Value first, then price: the new paradigm of B2B buying and selling

Abstract

Most companies today take an inherently adversarial approach to buying and selling in industrial markets, thereby missing out on opportunities for joint value creation with customers and suppliers. Sales as well as procurement are too obsessed with price and not enough with value. In this paper we present a set of principles that put joint value creation at the centre of the relationship with customers and suppliers. With respect to customers, the value quantification capability is the most important competency of the sales function, i.e. the ability to translate a firm’s competitive advantages into one quantified, monetary value reflecting both qualitative as well as quantitative customer benefits. With respect to suppliers, we call for the creation of new metrics, such as total value of ownership, reflecting innovation, management capabilities, sustainability, and other elements beyond quality, price, and delivery. With value quantification capabilities (sales) and total value of ownership models (procurement) the key element of relationship with both customers and suppliers is value first, then price.