Finding the Right Justifiers
Skip to content
Strategy Marketing Jul 7, 2014

Finding the Right Justifiers

In B2B sales, suppliers and purchasers can work together to streamline nonstrategic purchasing for the good of both parties.

Play Pause
Listen to this article 0:00 Minutes

Based on the research of

James C. Anderson

James A. Narus

Marc Wouters

There are purchases that keep purchasing managers up at night—the crucial products and services that contribute to a company’s ability to differentiate its offerings to its customers. These strategic purchases require attention, research, and resources. And then there are all the other necessary but undifferentiated, nonstrategic products and services they are responsible for purchasing. The ho-hum mailing supplies. The unsexy rebar. The sturdy, boring shelving units. Which is not to say that these purchases are not important for the company. But given their lower strategic priority, the purchasing process itself has to happen as efficiently as possible in order to benefit the company. So how does a purchasing manager decide which suppliers to count on for these nonstrategic products, and how do suppliers gain an edge in the process? The key is finding a useful extra to justify the purchase.

Add Insight
to your inbox.

The 80/20 Rule

According to recent research by James C. Anderson, the William L. Ford professor of marketing and wholesale distribution at Northwestern University’s Kellogg School of Management, and his colleagues James A. Narus and Marc Wouters, “we’re seeing that some progressive purchasing managers are starting to employ an 80/20 rule, where 80% of their time should be spent on the 20% of the items they purchase that are strategic” to the company’s business.

“That leaves only 20% of their time to purchase the remaining 80%—the nonstrategic items. So that means that they just don’t have the time or the knowledge to spend [on nonstrategic purchases],” Anderson says. “They may be making a purchase decision on these things only once each year or two, so they aren’t really keeping abreast of that item. They’re forced to buy a lot of things they don’t know much about.” This often leads to a “very cursory type of evaluation.”

To overcome this combination of time crunch and knowledge gap and make the right purchases, it is also important for the purchasing manager to involve the supplier as well as the product or service’s users in the process of identifying value-added extras. “[Purchasers] say, ‘the supplier may know more about that then we do, so let them suggest something to us,’” Anderson says.

He suggests that purchasers request “tiebreakers” to help them choose from among competing bids and allow them to justify the purchasing decision. “Going back to the finalists to ask, ‘Is there something more that your business might do for us, other than what we’ve asked for?’ is a way to have one of them stand out so they can make it an easy choice,” Anderson says. “This also makes it easily explainable to the rest of the business.”

A Better Tiebreaker

Interestingly, the winning response most often does not involve price concessions. In their research, Anderson and his colleagues set out to determine whether price concessions were the determining factor in suppliers winning business. “We did not hear a single purchasing manager in our research say they wanted the lowest price,” says Anderson.

There are several reasons why the lowest bid may not have much of an upside for the purchasing manager. “If they always buy at the lowest price, after awhile people ask, ‘why do we have these purchasing guys? We could have software that could do that,’” Anderson says. “Likewise, if they buy at lowest price and anything goes wrong, then it’s on them. ‘What were you thinking? You went for the lowest price and now we have this problem as a result.’”

Indeed, the researchers were surprised to find that price concessions have an unintended consequence. “If the supplier offers a price concession,” Anderson says, “this leads to more work, because then purchasing managers have to go back to the other finalist suppliers, give them a chance to reduce their prices, and then, having done that, they still have to return to finding a justifier: the one noteworthy extra that the other suppliers can’t, or won’t, supply.”

The most practical argument against a lowest-price offer, then, comes down to the decision of where purchasing managers put their resources. “Purchasing managers are looking to get in and out of these purchases quickly. They don’t want to have to start investigating why the prices are so low, particularly if it’s a supplier they don’t have experience with,” Anderson says.

The Next Justifiers

Once a purchasing manager narrows the options, what processes can they and their suppliers employ to find justifiers that add value to nonstrategic purchases? How can they build those processes into their purchasing? The answers are not so simple, given the nature of justifiers themselves.

Justifiers incorporating expertise may be more sustainable than justifiers that add simple operational efficiencies.

In today’s highly segmented marketplace, “you need more justifiers,” Anderson says. “They’re going to have to be more nuanced because it’s more segment-specific ideas. What works for a small-to- medium sized professional-services firm is different from a small-to-medium sized gear shop.”

In addition, Anderson and his colleagues found that justifiers incorporating expertise—such as manufacturing and cutting rebar so that it lies flat (making it easier for construction workers to handle)—may be more sustainable than justifiers that add simple operational efficiencies, like supplying parts with the customer’s own part numbers on the packaging. But by their nature, justifiers have a limited lifespan, as other competitors incorporate those extras into their own offerings.

Advice for Suppliers

Anderson has advice for suppliers hoping to woo purchasing managers, too. He recommends that suppliers focus resources on improving their capability to identify, provision, and deliver justifiers. This includes creating a framework where insights can be generated, for example, as a standard part of a quarterly account review, and then turned into processes.

