In the latest inquiry into what’s affecting B2B businesses, we recently worked with Hanover Research to find out how COVID-19 is affecting the purchasing professionals at enterprise businesses. This global survey of 210 purchasing professionals was conducted between May and June 2020. Results show that the impacts on purchasing activity have been mixed with 45% seeing slowdowns while 40% are actually seeing accelerated purchasing.
While only 3% of B2B buyers said that their vendors were so under-prepared that they had to seek new vendors altogether, two-thirds of purchasing professionals say that about half or more of their vendors were under-prepared when the crisis hit. The most frequently cited challenges in working with existing vendors were: 1) slow, inefficient responses; 2) inconsistent, highly variable pricing; 3) a lack of transparency.
- Slow and inefficient responses: As businesses shifted overnight to virtual environments, teams had to get comfortable not just interacting with customers virtually, but also taking back office processes that had historically happened in-person online. For B2B vendors that were already using tools like CPQ to enable sales to self-serve the process of configuring, pricing, and quoting, going virtual was likely no big deal. For those that were emailing around spreadsheets and waiting on product management to verify configuration compatibilities, virtual offices made it more difficult to run by the physical “Deal Desk” and seek some attention for their customer’s requested quote. 35% of respondents indicated that they were challenged by slow and inefficient responses from their current vendors.
- Inconsistent, highly variable pricing: Three out of ten purchasing professionals indicate that inconsistent and highly variable pricing is a pain point for them. We have to define the context within which pricing would be “consistent” in order to interpret what may be “inconsistent” for buyers. My belief is that these buyers were concerned that pricing fairness was not maintained as market conditions changed quickly. Within the same survey we inquired about what factors influence perceptions of fairness in pricing and the top factors included 1) competitor prices, 2) perception of value delivered in the past, and 3) adjusted to market condition such as supply and demand. Competitive prices and market conditions are more dynamic than ever in today’s environment, thus there are likely buyers who expect prices across competitive suppliers to be somewhat consistent – and then there are other buyers, who likely shop the market less often, who would prefer that their prices stay aligned to the “perception of value delivered in the past” – which may just mean what they paid last time.
- Lacking transparency into inventory: For purchasing teams that had to altogether replace their vendors, two-thirds cited that this was because supply had become unavailable. As noted in previous research on B2B buying needs, being proactive and transparent are essential to building long-term customer relationships. For many businesses an inability to communicate available inventory may have been a result of not having transparency into available stock at their own suppliers. What’s most important to customers is that any uncertainty is communicated proactively so that they have time to plan for disrupted supply. Unfortunately, three out of ten buyers felt that their vendors were not providing the desired transparency into inventory that they needed.
As a result of these challenges, 70% of buyers said that current conditions have compelled them to shift vendor preferences. According to their responses, these B2B buyers are moving wallet share to vendors offering 1) competitive pricing, 2) supply availability, and 3) better digital purchasing experiences.
- Competitive pricing: B2B buyers overwhelmingly prefer to maintain their relationships with existing vendors because they are more risk-averse than consumer buyers and because the B2B purchasing process is so gosh-darn difficult (according to Gartner, 77% said their last purchase was complex or difficult). However, today’s economic conditions are putting some businesses in dire need to unload inventory and driving them to unprecedented discounting. Businesses need to stay aware of their customers’ perception of the value differential between them and the competition. The risk of working with a new vendor becomes a worthwhile tradeoff for what was your customer at a certain drastically discounted rate.
- Supply availability: If the supplier can’t supply what buyers need, the buyer will have no choice but to go elsewhere and 39% of survey B2B buyers say this is why they’ve shifted wallet share. While supply availability may be inconsistent, it is key that vendors support their customers with transparency into inventory to allow for proactive solutions.
- Better digital experiences: The rate of B2B buyers favoring self-serve channels went up from 29% to 37% once the COVID-19 crisis hit. Forced into virtual work environments, it’s no surprise that procurement professionals increasingly sought self-serve channels to complete their purchases. While nearly all businesses have a digital presence, only a select few are delivering self-serve channels that effectively meet their buyers’ needs. Buyers indicate that the lack of inventory, realistic prices, and incomplete product information are their top challenges in purchasing online.
The shift of B2B buyers to digital channels is not a new phenomenon, but COVID-19 has accelerated the shift tremendously. For businesses looking to survive, COVID-19 has been a catalyst for accelerated change – a catalyst for investment in real, usable digital channels. No longer are “online catalogs” sufficient. Today’s B2B buyer expects frictionless experiences that allow them to autonomously complete their orders in just a few clicks and swipes.