In the B2B world,* purchasing of products, services, and supplies is generally accomplished through competitive bids and proposals, but there are numerous variations on this theme, including partnering arrangements; sole-source awards; online auctions; and a host of purchasing laws, regulations, requirements, or practices within buying companies that dictate how purchasing will be managed, how bids are solicited and evaluated, and who makes the buying decision. The ideal circumstance for most buyers is an efficient decision-making process where they can evaluate qualified providers objectively and make rational buying decisions. In the real world, these decisions are almost never as rational as buyers believe they are, nor as they present to the outside world, despite supply chain managers’ attempts to make buying totally logical and fact based. As objective as buyers strive to be, they are invariably influenced by such factors as:
The Game of Chess is not merely an idle amusement. Several very valuable qualities of the mind, useful in the course of human life, are to be acquired or strengthened by it, so as to become habits, ready on all occasions. For Life is a kind of Chess, in which we have often points to gain, and competitors or adversaries to contend with, and in which there is a vast variety of good and ill events, that are, in some degree, the effects of prudence or the want of it. By playing at chess, then, we may learn,
I. Foresight, which looks a little into futurity, and considers the consequences that may attend an action; for it is continually occurring to the player, “If I move this piece, what will be the advantages of my new situation? What use can my adversary make of it to annoy me? What other moves can I make to support it, and to defend myself from his attacks?”
II. Circumspection, which surveys the whole chess-board, or scene of action, the relations of the several pieces and situations, the dangers they are respectively exposed to, the several possibilities of their aiding each other, the probabilities that the adversary may make this or that move, and attack this or the other piece; and what different means can be used to avoid his stroke, or turn its consequences against him.
III. Caution, not to make our moves too hastily. This habit is best acquired by observing strictly the laws of the game, such as, “If you touch a piece, you must move it somewhere; if you set it down, you must let it stand:” and it is therefore best that these rules should be observed, as the game thereby becomes more the image of human life, and particularly of war; in which, if you have incautiously put yourself into a bad and dangerous position, you cannot obtain your enemy’s leave to withdraw your troops, and place them more securely, but you must abide all the consequences of your rashness.
And, lastly, we learn by chess the habit of not being discouraged by present bad appearances in the state of our affairs, the habit of hoping for a favorable change, and that of persevering in the search of resources. The game is so full of events, there is such a variety of turns in it, the fortune of it is so subject to sudden vicissitudes, and one so frequently, after contemplation, discovers the means of extricating one’s self from a supposed insurmountable difficulty, that one is encouraged to continue the contest to the last, in hopes of victory by our own skill, or, at least, of giving a stale mate, by the negligence of our adversary.
Their subconscious biases formed by their exposure to the bidding companies’ products, services, industry reputation, and advertising
Their history with the bidding companies and their preconceptions about what they are likely to propose
Their relationships (or lack thereof) with individuals in the bidding companies
Their reactions to the bidding companies’ initial efforts to respond to the buyer’s needs
Their strategic sourcing goals and priorities and their perception of suppliers’ alignment with those goals
Their impressions, perhaps subconscious, about what solution their management, other executives, users, or their team prefers
Formerly when great fortunes were only made in war, war was a business; but now when great fortunes are only made in business, business is war.—Christian Bovee
It should be obvious from this list of buyer influence factors that the business development process in B2B companies does not begin with sales visits to potential customers or with requests for proposals. On the contrary, business development begins in a company’s strategic and business planning phase, where executives are asking the most fundamental of questions:
What business are we in? What value do we create?
Who are our customers? Which segments of the market should we target?
What are our objectives?
What are our priorities? How should we be organized? How can we most efficiently create our products or services and bring them to the market?
How can we attract buyers? How can we best communicate our value? What are our core themes and messages to the marketplace?
How can we create competitive advantage? What are our competitors doing and how can we differentiate ourselves from them? How can we position ourselves in the markets we serve to generate and sustain an advantage?
The answers to these questions drive many decisions: which products and services the company will focus on; where in the value chain it will seek to create differentiation; how it will focus its market communications; and, ultimately, which specific customers it will target and how it will attempt to get those customers. In business, as well as in war and chess, strategy always drives tactics, and those early, big-picture decisions provide the direction and energy behind how the company tries to position itself with potential customers. Positioning is crucial, as any advertising agency executive will tell you, because it forms those predispositions and biases that subtly influence buyers, no matter how objective they try to be. If positioning weren’t so crucial, then brand would have no asset value, but it does.
Indirect positioning occurs through advertising, trade shows, and other forms of marketing that reach the marketplace as a whole. Direct positioning occurs when sellers contact potential buyers, make sales calls, learn more about the buying company, build relationships with key people, and introduce their products and services. This positioning can occur before there are any specific sales opportunities. Once opportunities do arise, momentum builds rapidly—or should. Account managers begin a more focused pursuit—learning more about the customer’s needs, meeting with others in the customer’s organization, helping them think about how to solve their problems, and preselling the company’s solutions. Sales managers track the opportunities, solicit top management’s support, and bring in other company resources to help in the pursuit.
As we said earlier, in B2B business development the purchasing decisions are usually made through a bid and proposal process. At some point in the course of most opportunities, customers specify what they want and need and identify the companies that can supply it. They may or may not have worked with these companies previously. In some cases, they ask these companies to submit their qualifications, and they may narrow the field of possible suppliers following a review of each supplier’s qualifications (or “quals,” as they are often called). Later, customers write and release an RFP or some similar bid request document, which typically includes product or service specifications, criteria for evaluating suppliers, contract requirements, and guidance on how to prepare proposals. Once this RFP is released, suppliers generally have a response period ranging from a few days to a few months to prepare and submit their proposals.
After they evaluate the proposals, customers eliminate the suppliers they deem unacceptable—for technical, price, or other reasons—and create a shortlist of the suppliers who remain in contention. These suppliers are usually asked to present their proposal to a customer team, including the decision-maker and other advisors or members of the evaluation team. Customers already know what the short-listed suppliers are offering, so these presentations have little substantive purpose. They are primarily a chemistry test. In the customers’ minds are these questions:
Are you responsive? Are you answering our questions in ways that make us feel confident? Do you “get it” (including any elements of “it” not specifically discussed or specified in the RFP)?
Can we trust you? Now that we’re face-to-face with your team, do we like what we see?
Do we want to work with you?
In the best of circumstances, suppliers pass the chemistry test and are awarded the contract. Then the cycle begins anew as they try to develop more business. At any one time in most major B2B companies, account managers and salespeople are at various points in the cycle with dozens and perhaps hundreds of prospective buyers. When they manage the process well, they can win more than their fair share of work. Managing the process well means understanding that the business development cycle has distinct phases, as does the game of chess.