Sellers' and Buyers’ Perspectives on Business-to-Busi- ness Selling: A Finnish case study Anni Piispanen Thesis Degree Programme in Modern Languages and Business Studies for Management Assistants 2014 Tiivis- telmä 14.11.2014 Johdon assistenttityön ja kielten koulutusohjelma Tekijä(t) Ryhmätunnus Anni Piispanen tai aloitusvuosi 2011 Raportin nimi Sivu- ja Myyjien ja ostajien näkökulmia yritysten välisestä myynnistä: Tutki- liitesivumäärä mus Suomesta 50+0 Opettajat tai ohjaajat Timo Kaski Opinnäytteessä keskitytään erityisesti uusiin asiakassuhteisiin ja siihen kuinka arvoa voidaan luoda ja välittää asiakkaalle myyntiprosessin aikana. Tavoitteena oli kasvattaa ymmärrystä yritysmyynnistä, myyntiprosessien dynamiikasta, sekä saada kattavampaa tietoa yritysten suhtautumisesta myyntiin ja tavoista muodostaa ja kommunikoida arvo- lupaus potentiaalisille asiakkaille. Opinnäytetyö koostuu teoriaosasta sekä empiirisestä osasta. Teoriaosassa tarkastel- laan arvon luomista yhdessä asiakkaan kanssa sekä asiakaslähtöisyyttä. Empiirisessä osassa tarkastellaan myyjien ja asiakkaiden näkökulmia arvomyynnistä. Tämä opinnäy- tetyö on toteutettu laadullisin haastatteluin sekä case-tutkimuksen kautta. Tutkimuksen kohteena oli suomalaisia, kansainvälisessä ympäristössä toimivia yrityksiä niin myyjä kuin ostaja puoleltakin. Tutkimuksessa pyrittiin selvittämään myyjien ja osta- jien mielipiteitä arvonluonnista ja sen muodostumisesta, sekä kuinka näiden kahden osapuolen näkemykset kohtaavat. Haastattelut paljastivat, että myyjien ja asiakkaiden näkemyksissä arvonmyynnistä ja muodostumisesta on samankaltaisuuksia, mutta myös eroja. Asiakkaiden näkemykset arvonmyynnistä ja muodostumisesta menivät syvemmälle henkilöiden väliseen dyna- miikkaan ja alussa muodostuneille intuitiivisille tuntemuksille annettiin enemmän paino- arvoa. Opinnäyte tarjoaa yrityksille materiaalia, jonka pohjalta yritysten on mahdollista tarkas- tella omia käsityksiään arvonmyynnistä uudessa valossa ja verrata omaa toimintaansa asiakkaiden käsityksiin. Asiasanat Yritysmyynti, arvonluonti, asiakaslähtöisyys, palveluliiketoiminta Abstract 14.11.2014 Degree Programme in Modern Languages and Business Studies for Management Assis- tants Author(s) Group or year of Anni Piispanen entry 2011 The title of thesis Number of report Sellers’ and Buyers’ Perspectives on Business-to-Business Sell- pages and ing: A Finnish Case Study attachment pages 50+0 Advisor(s) Timo Kaski Bachelor’s thesis examines new business relationships and how value can be created and conveyed to the customer during sales encounters. The object was to increase un- derstanding of value sales and the dynamics of sales processes as well as gain more knowledge on companies’ sales approaches as well as the ways companies create and convey customer value proposition to prospective customers. The study includes a theory section and an empirical section. The theory sections dis- cusses value co-creation and customer orientation as well as explains the differences between product and service sales. The empirical section focuses on sellers’ and buy- ers’ perspective on value sales. This study was conducted with semi-structured inter- views and case studies. Large Finnish companies that operate in international environ- ment were interviewed from both sellers’ and buyers’ perspective. The interviews revealed that there are similarities as well as differences in sellers’ and buyers’ perspectives on value sales and value creation. These different characteristics were then further analyzed. Buyers’ views on value sales and creation went deeper into interpersonal dynamics and first impressions were given more weight. Thesis provides material that companies may use to re-evaluate their own viewpoints on value sales in a new light and compare their actions to customers’ opinions. Key words Business-to-Business sales, Value creation, Customer orientation, solution sales Table of Contents 1 Introduction ................................................................................................................... 2 1.1 Background ........................................................................................................... 2 1.2 The Client ............................................................................................................. 3 1.3 Overview and objective of the research ................................................................ 4 1.4 Research Questions ............................................................................................. 4 1.5 Key words ............................................................................................................. 5 1.6 Structure of this thesis ........................................................................................... 5 2 Creating Value .............................................................................................................. 7 2.1 What is value? ...................................................................................................... 7 2.2 Value co-creation .................................................................................................. 8 2.3 Customer orientation ............................................................................................. 2 2.4 Customer Value Proposition .................................................................................. 4 3 The New Angle of Sales ................................................................................................ 7 3.1 Product sales versus Service sales ....................................................................... 7 3.2 Selling Value successfully ..................................................................................... 8 3.3 Advantages of selling value................................................................................. 10 4 Methodology ............................................................................................................... 12 4.1 Research methods .............................................................................................. 12 4.2 Questions ............................................................................................................ 13 4.3 Data collection .................................................................................................... 14 4.4 Data Analysis ...................................................................................................... 