(By Ken Lambert) This topic, and lament, is nothing new- but it does appear that over the past several years things have gotten even more convoluted. Everyone in B2B sales knows what I speak of: The hurdles and delay involved with selling based on the “consensus buying decision” which is prevalent at most medium to large companies.
According to this 2017 article from https://www.roi-selling.com/blog/manage-consensus-buying-decisions , there are an average of 5.4 people actively involved in a company’s purchasing decision. This number excludes indirect persons like Accounting, Legal, etc.
Whenever I have been giving a sales presentation/demo to a buying group at a potential client, I often calculate just how much it is costing said company to have all these people in the room for that hour or 2 hours, etc. Let’s do a quick math exercise, even though the actual numbers of course will vary.
Assume 5 people will determine the purchase, and you must meet with them a total of 4 hours, over the course of 2-3 meetings. 5 x 4 = 20 hours. Let’s assume the average person in that meeting is making $65/hour (obviously some make less and some make considerably more). Add 30% burden on top of that wage rate; that would equal $84.50 per hour per person. The company may spend the 20 hours in a meeting with the service/product provider, but then internally they will need to discuss and review and try to arrive at a “consensus”. So let’s throw on another 8 hours; that then equals 28 hours x $84.50 which totals $2,366. But, this assumes that they only met with you. Of course that is not the case- they likely met with 1 or 2 other vendors. So we can add another 40 hours of meeting time. Now we are at 68 hours x $84.50/ hour = $5,746. This is the raw cost in this example; we are not talking about the fact that these 5 employees are not doing their main jobs and tasks during this whole purchasing endeavor.
I do realize that $5,700 is not an enormous amount of money, but I wonder if companies that are early on in thinking about a new product or service consider the needed money and TIME they will have to spend just to make a decision- never mind the implementation. Do some firms just say “Nah, just forget it; we are fine” because the popular “consensus” buying decision is needed or promoted?
I have 2 general issues with this current status.
One is the theory that a company needs to reach a consensus to make a purchase. Do we think that is a true consensus? If 5 or 6 people need to fully agree on Brand A vs Brand B or C, do we really think that these 5-6 folks are on the same page and like /need the same Brand?
Life, and business, has taught me that if you get a room full of people together and bring up a topic, you cannot get the 6 people to actually agree on anything that is debatable. Pick any 6 people off the street and lock them in a room and tell them they have to completely agree that chocolate ice-cream is better than vanilla ice-cream. It likely will get ugly, and I doubt if there will be a unanimous verdict. People may SAY that they agree, but it may be just to get out of the meeting and to move on with their day and their to-do list.
The other question I have is: Why can’t a VP or a Department Manager (etc) just make a decision and buy or contract Vendor A, vs. Vendor B? It just seems that there is a pervasive phobia of making a decision. We assume that the Departmental VP who makes $180k (??) per year is competent, and he/she knows his staff and knows the issues. Why does he/she need a team to make a decision? I understand that at many companies that is the protocol and the rule- but why?
Along with technical sales, I spent over 12 years working as a project manager. The precise industry is irrelevant, but any PM knows that most of the job is: making decisions. Every single day I, myself, made many decisions which directly effected the project and effected the fiscal (and other) success of my company. The President of the company hired me to use my discretion and knowledge, and general business sense, and make decisions. I’d estimate that 90% of the decisions I made on a weekly basis were fully my own; I did not clear them with anyone else- and I did not reach any consensus. One key reason was there was no time to attempt to reach consensus. But more than that, the C-suite trusted me to use my judgment. Sometimes I made a bad decision- that happens in business (and life).
To the larger firms out there- is there any desire or internal push to make buying decisions less complicated and less focused on team consensus? And similarly, is there a such thing as “analysis paralysis”?
This article is merely pointing out some general business observations, and is the work and opinion of Ken Lambert. This is not the formal stance of the Association.