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User view - the
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User attitudes
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Choosing a supplier - the price factor
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What
are the factors that influence CAD/CAM users’ choice of suppliers?
How easily swayed are they by discounts? We interviewed 300 end
users to gain a snapshot of current attitudes.
Background
In the first issue of CAD
SPAGHETTI,
we reported on our research findings that nine out of ten CAD/CAM users
are not currently considering changing their supplier (How
loyal do CAD/CAM users feel towards their supplier?) –
This research revealed that once a good relationship with a
supplier has been established, the cost of their products and services is
not viewed by the majority of users as a key reason for remaining loyal.
Only one in five quoted price as a factor behind their decision to
stick with their existing supplier(s), compared to the half who cited a
good overall standard of service.
Selection
Criteria
So
what criteria do CAD/CAM users use when they do decide to choose a new
supplier?
The
table below summarises the responses of this sample when asked to name the
two most important factors they would look for when choosing a new
supplier.
|
Most
important |
Second
most important |
% of
respondents rating this among their top 2 factors |
| Price |
29% |
18% |
47% |
| Technical ability of
reseller/vendor |
23% |
24% |
47% |
| Availability of
support/service |
17% |
23% |
40% |
| Knowledge of
applications/market |
10% |
10% |
20% |
| Reputation of
reseller/vendor |
8% |
5% |
15% |
| Location/where
reseller/vendor is |
6% |
5% |
12% |
| Other factors |
5% |
4% |
9% |
| Delivery times |
2% |
8% |
10% |
BASE TOTAL = 276 (representing the nine out of ten who are not considering
a change in supplier)
| The interesting point
here is the proportion of users that now cite price as a key
factor - nearly half of them.
This represents nearly a 30% increase on the proportion who
named price as a factor for staying loyal to their current
supplier. Clearly
when the quality of service from a potential new supplier is
unproven, the importance of price is increased. Money
Talks
How
willing are CAD/CAM users to risk a drop in service quality for a price
discount?
We asked our full sample of 301 users how likely they would be to
purchase products (such as additional software licences) which would probably
require little technical support from a new |
Methodology
Telephone interviews were
conducted with 301 UK-based CAD/CAM users, representing a range of
industry sectors and company sizes. The term 'supplier' was
defined as the company that provides goods and support services to
the end user. For the vast majority of companies in our
sample, this meant a reseller or a dealer. |
|
|
| supplier
at varying discounts,
but in the knowledge that they would be likely to receive an inferior
overall service than they do currently.
The table below shows their reactions to being offered a 5%, 10%
and a 20% discount by a new supplier. |
Two-fifths
of CAD/CAM users say they are not very or not at all likely to accept even
the offer of a 20% discount.
This group corresponds to the same companies we identified in our
research into user loyalty to suppliers (issue 1
of CAD
SPAGHETTI) who
feel their supplier is the best available.
The
findings indicate that for a supplier to compete on price alone, a
discount of at least 10% is needed.
A third of potential new customers are quite or very likely to be
swayed by this type of saving.
Raising
the stakes
| How receptive are
CAD/CAM users to price discounts for purchases that are likely to
require greater reliance on the technical ability and overall
support from a supplier? We
asked our sample how likely they would be to purchase a new
CAD/CAM solution from a new supplier, but in the knowledge that
they would be likely to receive an inferior overall service than
they do currently. |
In responding to
this question our sample assumed that the same new CAD/CAM
solution was available from their existing supplier and the new
one offered discounted prices. |
Again
the table shows the reactions of our sample to being offered a 5%, 10% and
a 20% discount by a new supplier.
Surprisingly
nearly a quarter said they would be very or quite likely to consider
changing supplier for a 10% discount.
Just over two-fifths seem to be receptive to the prospect of the
(initially at least) substantial savings from a 20% discount.
However once again the presence of those users who declare
themselves to be wholly satisfied by their current suppliers shows up in
the just over two-fifths of those who said that they would be not very or
not at all likely to consider a 20% discount.
Conclusion
We
recognise that the users in our sample have given their responses to
hypothetical situations and that their actual behaviour may change when
confronted with the practicalities of purchasing new products/services.
However:
- These findings do provide an insight
into the proportions of users who are at least willing to
consider changing suppliers for immediate financial savings at the risk of
an inferior service. The proportion willing to take this gamble seems
high at first glance, but bear in mind our findings in issue
1 of CAD
SPAGHETTI
that nearly half of CAD/CAM users do not think they have the best
available supplier; they simply do not feel it is worth the effort to
seek a better one. The
offer of discounts might be able to shake this inertia.
-
While the discounts we asked our sample to
consider would be unsustainable at the higher levels, they do provide
a pointer to the size of discounts needed to attract new business,
perhaps for a short-term campaign.
- There
are implications here too for the different approaches that suppliers
can take to market to different segments of their customers. Our findings show that around two in five CAD/CAM users think
that their suppliers are the best available; we also know that good
overall service is their prime reason for staying loyal. Suppliers could identify who these customers are, and divert
more resources to selling additional value added services to them.
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