waiting on the call to a competitive tender)
- Adapt how you sell to fit the new realities of how your customers buy, including the requirements of the buying process, the business case and the buying team
- Focus on more effective negotiation, with a particular emphasis on pre-negotiation preparation
- Stop relying on past relationships or past glory. Strive to become more proactive in guarding existing accounts, while always planning ahead for the possibility that they will go out to tender.
- Adopt an account development mindset, as opposed to one simply focused on account management. In other words, look to emphasize innovation and partnership.
- Stop acting like a salesperson, and start behaving like an expert or trusted advisor upon whom the buyer can depend
- You must be prepared to walk away, especially if you are either unwilling to be bullied by a buyer or determined to protect your margin. At the end of the day if the buyer doesn’t value your value, you have to walk.
It would be great to hear other peoples experiences.