Buying and selling are the most fundamental and important economic activities that people and businesses engage in. Yet they are often taken for granted, with little scrutiny of how these activities are conceived and conducted. Seldom asks anyone what the capability of buying or selling really is.
There are, however, discernible differences in the buying and selling processes, depending on the subject of sales transaction. Figure 1 depicts three archetypes of selling – transactional, consultative, and enterprise selling – as well as more detailed levels of selling and buying in terms of the leverage that the seller has and the focus of the buyer at each level.
Transactional Selling
In a transactional sale, the buyers are intrinsic value customers, looking for value in the product itself. Sales transactions typically pertain to fungible commodities or standardized products that hardly differ from each other. At the most rudimentary level, readily substitutable commodities are sold by cost-sensitive sellers to price-sensitive buyers, making the sale highly competitive (cf. Barnes et al., 2009). The salesperson has no opportunity to create value by expounding on product features or providing insights into the customer’s problems (Rackham and DeVincentis, 1999). For the seller, the best approach is to drive down costs, typically through standardization and economies of scale.
At the next level up, commodity components are combined or bundled to products or services that fulfill a specific operational function (Barnes et. al., 2009). The seller can levy a price premium based on differentiation in quality parameters such as packaging, delivery time, the distance to the consumer, the variety of products, etc. (Van Vrekhem, 2015). The product or service can be configured or adjusted to the customer’s requirements within pre-specified bounds. Buyers focus on product features, not just the price.
The highest level of transactional selling verges on consultative sales and is about solutions. These solutions are often built on a number of products and/or services that together provide a solution to the problem (cf. Barnes et al., 2009). The focus of the seller is on maximizing sales of a particular type of solution and increasing the market share in the respective segment. Buyers have a good-enough grasp of their problem so that they can seek a fitting solution to their needs.
Consultative Selling
In consultative sales, buyers do not have enough knowledge to make a sound buying decision. Either their understanding of the product is incomplete or they may not have fully defined their problems and needs. The seller can create value by shedding light on these hidden factors and adding insights into the customer’s problems.
The fourth level of sales transaction is about co-creation of value, wherein both buyer and seller actively partake in developing and customizing the solution and where this interaction is as important as the resulting outcomes. Sellers can create substantial value by helping customers gain new insights into their problems, understanding differences in the product/service choices, learning about a new category, and discovering unique value in a new solution.
Enterprise Selling
The enterprise sales mode is a complex selling process that requires a deep understanding of the customer’s needs and a long-term commitment from both parties. In enterprise sales, the strategic interests of the buyer and the seller (i.e. the customer and the supplier) are aligned, and the focus is on creating mutual value across multiple functions. This mode is appropriate for large and strategic B2B sales in circumstances where there is substantial mutual benefit and alignment of strategic interests.
The first level of enterprise sales is about value proposition. A value proposition articulates the essence of a business, defining exactly what the organization fully intends to make happen in the customer’s life (Lanning, 1998). It goes beyond the features and benefits of a product or service and focuses on the broader strategic benefits that the seller’s organization can bring to the customer in a given field of need. What drives the buyer’s decision is the fit of values of the seller and the buyer. The seller’s leverage lies in its strong brand identity – the conspicuousness of what the organization stands for.
The next level of buying and selling pertains to ”value platform,” which involves a seller’s ability to provide a comprehensive platform that caters for multiple fields of need that share a common ground. This platform appeals to a buyer’s fundamental motives or drives and provides a coherent response to the way the buyer gives meaning (cf. Van Vrekhem, 2015). At this level of complexity, the seller differentiates itself through tangible societal contribution. The buyer’s major concern is the fit of its own platform with that of the seller: are they mutually reinforcing and aimed at the same purpose?
In the most abstract sense, one can argue that there is even a higher level of buying and selling that pertains to universals in the global trade ecosystem. The question here is whether the seller and buyer subscribe to the same metaparadigm – a common set of values, theories, principles, concepts and ideas that underlie how the economy should work. The buyer is attracted to the seller whose espoused metaparadigm is congruent with the universals that the buyer embraces.
Invest Enough in Right Customers
So what is the relevance of the levels of buying and selling? First of all, each consecutive level of sales transaction requires a progressively higher investment (of time, money and resources) from both the seller/supplier and the buyer/customer. Ideally, the supplier's investment in the value-add is reciprocated by the customer’s investment in exploring the solution space (see Figure 2 below).
In case of commodities and highly standardized products, the transactional mode is optimal, as the customer knows what it wants, and the supplier is not wasting its resources to embellish its offering. However, if the customer tries to apply the same mode to buying something more complex that would require co-creation with the supplier, it is not learning enough to make an informed buying decision, and the supplier is wasting its resources in trying to educate the customer.
Similarly, the customer may be ready to engage in co-creation with the supplier, but the supplier is selling its complex offering in a transactional way, rendering it vulnerable to competition that is more attuned to the customer’s idiosyncrasies. These discrepancies are further exacerbated in case either party is looking for a trading partner that matches it in terms of values or purpose. A value-seeking customer does not resonate with suppliers without a value proposition, and a supplier going to great lengths to court its price-driven customers is haemorrhaging its resources.
In case of customized one-off solutions, the best mode of sales is consultative: both the supplier and customer invest in elucidating the customer’s problem and finding an optimal solution thereto. This mode, however, fails to reach a more strategic supplier–customer relationship. When the customer is not a strategic buyer or the supplier not clearly articulating its value proposition, the disparity results in over-investment by the supplier or in competitive vulnerability, respectively. Only when both parties are duly investing in a strategic ”shared destiny” relationship (Ghoshal et al., 1999), can the enterprise sales mode really work.
References
Barnes, C., Blake, H. and Pinder, D. (2009). Creating and Delivering Your Value Proposition: Managing Customer Experience for Profit. Kogan Page.
Ghoshal, S., Bartlett, C., and Moran, P. (1999). A new manifesto for management, MIT Sloan Management Review, April 15.
Lanning, M. J. (1998). Delivering Profitable Value. Perseus Publishing.
Rackham, N. and DeVincentis, J. (1999). Rethinking the Sales Force: Redefining Selling to Create and Capture Customer Value. McGraw-Hill.
Van Vrekhem, F. (2015). The Disruptive Competence: The Journey to a Sustainable Business, from Matter to Meaning. Compact Publishing.