In a Harvard Business Review article discussing their research, Anderson and his colleagues describe how the shipping company UPS “has reorganized its marketing and selling efforts around targeted industry segments such as health care, retail, and professional services, as well as U.S. regions with strong growth potential,” and has assigned field managers to each region and segment. This increased collection, combined with encouragement from the company’s headquarters to share findings, has resulted in justifiers that have helped the company win significant new business.

What suppliers should not do is assume that, because the purchase is nonstrategic for a customer, it should be treated as a commodity. “Then a commodity mindset kicks in. They think, ‘What’s the only way we can increase profitability for these items? Well, reduce cost. What’s the only way we can reduce our costs? Well, we can reduce the amount of time that’s spent selling these items,’” explains Anderson. “So they up the sales productivity measures such that the salesperson doesn’t really have time to have a real conversation with the purchasing manager about this.” Without building in those conversations, discovering what might help make the offering better for the purchasing company becomes more difficult.

Thus, in the end, Anderson’s advice for suppliers is not all that different from his advice for purchasers. Ask open-ended questions that encourage customers to mention ideas or elements that they would find helpful or attractive. Some of these may have been overlooked or even considered inherent parts of the manufacturing process. But investigating them further to provision a justifier may have clear value to the purchaser’s business—and it may just win you a customer.

About the Writer
Fred Schmalz is a writer and editor for Kellogg Insight.
About the Research

Anderson, James C., James A. Narus, and Marc Wouters. 2014. “Tiebreaker Selling.” Harvard Business Review. March.

Read the original

Most Popular This Week
  1. What Happens to Worker Productivity after a Minimum Wage Increase?
    A pay raise boosts productivity for some—but the impact on the bottom line is more complicated.
    employees unload pallets from a truck using hand carts
  2. 6 Takeaways on Inflation and the Economy Right Now
    Are we headed into a recession? Kellogg’s Sergio Rebelo breaks down the latest trends.
    inflatable dollar sign tied down with mountains in background
  3. How to Get the Ear of Your CEO—And What to Say When You Have It
    Every interaction with the top boss is an audition for senior leadership.
    employee presents to CEO in elevator
  4. 3 Tips for Reinventing Your Career After a Layoff
    It’s crucial to reassess what you want to be doing instead of jumping at the first opportunity.
    woman standing confidently
  5. How Offering a Product for Free Can Backfire
    It seems counterintuitive, but there are times customers would rather pay a small amount than get something for free.
    people in grocery store aisle choosing cheap over free option of same product.
  6. Which Form of Government Is Best?
    Democracies may not outlast dictatorships, but they adapt better.
    Is democracy the best form of government?
  7. When Do Open Borders Make Economic Sense?
    A new study provides a window into the logic behind various immigration policies.
    How immigration affects the economy depends on taxation and worker skills.
  8. Why Do Some People Succeed after Failing, While Others Continue to Flounder?
    A new study dispels some of the mystery behind success after failure.
    Scientists build a staircase from paper
  9. How Are Black–White Biracial People Perceived in Terms of Race?
    Understanding the answer—and why black and white Americans may percieve biracial people differently—is increasingly important in a multiracial society.
    How are biracial people perceived in terms of race
  10. How Has Marketing Changed over the Past Half-Century?
    Phil Kotler’s groundbreaking textbook came out 55 years ago. Sixteen editions later, he and coauthor Alexander Chernev discuss how big data, social media, and purpose-driven branding are moving the field forward.
    people in 1967 and 2022 react to advertising
  11. College Campuses Are Becoming More Diverse. But How Much Do Students from Different Backgrounds Actually Interact?
    Increasing diversity has been a key goal, “but far less attention is paid to what happens after we get people in the door.”
    College quad with students walking away from the center
  12. What Went Wrong at AIG?
    Unpacking the insurance giant's collapse during the 2008 financial crisis.
    What went wrong during the AIG financial crisis?
  13. Immigrants to the U.S. Create More Jobs than They Take
    A new study finds that immigrants are far more likely to found companies—both large and small—than native-born Americans.
    Immigrant CEO welcomes new hires
  14. Podcast: Does Your Life Reflect What You Value?
    On this episode of The Insightful Leader, a former CEO explains how to organize your life around what really matters—instead of trying to do it all.
  15. How Peer Pressure Can Lead Teens to Underachieve—Even in Schools Where It’s “Cool to Be Smart”
    New research offers lessons for administrators hoping to improve student performance.
    Eager student raises hand while other student hesitates.
  16. Why Well-Meaning NGOs Sometimes Do More Harm than Good
    Studies of aid groups in Ghana and Uganda show why it’s so important to coordinate with local governments and institutions.
    To succeed, foreign aid and health programs need buy-in and coordination with local partners.
  17. How Will Automation Affect Different U.S. Cities?
    Jobs in small cities will likely be hit hardest. Check how your community and profession will fare.
    How will automation affect jobs and cities?
More in Strategy