If your most valuable customer had the chance to buy from another supplier, would they?
Of course not! You have the best product on the market. You have the best brand recognition. Your prices may not be the lowest around but you have a rock-solid relationship with this customer. You would walk through fire for them. No way would they leave you for a competitor, right?
Now let’s think about the customer’s perspective for a moment. Imagine, for example, that you’re a purchasing manager at a big industrial company. One thing you buy is widgets. In fact, you’ve purchased widgets from the same supplier for the past 15 years. This supplier has worked with you to alter specs when you needed them altered. This supplier has never raised the price of widgets beyond what you deemed reasonable. When you forecasted badly a few years ago, they didn’t up-charge to expedite a couple of shipments. Twice a year, they come out to visit you and take you to your favorite restaurant. In short, you have a great relationship with this supplier.
Now imagine that you get a call from someone you’ve never heard of, in a place 11 time zones away, and this person tells you that his company can supply you with widgets at two percent less than what you currently pay. Do you spend a lot of time investigating that supplier?
Your reasoning is simple: your existing supplier already takes very good care of you and, more important, is a known quantity. Does this other supplier have a support team that speaks your language? Do they understand your definition of quality? Will they ship on time to meet your production schedule? Will they stand behind their product? Will they still be in business five years from now? With a new supplier, there’s always risk. A two percent savings in price is often not enough to justify that risk, and it probably will not turn a purchasing manager’s head.
Now let’s imagine you get a similar call, from a different supplier. But this time, the supplier says they can offer widgets at a price 20 percent lower than your current price.
Do you spend some time investigating that supplier?
Of course you do. You’ll probably start with 15 minutes of online to research the company. You might try to find out if they make widgets in your size range or ask if they’d be willing to foot the bill for you to visit them on-site. If their claims appear to stand up, you might even order samples and run them through your quality control tests. In short, no purchasing manager worth his calculator can ignore a chance to save 20 percent.
There are lots of situations in the B2B world where brand, relationship, and reputation may stand up to a two percent price saving. But not many will stand up to a 20 percent price savings from a competing supplier, at least without some deeper analysis.
This is why it’s so important to think about value not just in terms of having a great relationship, “best product”, or brand recognition. Think about the sum total of what you offer. That includes all things that go into a customer’s experience: service, pre and post-sale support, technical support, or just knowing you’ll be there when they call with a technical question two years later.
Your value is always defined in relation to each customer’s specific needs, but it’s also defined relative to their next-best alternative. Just because you’re catering to an individual’s preferences (flying out to wine and dine them) doesn’t necessarily mean you’re providing value to their company that will keep your business relationship intact in the face of an aggressive low-cost competitor.
What matters most to your customers? Share your thoughts in the comments section.