This paper aims to shed new light to the role of customer’s potential down-side value factors in their buying processes. We seek to explore customer perceived risks and uncertainties that may rise the risk for sales cases to fail. To do so, we analyze a collection of customers’ experiences from recent business-to-business (B2B) sales cases. Much sales literature has focused on upside of creating value for the customer through salesperson’s actions, but less is known about the downside of how customers perceive their purchasing collaboration with salespeople. This study makes an empirical contribution to this discussion using 23 in-depth face-to-face interviews with business buyers, analyzed using qualitative methods. The study reveals that the perceived risks are essential elements of the business buyers’ behavior, and that customers often feel that salespeople don’t address them properly, thus creating de-constructive value experiences. Customers’ concerns about realization of risks in the implementation or use phase of the solution are hindering the progress of the sales case during the buyer’s buying phase. The findings point out categories of customer perceived risks that salespeople and sales organizations should consider to tackle more effectively already during the early phases of the sales process.
The recent sales and marketing literature emphasis the importance of value co-creation in buyer-seller interactions (eg. Haas et al. 2012; Terho et al. 2012; Töytäri and Rajala, 2015), but less is spoken about the expectations and experiences of buyers’ perceived risks concerning to the sales and buying processes. The concept of customer perceived risks and uncertainty become apparent in many ways from the sellers’ side during the sales process. For example, practically every experienced salespeople have met a situation where benefits are evident for the customer and value proposition has been mutually agreed, but the customer is delaying the buying-decision. The customers probable politely say that the offering and services are good, but we have to think about this yet. The customers in those situations may state some formal excuses and reasons for time-out, but the ultimate reason why the customers are still keeping sales case open remains mystery for the salespeople.
We argue that a reason for hesitation in the decision making process might be a perceived risk which is causing uncertainty to decision makers. This is especially topical in the purchasing decisions of complex industrial solutions and services, e.g. information technologies and software solutions, as buyers and users have gained several bad experiences from the failures of IT-projects (Flyvbjerg and Budzier 2011). The technological development is also causing business environment and services turning more complicated (Porter and Heppelmann 2015) which increases uncertainty for business buyers since there are more unknown variables, and thus more potential negative outcomes than before. The scientific research on customer’s perceived risks in purchasing processes was a hot topic especially in 1970s (Stone and Gronhaug 1993), but after 1990s there are less research done dealing with perceived risks and uncertainty. Furthermore, this challenging business environment is visible at the moment via the demands to salespeople. For example the effect of digitalization, increased global competition and market fragmentation may be seen already in B2B buying and selling activities (Spina, Caniato, Luzzini, & Ronchi, 2013).
Overview and objective of the research
The objective of the present study is to shed more light on the down-side of the B2B value selling approach as experienced by the business customers. Our study focuses on customer’s perceived risks and uncertainty from the viewpoint of B2B customers, involving professional buyers and business buyers. Especially, we aim at exploring and explaining how customer perceived risks may influence on success or failure of the sales cases in the complex B2B value selling environment.
The empirical part of this study describes how B2B customers speak about risks, how the perceived risks impact on their buying behavior, how the perceived risks occur in the interaction of salespeople and how perceived risks may lead to a failure of the sales case. This study contributes the value selling debate currently seen in the marketing and sales literature.
The perceived risk and uncertainty are a crucial part of customers’ buying behavior (Laroche, Bergeron and Goutaland 2003; Pfaffenberger 2000; Stone and Gronhaug, 1993; Sweeney, Soutar and Johnson 1999) and thus still valid though few studies are dealing with this phenomenon in the marketing and sales literature especially from the viewpoint of business-to-business (B2B) sales.
