If you’re trying to use e-commerce in a B2B context, it is no longer safe to ignore the procurement role within your customers’ organization. At the moment you may be able to market and sell successfully direct to end-user customers, but not for long. The growing imperative for chief procurement officers (CPOs) to guarantee compliance with various external laws and internal policies is driving a much tougher stance on so-called rogue buying.
I’ve been studying the customer’s side of B2B e-commerce for a number of years. The clients I speak with work in procurement, finance, and the part of I.T. that supports those two functions. One of their most common questions is, “How can I prevent employees buying stuff from sell-side websites?” This used to be purely concerns about cost—they assumed that their e-procurement application would direct employees to approved suppliers who would, they believed, be the cheapest. Now, however, the bigger issue is supplier risk. Issues such as corporate social responsibility, conflict minerals, corrupt practices, data security, and so on, are forcing CPOs to be much tougher in preventing purchases from unapproved suppliers.
One way they are doing that is by switching to a new breed of e-procurement products such as Coupa, Sciquest, Verian and Zycus, whose usability is much closer to sell-side standards than their ERP-based predecessors. Older players SAP SE and Oracle Corp. have also improved their e-procurement usability via the acquisitions of, respectively, procurement technology company Ariba and site search provider Endeca. The CPOs will allow a few approved suppliers to control the shopping experience, but only via punch-out from the e-procurement tool. This is where, for a few selected items, the e-procurement software routes the user to a supplier’s e-commerce site so he can browse, configure and cart products, and then automatically returns the cart back to the e-procurement system for approval. Employees who go directly to unapproved suppliers’ sites may find themselves in trouble. “But I bought it cheaper/ better/ faster” is no excuse, because these compliance obligations allow no exceptions.
Illustration: In B2B commerce, different stakeholders have different views of the price/ utility balance.
What this means for online B2B sellers is that you will have to convince your customers’ CPOs to agree to let you be a punch-out supplier, or face increasing barriers to e-commerce sales. Customer traffic from search engines rather than punch-outs is likely to be rogue traffic, and relying on selling only to rogue buyers is not a good long term strategy. To earn the right to be a punch-out, you need to deliver a superior experience to the e-procurement platform for the end user and deliver additional value for the CPO. That could involve:
- Supporting down-buying, not up-selling, by better balancing price with utility. Shoppers care far less about price in a B2B context than they do when they are shopping for themselves B2C. However, the CPO is at the other extreme. The shopper’s boss who holds the budget (and is therefore your real customer) is somewhere in between (see figure, above). You need to help users balance price and utility—and prove that you have done so—in order to keep all three stakeholders happy. That means having a deep understanding of what utility means to your customers, and helping them find the cheapest item that meets their needs. I coined the term “down-buying” to describe this process, which is the opposite of up-selling. As an illustration, if I’m travelling to visit a client, my hotel chain’s website will show me the best and closest hotels but will also help me down-buy to cheaper properties that are good/close enough. Why do they do this rather than try to up-sell me to premium properties? Because travelers won’t use providers’ sites that don’t support down-buying.
- Supporting punch-in back to e-procurement, in addition to punch-out. By “punch-in” I mean routing shopping carts created on your site or in your mobile app back to the customer’s purchase system for approval, waiting to process the order until you have received confirmation from it. Punch-in is seller to buyer and back, in contrast to punch-out, which is buyer to seller and back. You can control the shopping experience without incurring the procurement department’s wrath if you can give them the visibility and control that they need. To support this, eProcurement platforms will soon have validation web services that act just like credit card validation services do today. They’ll also be able to trigger approval processes from emailed Hold notifications, just like tools such as Tripit and Worldmate do already with travel reservations.
Bottom-line: B2B e-commerce sites must work with corporate e-procurement applications, not ignore them or fight against them.
Duncan Jones is a vice president and principal analyst specializing in procurement technology and strategies at Forrester Research Inc. Follow him on Twitter @duncanwjones.Favorite