How COVID-19 is Changing B2B Buying

The COVID-19 crisis has forever changed us. Social distancing requirements have changed buying trends and impacted businesses across the globe. Chief Visionary Officer Craig Zawada shares his perspective that these buying trends aren’t new, the crisis simply accelerated already shifting buying habits. Craig and Valerie Howard dive into the details of these new habits and explore the key findings from the COVID-19 B2B Buying Trends Report, a global study conducted by Hanover Research on behalf of PROS.

Highlights

[0:29]: Valerie explains how PROS worked with Hanover Research to get insights on the B2B buyer
[1:09]: Craig discusses the importance of addressing both the current situation and beyond
[1:51]: Valerie and Craig discuss the shift to digital, self-serve channels 
[4:20]: Valerie and Craig discuss how buyer preferences have changed and that 70% of those buyers have a preference for new vendors since the onset of COVID
[7:31]: Craig highlights additional research that shows 50% of buyers will buy from whichever vendor quotes first and that 77% of buyers believe their last purchasing experience was inefficient 
[8:48]: Craig talks about viewing pricing as a management function and the importance of assessing the buying experience from a customer’s perspective to make sure their expectations are being met
[9:34]: Valerie and Craig discuss the statistics around the number of buyers who have stopped working with their existing vendors all together
[12:00]: Valerie mentions an interesting statistic that 2 of 3 buyers in North America would actually switch to a vendor offering real-time, dynamic pricing
[13:33]: Craig talks about how science and algorithms can bring in the right data and attributes to ensure companies stay on target while providing market-relevant prices
[15:16]: Valerie lets everyone know where to find the full report if they’re interested in reading more about these findings

Full Transcript

Valerie Howard: Hi everyone and welcome to Coffee Chats with the PROS. I'm Valerie Howard Solution Strategy Director at PROS and I'm so pleased to be here today with Craig Zawada, our Chief Visionary Officer at PROS....

Craig Zawada: Hi Valerie.

Valerie Howard: Hi, Craig. Thanks for joining us. So today we're talking about some fantastic new research that PROS just released on the B2B buyer. We worked with Hanover Research and we surveyed about 210 purchasing and procurement professionals around the globe. We wanted to really understand how COVID was affecting their buying behavior and their buying preferences. So I know, Craig, you've had the opportunity to take a look and dive into this study, and really gain some perspective on what's going on how trends are changing amongst B2B buyers.

Craig Zawada: Great. Yeah, I think it was great research and it comes down to thinking of “where the puck is going”, where the market is going, and how buyers are changing. I think it's important to go with the perspective of not just solving the immediate issue, but “where do you want to go?” And if we focus on the buyer and what's changing, I think that will be indicative and prescribe what we should do in the pricing world to respond to that. And I think there's lots of implications and very major implications from a pricing perspective of how companies need to address the current situation and beyond.

Valerie Howard: Absolutely. It has definitely been a catalyst for change. So in the COVID-19 B2B Buying Trends report, you can find out more detail about perspectives across the globe. Today we're going to dive into a few specific stats and the first one on that is the shift to DIGITAL self-serve channels. It absolutely makes a lot of sense that when we were put into quarantine, when we were all and forced to work remotely or virtually, many buyers started to prefer and favor digital self-serve channels. With that perspective in mind, we went ahead and asked these B2B buyers, “where were you making your purchases?” And when it came to what they work favoring before COVID, 29% said that they were actually purchasing 50% or more of their goods through digital self-serve channels. But since COVID-19, that actually jumped up to 37% so that's about a 28% increase in a matter of weeks because this survey was run from May 28 to June 3. So, quarantine for a lot of the country, or in the world, hit around March for many people. So with that perspective in mind, those are pretty fast increases. In just a matter of weeks. And what are your thoughts on that, Craig?