15 5 Results ........................................................................................................................ 18 5.1 How do sales people think create they value for their customers during the sales process? ..................................................................................................................... 18 5.2 What do customers want and value? .................................................................. 21 5.3 How well do sellers’ perceptions match customers’ expectations? ...................... 26 5.4 How could companies create more value for their customers? ............................ 29 6 Discussion ................................................................................................................... 31 6.1 Conclusions ........................................................................................................ 31 6.2 Further research suggestions .............................................................................. 34 6.3 Project thesis ...................................................................................................... 35 6.4 Learning process ................................................................................................ 35 Sources ........................................................................................................................... 37 1 Introduction During the past few decades business-to-business sales environment has changed dra- matically. Sales companies face new challenges when selling to their customers. Service sales have increased also in business as well as in the private sector and so sales companies need to adapt and find ways to sell non-material products and to create value for their customers in order to succeed in this new era. 1.1 Background In the most developed countries 75 % of the gross domestic product is from services and also most of the new positions are on the service sector. These numbers are based on statistics, which use the traditional division of the economy into three parts, primary, sec- ondary and tertiary productions. Finland is one of the developed countries and even though the service sector at the moment is a little below the OECD – countries average, the percentage is growing all the time. Another significant shift affecting the Finnish econ- omy is the shift in the export industry. Service is one of the new main exports of Finland. (Pajarinen, Rouvinen & Ylä-Anttila 2012, 6.) Partly this trend towards services is due to the global distribution of work. This means that companies distribute the different actions of the supply chain according to their own inter- ests. Production tends to move more often to emerging countries, such as China and In- dia, whereas the developed countries tend to focus on services. (Pajarinen et al. 2012, 7- 8.) Also, when looking the development of products’ unit prices, this distribution of work be- comes even more understandable. Producing commodities has become easier and the competition has tightened in almost all industries. Markets’ maturity and grown efficiency in production has driven down the unit prices and companies are increasingly forced to look elsewhere to maintain current growth in revenue and profit. In these deflationary mar- kets companies are in need of new, redefined strategies to differentiate them from compe- tition. (Kaario, Pennanen, Storbacka & Mäkinen 2003, 15.) Education, research, development and creating a brand are also services. They are also investments in the future. Services are company’s intangible assets, which create value for the customer and also differentiate the company from its competitors. Intangible assets are challenging because it cannot be seen on balance sheets and yet the value of Apple’s brand is estimated at 73bn euros. (Pajarinen et al. 2012, 13; Helsingin 2 Sanomat 2013.) Drawing a line between products and services is becoming increasingly challenging, it is not often even necessary and may be damaging. More often products and services are intertwined in one way or the other. A service may be an add-on to a product or services may form around a product, such as repair and maintenance. (Pajarinen et al. 2012, 22- 23.) As stated in the VTT Technical Research Centre of Finland’s report “Palvelut muokkaavat kaikkia toimialoja” (2009, 9) services are the supporting pillar for the new economy. The general trends across the economy substantiate the growth and development of services. The trends are as follows: - Global economy and the China phenomena - The change in population structure and the weakening of demographic dependency ra- tio in the developed countries - Increased consumption of energy and economical availability - The ecological factors and climate change as well as - Digitalization and new possibilities created by technology. The hype around services has not arisen out of the blue. Services offer new possibilities to companies, they can also be a way to stand out from the competition and way to ac- quire loyal customers. These opportunities arise from the unique nature of services – the competition cannot copy the service ratio. (Tuulaniemi 2011, 18.) Because services have become increasingly important aspect of sales, companies have become more interested in how to create value for their customers. There are companies that have excelled in their field of business year after year. These exceptions with their success have gained a lot of attention and interest from their competitors. These compa- nies have most often been companies that have mastered services and value creation for its customers. This again, has increased interest towards value creation. Another reason why creating value through services has gained a lot of attention and interest is the inten- sified competition in prices. 1.2 The Client The shift to more service oriented economy and the need for companies to differentiate themselves as well as the need to find ways to add value for customers are some of the reasons behind the MANIA sales research. This research started in the early 2014, runs 3 for two years and will be conducted by the HAAGA-HELIA University of Applied Sciences, Aalto University and the University of Helsinki. MANIA focuses specifically on interaction and value creation related to sales at individual and organizational level in business-to-business sales. MANIA aims to determine the role of emotions, hidden needs and incentives related to sales. The goal is that after the two- year research MANIA will have produced new scientific knowledge as well as enhanced methods and tools for companies to work with. (MANIA 2014.) 