Buying behavior of professional buyers, executives or managers is not isolated from the human factors, where a feeling of risks or uncertainty are significant variables from the viewpoint of sales success. Various types of risks, such as financial, functional, physical, time and social risks have been identified in the literature (Laroche, Bergeron and Goutaland 2003). People do not make the same estimate when they evaluate risks but the level of perceived risks varies between people (Sjöberg, 2000; Tan 1999). In addition, the type of service business is associated with the level of perceived risks, as purchasing from the credence based service providers involves higher perceived risk than buying experience or search based services (Mitra, Reiss and Capella 1999). The buying environment is also associated with the level of perceived risk. Tan (1999) has shown that consumers have different perceived risk levels on the Internet shopping and in-store shopping, some consumers see the Internet shopping risker than the others.
Cambridge Online Dictionary (Cambridge 2015) defines the term of risk as “the possibility of something bad happening” or “something bad that might happen”. Stone and Gronhaug (1993) state that in the consumer behavior studies, focus has mainly been in the potentially negative outcomes of risks, whereas in other disciplines, such as in economics, psychology or statistics, risks is however concerned to both positive and negative risks. Perceived risks are also concerned to the concept of tangible and intangible products and services. Laroche, Bergeron and Goutaland (2003) pointed it out in their study that physical intangibility does not correlate with perceived risk, whereas mental intangibility was strongly associated with perceived risk. Consequently, according to their findings, the buying of services are not stronger involved to the perceived risks than buying of products, but the buying of unknown products is more risky than buying of familiar intangible services in terms of mental intangibility. Uncertainty as a concept prefers to the customer experience (Stone and Grønhaug 1993). Hence, uncertainty is rather emotional state or consequence of human experience than a factor which impact on the desired outcome.
Recent studies have also shown that the interactions between B2B buyer and seller may be either constructive or de-constructive (Echeverri & Skalen, 2011). It would be beneficial to have more knowledge of what kind of interactions form value experiences to the customer and when the customer experiences that initial interaction is constructive (cf. Echeverri & Skalen, 2011; Ford, 1980; Weitz, 1981). Some other studies suggest that the concept of customer perceived risk is more important in the fields where the buyers require knowledge intensive solutions and intangible services, into which the access is involved only after decisions are made (Edvardsson, Holmlund, & Strandvik, 2008; Nordin & Kowalkowski, 2010). In B2B service selling, there are often situations where buyers are not able to evaluate the solution prior to the purchase decision. Therefore, the satisfaction of B2B buyers’ expectations are worth of consideration. Day and Crask (2000) also suggest to include customer’s risk factors in the customer value phenomenon.
The interests of major part of scholars have been in value oriented debate and research in the last years (Galvagno & Dalli 2014). However, the customers also think about the potentially negative outcomes of purchasing decisions and they try to recognize and scan them during the sales interaction processes. For example, Sweeney, Soutar and Johnson (1999) have shown that customers’ buying behavior involves both perceived value and perceived risk and they are interrelated variables from the viewpoint of sales success. In other words, the perceived risk and perceived value are different sides of the same coin. Thus, both of them should be considered in the course of sales interaction.
To summarize, the extant literature recognizes the importance of customer perceived risks in professional sales. Yet, given its importance, it provides little answers on the role of perceived risks and uncertainty into the success of failure of the sales case.
Our methodology follows a typical inductive qualitative research structure (Eisenhardt 1989; Eisenhardt and Graebner, 2007). The data was constantly revisited based on emerging topics and themes, thus developing a theoretical understanding of the phenomenon. The benefit of the iterative process is to enable the building of a deeper understanding of the empirical material while conducting the research and simultaneously developing theory (Dubois and Gadde, 2002; Strauss and Corbin, 1998). In so doing we relied on the in-depth face-to-face interviews involving broad open-ended questions aiming to explore the customers’ personal views of how they think (how they make sense) and how they act when doing B2B buying. Interviews consisted of three parts: 1) interviewees’ personal role in purchasing and his/her own thoughts on purchasing, 2) detailed step-by-step discussion of recent sales/purchasing cases with which they had been involved, a specific focus on recent failed purchasing case as an example, and 3) thematic broad questions that allowed free space for informants to talk about issues that they felt were important (e.g. feelings in certain situations).