Craig Zawada: Yeah, this was definitely…this goes into the category of an acceleration of existing trends. So, I think, we've been seeing this, as far as the movement, the preference for self-serve digital channels that's been happening over the last couple of years. And you just see a vast acceleration of this. And companies, you know, the ones that we're talking to are really being forced to do this. They need to make available pricing in the self-serve channels. And just to give you an example of this one distributor I talked to this week they said, you know, it kind of makes sense about 80% of their purchases and sales were repeat purchases from customers. So why do they need a long complex process where someone has to call and maybe negotiate back and forth when you can make this available in your self-serve channels? Unfortunately, a lot of companies aren't prepared for this right so in their self-serve channels, they'll put too high of a price out there and it's not relevant to the market now. And so I think this has huge implications from pricing, of how do you make sure that you’re relevant to the market in a self-serve frictionless way? So a lot of companies need to be prepared for this now and going forward.

Valerie Howard: Absolutely. So, our second data point discusses how buyer preferences have changed and how they're actually moving some of their wallet share. What we've heard is that about 70% are actually preferring a new vendor “Somewhat” or a “Great Deal”. And what's driving a lot of that is competitive pricing. Of course, the availability of supply – if a supplier can't provide the goods that a company needs – then they're going to have to go elsewhere. And then third, a better digital purchasing experience – to just what you said earlier, right? A lot of companies are moving to digital channels and so that experience in purchasing has been important to those that are shifting wallet share.

Craig Zawada: Yeah, Valerie. I agree. And I think this should be a wake-up call for a lot of companies, because, in the B2B world, a lot of suppliers, they sort of rely on stability, right? I have my existing customers. They've been with me for years. I need to stay competitive. But now what we're seeing is a lot of companies are just evaluating more. And whenever you have a purchase situation where companies are going to evaluate “What are the benefits of what I'm getting? What's the price relative to that?” You really have to be on target with that value proposition. And so, I think it is a wake-up call. To give you an example of this in the food service industry, I’ll share perspective on food service suppliers. They have restaurants that buy from them every week. But one of the things, historically, they've tried to do is, they call it, “Not get caught speeding”. So, you don't want to have a singular high price out there that will cause the supplier to then evaluate everything. And get down and really negotiate. And that's just an example, whenever you have a purchase occasion where there's an evaluation that happens, it's really important to be market relevant with your prices. And I think now, what's happening based on this research, you're saying that companies are increasingly evaluating supplier. So, it's really a time to be on target and make sure that you deliver on those benefits that are out there with the right price.

Valerie Howard: That makes a lot of sense. And, I think, in conversations that we've had over the last couple weeks, as well… what we've heard is that those vendors that were hesitant to enable a digital self-serve channel initially, they've actually had quite positive results. They're finding customers to be stickier and loyal – more loyal than they expected them to be to their digital channels. So, one of the reasons – or actually several reasons – why buyers are perhaps moving their wallet share is because they're somewhat frustrated with their existing vendors. And the top three reasons that they were expressing challenges with their current vendors were 1) slow and inefficient responses to their inquiries, 2) inconsistent pricing and then 3) a lack of transparency into inventory. These were the top three reasons why they were expressing challenges with their current vendors and perhaps considering moving some of that wallet share to other vendors.

Craig Zawada: Yeah, I think, Valerie. This also falls into the category of an acceleration of existing trends. So some of the research we did last year, show the increase importance of speed in response and this jives with other research that was done by Inside Sales. They found that over 50% of buyers will buy from whatever vendor quotes first and responds first. Gartner also found 77% of buyers called their last purchasing experience inefficient and noted there were problems with it. They didn't like the buying process. So again, I think this is a wake-up call, and it points to making the buying process a source of competitive advantage. So, traditionally, you have competed on your value, you know, the attributes of your product and your price, but the whole selling experience is going to be a new attribute by which B2B companies will compete on in the future. So I think, again, this falls in the category of acceleration of the existing trend. And the importance of getting pricing to deliver on that quick responses. You know, I see a lot of pricing organizations and groups have been built on viewing pricing as a management function. So I need to manage prices, I need to make sure I'm not making bad decisions. I need to protect margins and I really haven't had that lens of a customer perspective of, “How do you deliver a great experience”? And so I think speed and making sure that you have a relevant price is going to be an increase importance of competing in the future.

