Price plays a major role in B2B decision-making
As a VP of Marketing and Sales, I am constantly engaging my prospective clients and existing clients on factors that influence their decision-making process when it comes to selecting a vendor for business services.
Most people I speak with tell me that price is the first consideration, and often the most important, especially when comparing two or three vendors that can equally meet the service requirements.
Last week, I experienced this first-hand.
I received an email from one of my clients, who has been using our services for about a year. They informed me that they received an offer that was about 30% less than we charge for the “same” services.
Now keep in mind that our rates tend to be anywhere from 10% to 30% lower than most of our competitors – and when we won their business last year, we did so with a 20% cost reduction. We also demonstrated our capabilities with a free trial and we shared ten references with them so they ultimately selected us.
Since that time, we have received numerous emails from this client, singing our praises for exceptional customer service the likes of which they’ve never received from a background screening vendor.
But suddenly, with a lower cost offer on the table from one of our competitors, they’ve completely forgotten about the poor quality service they received from their old vendor and the exceptional service they’ve receive from us. They are toying with the idea of risking another negative vendor relationship for a 30% cost break.
Clearly, price carries a lot of weight with this company, which got me to wondering if any studies or surveys had been conducted recently that dig deeper into the psychology of the B2B decision-maker on this and related issues.
It turns out that a B2B marketing agency called TriComB2B commissioned such a study last summer. Partnering with the University of Dayton’s School of Business Administration, they surveyed 448 respondents from various sectors and verticals to help answer the following questions:
- Is total cost of ownership as powerful a message as we think it is?
- How do price, quality and delivery rank as purchase criteria?
- What does being a “preferred supplier” really mean?
- Are distributors a key information source for customers?
- How do safety, health and environmental factors rank?
For anyone offering B2B services, the information gleaned from this survey is extremely informative.
Most notably, about two-thirds of survey respondents indicated that 60% or more of their purchase decisions were dominated by the immediate purchase price. On average, price dominated in 64% of the purchases. There was no significant difference in response by decision role, industry type, age group or role in the company.
In order of importance, the factors that influenced a B2B purchase decision were:
- 87% emphasized Price
- 64% emphasized Satisfied Clients
- 60% emphasized On-Time-Delivery
- 58% emphasized Product Availability
- 52% emphasized Financial Stability
You can view the full report by clicking here:
This is pretty good news for companies that are truly the price leaders in their space (meaning they offer a product or service that compares equally with leading competitors, but they also enjoy a significant advantage on price).
As one of the top performing companies in our space, we also have a reputation for being a low-price leader. Where before, I had a strong suspicion that this was a key value proposition – this survey more clearly defines how much influence price carries with B2B decision-makers.
Will my client stay with us because we offer customized solutions with accurate data and rapid turnaround at competitive rates – or will they base their decision on price alone? The word is still out but I will keep you posted.
If you want to learn about key factors that influence the price of background checks, so you can negotiate significant cost savings for your company, the link below will take you to our latest eBook on this subject.