1.3 Overview and objective of the research Acquiring new customers and establishing new business relationships has not received the same amount of attention as value creation process in general. Thus, this thesis deals with value creation in business-to-business selling context. All the studied companies are multinational companies that offer professional service solutions to other businesses. Especially the focus will be on new relationships and how value can be created and con- veyed to the customer during sales encounters. The objective of this study is to increase understanding of business-to-business selling and buying dynamics through analysed data from both seller and buyer organizations as well as gain a better knowledge of com- panies’ sales approaches and their ways of crafting and communicating value proposi- tions to prospective customers. Typically, this topic is studied with focus on only the seller’s perspective. Therefore, this study also aims to increase understanding on the buyer’s side by also interviewing cus- tomers. This should offer new and relevant information from the buyer’s perspective. Due to the nature of the research questions, the study is conducted as a qualitative case study through narrative and themed interviews. 1.4 Research Questions In the conducted qualitative research and case study there were three questions this the- sis aims to answer and find explanations for. They are as follows: 1. How do sales people think they create value for their customers during the sales process? 2. What do customers want and value? 3. How well do sellers’ perceptions match customer’s expectations? 4. How could companies create more value for their customers? 4 1.5 Key words Business-to-Business – Commerce involving two companies Value – A relative worth of something Customer Value Proposition – A statement to the customer why a customer should pur- chase from a certain company. Sales – A transaction that transfers ownership of something from one to another. Seller receiving a monetary compensation Solution – Answer to a problem or a dilemma Value creation – Adding value to something. This may be seen as a rising monetary value but added value may also be sentimental. Trust – A strong feeling or expression of certainty Customers’ expectations – What customer believes to achieve by acting with the seller Tailored solutions – Personified products or services according to exact need of the cus- tomer. 1.6 Structure of this thesis This thesis has seven chapters and each chapter has a clear theme. The first chapter is introduction to the chapter. The second is the beginning of the theory section of this the- sis. Called “Creating value” it introduces the concept of value creation, explains what value is and gives an idea why value creation is so vital in b-to-b business. The third chapter is the second theory chapter of this thesis and it is called “The new an- gle of sales”, this chapter explains in more depth how sales as a concept have changed from product sales to services and what shift actually means. This chapter also explains what is concretely needed to success in value sales. The final part of the third chapter ex- plains the advantages of selling value a company may gain compared to its competitors. The fourth chapter goes on to explain the methodology used in this study. In this chapter the research methods are explained in more detail. The whole data collection process as well as data analysis methods are also explained in more depth. 5 In the fifth chapter all the research questions are answered with answers provided by the collected data. The sixth chapter gathers together the findings from the data as well as from the theory. After this the two aspects of this research are compared in order to see if there are some new findings or perhaps if there are aspects that could be researched more. The final chapter is called “Evaluation” and as the name tells, the chapter is mainly reserved for reflection about the thesis project. 6 2 Creating Value Very few B-to-B-companies can succeed and thrive without sales, which most often is the department that creates revenues. Sales situations are where the customer meets the prospective supplier. This interface is also the time, place and event where the customer’s expectations of delivered value are created. These situations are the opportunity for sales personnel to convince a prospective buyer of the solutions and value their company can deliver, in other words, to deliver the customer value proposition to the customer. On the other hand, these situations are also the time and place for the customer to decide whether a certain company can meet the customer’s needs and if the supplier has really grasped what is the essential need the customer has. 2.1 What is value? There is no unambiguous definition for the term of value. What is common among these different statements is the realization that value is proportional and subjective. It is related to what individuals or enterprises hold valuable and so there is no absolute value (Tuula- niemi 2011, 31). According to Merriam-Webster Online Dictionary (2014) the definition of value is: “1: A fair return in goods, services or money for something exchanged. 2: The monetary worth of something. 3: Relative worth utility, of importance”. By one definition the term is used when referred to the ratio between the benefit or gain achieved and the made sacrifice. Sacrifice refers either to the paid price, used time or the actions taken to acquire or achieve the wanted object. According to this definition value is the experienced usefulness by the stakeholders. (Tuulaniemi 2011, 31.) These definitions are similar but the more nuanced meaning is different in each. Another shortfall of these definitions is that they are inexact, ambiguous and cannot be measured. Value is a commonly used term in the business environment and several companies praise themselves for delivering value to their customers. (Soman & N-Marandi 2010, 29- 30.) As can be seen from above, value is not completely self-explanatory. Therefore, it is es- sential to understand the nuanced meanings of the term. Without this thorough under- standing it is difficult to understand the various drivers of value. Value is created through all the positive experiences a customer has in the buying process. Anything a customer 7