Buying Benefits and Strategies

Four Types of Benefits in B2B Business

1. Tangible Financial Benefits

• Definition: Values that the seller can communicate and the buyer can verify readily.
• Examples:
  • Horsepower in engines.
  • Processing speed in computers.
  • Fuel efficiency in machinery.
• Key Feature: These benefits are measurable and verifiable, making it easier for buyers to understand their value proposition.

2. Non-Tangible Financial Benefits

• Definition: Values that the seller conveys but are not easily validated by the buyer.
• Examples:
  • Revenue increase through improved CRM software.
  • Enhanced profitability using advanced hardware.
• Challenges:
  • Buyers don’t typically calculate the financial implications of these benefits.
  • Sellers must tangibilize the intangible by:
    • Showing clear paths to benefits (e.g., increased repeat orders due to big data analytics).
    • Providing third-party reports or case studies demonstrating success.
    • Offering performance-based payment models (e.g., leasing, pay-per-use).
• Objective: Make the intangible benefits concrete by demonstrating their potential impact on the customer’s business.

3. Tangible Non-Financial Benefits

• Definition: Values that are difficult for the seller to quantify but are appreciable by the buyer.
• Examples:
  • Ease of use of a familiar operating system.
  • Reputation of the supplier.
  • International sourcing ensuring uninterrupted supply chains.
• Importance:
  • Buyers often reward these benefits with price premiums or preferred vendor status.
  • Although not directly tied to financial metrics, these benefits enhance the trust and reliability perceived by the buyer.

4. Non-Tangible Non-Financial Benefits

• Definition: Values that neither the buyer nor the seller can easily quantify in monetary terms.
• Examples:
  • Vendors exceeding contractual obligations, such as offering 24/7 maintenance.
• Challenges:
  • Buyers may not prioritize these benefits without clear proof of their value.
  • Sellers must tangibilize these benefits by:
    • Presenting past breakdowns and associated losses to justify the value of round-the-clock maintenance.
    • Highlighting potential savings or business continuity benefits.

Importance of Benefits in Strategy Development

1. Quantifying Benefits

• Regardless of the type of benefit, it must be represented in measurable terms:
  • Reducing costs.
  • Increasing revenue.
  • Avoiding losses.
• Sellers should clearly demonstrate how their offering aligns with the customer’s performance metrics.

2. Role of Salesmanship

• Key Tool: Personal selling is the cornerstone of B2B marketing.
• Process:
  • Providing detailed presentations and demonstrations.
  • Engaging in multiple rounds of negotiations.
  • Building long-term relationships with the customer.

3. Government and Tender Processes

• Typical Process:
  1. Advertisement of tender.
  2. Submission of technical and financial bids.
  3. Evaluation of technical qualifications.
  4. Selection based on the lowest financial bid (L1).
• Significance: Sellers must meet both technical and financial criteria to secure contracts.

Strategy Implications

• A clear understanding of benefits allows sellers to:
  • Convince customers by demonstrating how offerings solve specific problems.
  • Tailor value propositions to address tangible and intangible needs.
• Tangibilizing benefits and providing measurable outcomes ensures trust and facilitates decision-making.
• Personal interaction and sales engagement play a pivotal role in delivering and reinforcing the perceived value of these benefits.