We used a sample of twenty-two (23) in-depth qualitative interviews with customers (Table I), including professional buyers and business buyers. The customer firms represented logistics, retail, education, consultancy services, as well as paper and machinery industries. The buyers’ roles are here divided into two distinct type of roles: business buyers (business managers/executives) and professional buyers (purchasing/sourcing managers).
Table I The buyer interviews
|Buyer company||Business sector||Number of business buyer interviews||Number of professional buyer interviews||
|Customer company 1||Logistic||3||1||4|
|Customer company 2||Retail||2||1||3|
|Customer company 3||Consultancy||2||2||4|
|Customer company 4||Construction||4||0||4|
|Customer company 5||Paper industry||0||3||3|
|Customer company 6||Education||3||0||3|
|Customer company 7||Machinery||0||2||2|
The analysis approach in this study was open ended and exploratory. A rigor qualitative data analysis includes findings that are done in the context of the setting for the case currently under inspection (Eisenhardt, 1989; Eisenhardt and Graebner, 2007). Understanding the whole situation benefits the research more than details regarding separate factors (Schutt, 2011). We applied a narratives analysis to identify patterns, similarities and differences (Abbot, 2008; Squire et al., 2008). When we compared buyers’ narratives of recent cases, we identified often repeated narratives, similarities and differences. In earlier research, for example, organizational studies have examined aspects, such as change, identity and strategy in terms of narratives and stories (Barry and Elmes, 1997; Brown et al., 2009; Reissner, 2011, Vaara, 2002); however, in sales studies, narratives have been less discussed.
We discovered that business buyers usually experience concerns regarding to the implementation and use phase of a solution proposal, and that they do evaluate them in their minds already during the sales negotiations. Moreover, many business buyers experience salespersons’ inability to address customer perceived risks properly. Buyers feel that they often need to figure them out themselves, or they need to teach and help salespeople to handle them collaboratively.
Business buyers tend to think that they main goal is to ensure the continuation of business operations while meeting the cost objectives and avoiding any risks to realize. Our data analysis of recent failed purchasing cases from 23 professionals revealed some repeating patterns of things of concern for professional buyers. Our data included a vast collection of examples of recent cases plus a detailed example of one failed case from each interviewee. Thus, based on our analysis, we suggest eight (8) typical categories of customer perceived risks and uncertainties that arose from the past failed purchasing cases. Therefore, these eight categories are issues that may seriously hinder the progress of a sales case also in the future. The table II below describes the issues together with an examples.
Table II. Categories of customer’s risk and uncertainty experiences arising from the past failed the sales case.
|Category||Description||Example customer’s quote|
|Salespeople offering standard solutions
|Concern of ending up buying something that does not fully match the needs||“We have bought, because of an active and strong salesperson, something that really didn’t fit for us that well…”|
|Lack of details in specifications||Lack of tech details rises risk of failure in implementation, causing extra costs and troubles||“The scope of the technical content was not well defined, leading to fighting afterword that who pays the extra costs. It means a loss for both parties.”|
|Unclear share of responsibility over the sales process||Roles and responsibilities not clear, leading to problems later in the implementation and use||“It became a hassle and debating on who does what and who should fix that and that…the responsibilities were unclear.”|
|Seller has little understanding and commitment for the implementation||Too high internal change effort to realize the benefits in practice||“The solution was nice and technically good. However, it finally failed because the management commitment etc. it’s very difficult to sell it here in the field….”