Valerie Howard: That's great perspective, Craig. Thanks for that. Yeah. So it seems like you need to be a lot more transparent, a lot more connected and in tune with your customers at a more rapid pace more dynamic sort of perspective on that. So the next statistic that we wanted to share with you is that, you know, in many cases, some buyers are actually having to stop working with some of their current vendors all together. And to the question of, have you stopped working with certain vendors, 45% answer that question with a Yes. And the primary reason was that two thirds of them found that certain suppliers were no longer available able to supply their expected goods or the goods that they needed. But then, quickly thereafter, other reasons that they're switching is for pricing and perhaps the inability to accommodate their payment terms or perhaps varied payment terms that they may need in this type of challenging environment. So what are your thoughts on the fact that some buyers are having to altogether switch for cases where perhaps pricing or payment terms aren't just accommodating for them.

Craig Zawada: Yeah, I think, Valerie that this points to one of the things that we've heard from companies is what I call “the Volatility Trifecta”. So, if you're a supplier you're faced with volatility in many cases on three dimensions: demand, competition, and cost, right? So, on demand, you have really large shifts in product mix that we've seen. So companies and buyers are preferring [different things], they're buying different things, product mix is changing, competition is changing. Some are trying to go after market share. Some are trying to protect margin. And on the cost side, you have issues of supply availability and it really points to this need of being able to maneuver in this environment smartly with pricing. To give you an example: we have a customer in hospitality supply and, in the past, sanitation products were a background item for them. Well, now it's a core item. And so, while you have to be able to respond to the supply availability, make sure you don't discount when you've got huge increases in demand without a lot of supply available in order to deliver on that promise. So, I think, what this is pointing to is, I call it: “You don't want to be judo-priced in the market.” You don't want competitors to help maneuver you because you know they have supply or you don't, or you have supply and you give too low of a price and you get rid of your supply immediately. So it really points to this idea of being agile with pricing to be able to read what's happening and be able to respond to it in this highly volatile environment.

Valerie Howard: Great point. And it really brings up our last statistic. What's really interesting here is that we found that buyer said and two out of three times in North America that they would actually switch to a vendor that was offering dynamically updated real time pricing. So what's interesting about that is that in a lot of cases businesses tend to believe that, you know, if they change pricing too often, that might actually scare away their customers or it might be confusing for their customers if they were changing price too often. But what we're hearing here is that it seems as though buyers are really appreciating when their vendors are in tune with the market.

Craig Zawada: Yeah, and Valerie. I think it points to the fact that there's a certain perception of objectivity with an algorithm. So, if you're doing a ride-sharing service and you may not like to pay surge pricing. But you understand that it's based upon availability of supply and high demand. And so, since you understand what that algorithm is based on, you may not be happy with the price but at the same time, at least you trust it. And this also, it comes down to: if you look at most pricing processes, you have to factor in so many different things and different people. The product managers, finance, the pricing group, sales in order to determine pricing and often that takes time and it's error-prone. But an algorithm really sorts through that if you can bring in the right data, the right attributes you could really ensure that you're on target and you're relevant in the market with your prices. And so, it gets back to some of the other things of why buyers are switching suppliers. You want to make sure that you're factoring in all these things to be relevant, and oh! by the way, they prefer that. If a lot of companies in the past have sort of hid the fact when they use science and algorithms to determine pricing. But actually there's some benefit to that, there's the perception of objectivity in determining those right prices and we know from our experience and the research that you don't have to have the lowest price, but if you're relevant if you're in the ballpark, but you're quick, there's a huge benefit to that in terms of volume. And you can also gain margin in the process.

Valerie Howard: Great perspective there. I love that perspective on objectivity and I would say also that drives a set of expected consistency, right? In pricing, while the price may not calculate to the exactly the same value, the fact that it is based upon calculation of or response to varied inputs, maybe competitive conditions, maybe relative to your negotiated price or the price that you last paid, those types of things. And that you are considering the perceived fairness from the buyer in managing a consistency or a consistent evaluation of that price I think is really valuable to buyers. So thanks so much, Craig. Thank you for your time today. Thanks for talking through all of this research with me. I'm really excited about what we're launching with this B2B buying trends report. So I hope that you, our audience, will check out that report. It's available on pros.com and we thank you so much for joining our coffee chat with Craig's a lot of today. Thank you, Craig.

Craig Zawada: Yes, thank you. Thanks, Valerie.

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