”Salespeople just didn’t understand how big effort it is to change our daily way of working”
|On-Time-Delivery requirements||Concerns of down-time due to possible delivery delays||“…the installation window is tight and we have to trust the supplier delivers exactly on time. It causes an expensive down-time that we can’t afford”|
|Irritating behavior or attitude of salesperson
|Negative feelings rise a fear of lack of support in the implementation and use phase later||”Nothing irritates more than a person who is arrogant, talks lot and doesn’t listen”
” So we’re talking about it on totally different levels. And when you tell them the value you are proposing does not correspond to it, they don’t understand it.”
|Security or environmental risks when implementing the solution in the plant||Concerns of security of employees, or environmental impact due to changing operations||“Suppliers usually don’t understand our security demands and how important it is for us. It is the number one thing. We have to teach and help them to handle these issues…”|
|Customer internal collaboration||Fear of social conflicts and lack of internal collaboration moving forward|
This study advances our knowledge base in terms of what types of customer’s perceived risks may influence on the failure of the sales case. Our paper increases understanding concerning the concept of perceived risk from the viewpoint of buyers. The positive outcomes (benefits, value) and negative outcomes (realized risks) are different sides of the same coin. The recent sales literature (e.g. Haas et al. 2012; Hohenschwert and Geiger 2015; Töytäri and Rajala 2015) has dealt with a relational value and value selling, but surprisingly little is known about value selling approach from the viewpoint of down-side issues having a role in customer’s world. To complement the extant knowledge, and based on in-depth interview data, we suggest various types of possible down-side value determinants that may lead to either a success or a failure of a sales case.
Our findings in this study point it out that the concept of perceived risk and uncertainty is an integral part of B2B customers’ value experience and buying behavior, and managing the uncertainty during the sales process and addressing potential customers’ perceived after-sales related risks during the sales process should be seen as the essential part of the professional sales work. It is not only increasing trust and credibility, but the buyers also expect that salespeople pro-actively show interest and commitment towards solution implementation in the customer’s sphere and the use phase of the solution.
The findings also demonstrate how the buyers believe that experienced salespeople differ them from the more novice colleagues. An essential features which make positive effect to buyers is the ability to ask relevant questions concerning to the perceived risks. The analyzes of interview data shows that the buyers expect that those salespeople who can listen to customers and ask the right questions will have a better understanding of the critical issues from the viewpoint of customers. Often, the buyers cannot clearly express their uncertainty, but they express them indirectly and emotionally. Therefore, questions are important tools to help the buyers conceptualize and define the perceived risks to form where they are easier to be solved or minimized. Making risks visible is a precondition for minimizing, removing or solving them, as the salespeople can only focus on the perceived risks that the buyers can consciously describe or indirectly indicate during the sales interaction.
To succeed in demanding value selling, salespeople should not only focus on demonstrating value upside, but they should put effort also to the down-side risks in the customer’s own value equation. Salespeople and managers may need to more observe, directly ask and then address customer’s risks and uncertainties, instead of trying to leave them out of attention hoping that positive optimistic value outlook is enough as such. Avoiding of raising perceived risks to the topic of sales discourse seems to decrease the trust and credibility of salespeople. The managing of perceived risks in the sales discourse have positive implications to the perceived value as it increases the success possibilities while deploying new solutions to the customers’ organization. To handle customer perceived risks properly, salespeople need to spend time to gain enough understanding of both the customer’s business and the organization, as well as own organization’s capability to tackle all the potential issues customer may perceive as a risk.
Limitations and future research
This study focuses to a beforehand selected industries and their customers with a limited quantity of respondents. When the study fills the definition of a case study, the results do not aim to generalize its findings to others industries or contexts. Furthermore, the findings of this study are relevant to be tested in other context, for example on in a wider buying context.
REFERENCES AVAILABLE ON REQUEST FROM ANY OF THE AUTHORS
Kaski, Timo, Dr, Head of R&D at Haaga-Helia University of Applied Sciences, Ratapihantie 13, 00520 Helsinki, Finland, +358 40 488 7594
Alamäki, Ari, Dr, Principal Lecturer at Haaga-Helia University of Applied Sciences, Ratapihantie 13, 00520 Helsinki, Finland, +358 40 510 2285
Hautamäki, Pia, PhD candidate, Principal Lecturer on Sales at Tampere University of Applied Sciences, Kuntokatu 3, 33520 Tampere, Finland, +358 40 415 6 827, email@example.com