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Buying Group Strategy1- Max

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MaxKirschner

This document outlines a strategy for establishing a buying group program in Canada. It defines what a buying group is and discusses the benefits for both buying groups and suppliers. The strategy includes developing pricing and implementation tactics, qualifying potential buying groups, and leveraging internal and external resources. The goal is to increase revenues and market position by providing favorable pricing and services to pre-approved buying groups.

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Buying Group Strategy Concept Document Prepared by Max Kirschner March 2015 1
Buying Group Strategy Contents 際際滷 Executive Summary 3 What is a Buying Group 4 Buying Group Benefits 5 Strategy Benefits 6 Graphic Representation of Some Buying Groups 7 Pricing Strategy 8 Working with Internal and External Resources 9 Tactical Implementation 10-11 Key Assumptions to Qualify 12 Summary of Strategy Benefits 13 Appendices 14-17 1. Information Resources 15 2. Info-Canada Data 16 2. Info-Canada List Cost Estimate 17 2
Buying Group Executive Summary What is a Buying Group Positioning a winning scenario Putting a framework around the opportunity with empirical information on buying groups in Ontario A sampling of some buying groups. Tactical implementation outline 3
Buying Group Strategy What is a Buying Group A Buying Group is responsible for sourcing and managing supplier contracts on behalf of a group of companies. Most organizations are responsible for buying 150+ different categories and those responsible for indirect procurement simply cannot handle that level of volume. In managing less strategic categories, like office supplies, office equipment, or safety supplies, (buying groups) allow the internal resources at these organizations to tackle more of those strategic, larger spends. Buying Groups see the strategic value in partnering with a pre- approved supplier for their specific needs 4
Buying Group Strategy Buying Group Benefits Working with a pre-approved supplier (open purchase orders, guaranteed quality standards, special terms of payment, etc.) Established re-order points for increased efficiencies Turnkey solutions; flexibility to address the groups needs Favorable pricing (better than individual company purchasing) Increased support and better account servicing Predetermined discounts based on contracted spend Committed volumes; spend reporting and analysis Improved delivery scheduling 5
Buying Group Strategy Vendor Company Benefits Higher revenue streams; forecastable based on agreements Separate line of business with a dedicated team Less Sales & Marketing costs: Working with a Group vs. Individual companies Develop an on-line portal specific for buying groups Contracted volumes of business spend, specific agreements Greater management of resources and account management Dealing with a single entity, streamlining support and delivery 6
Buying Group Strategy7 Boards of Trade. Chambers of Commerce, Municipalities Real Estate, Automobile, Franchisees & Distributors, Electronics, Telecom Health Care, Medical & Dental Suppliers, Pharma.Service Groups, Travel Groups Affinity, Sports Buying Groups Brand Name Retail Groups, Insurance, Associations Construction, trades, Developers; Manufacturing Planning Groups Some Buying / Purchasing Groups There are some 46K entities that can be considered Buying Groups in Ontario (InfoCanada, appendix 2)
Buying Group Strategy Value-Based Pricing Strategy (Custom / Dynamic) In Theory Price Points to be lower than regular B2B pricing by 10% + Buying Group minimum annual spend is $150,000 per group Incentive volume discounting Supported by business margins and profitability 8 Annual Dollar Spend Percentage Discount* $150,000 0% $200,000 1% $300,000 2% $500,000+ 3%
Buying Group Strategy Work with Internal Resources Marketing, to create materials for this market; Value Proposition development; positioning the message that partnering with a designated supplier / vendor, is a strategic decision Finance: pricing elasticity and financial triggers Contract management: processes and procedures Reporting and analysis, processes for this market Create a communication strategy; Social Media information sites for Buying Groups, on-line portal, segment and sub-segment strategies External Resources List managers on creating target lists of buying groups, e.g. Info-Canada Reach out to companies with similar strategies to determine best practices and success models 9
Buying Group Strategy Tactical Implementation Evaluate Buying Groups in Canada and alignment other markets, review best practices; establish a local prospect list Review online portals being used in regional markets, possibly mirroring them, work on IT requirements of buying groups; account set-up and processes Develop a contact strategy or rent/purchase the file records from Info- Canada; (perhaps the data can be downloaded into Salesforce.com) Work with Marketing: media opportunities, social media, collateral materials, market pricing and establishing auto-discounting Begin to qualify the top ten buying groups on the target list; needs analysis, custom opportunities; uncovering requirements, etc. 10
Buying Group Strategy Tactical Implementation, continued Develop a criteria-set to qualify which buying groups to go after as prime prospects Scoring metrics to evaluate the size of the business opportunity Group membership size and fees (if any) Membership hierarchy; parent company, partnership, etc. Type of businesses that are member companies Business revenue aggregate of the member companies Are they currently set-up to work with pre-approved suppliers Co-marketing and joint program opportunities to access group members 11
Buying Group Strategy -- Key Assumptions to Qualify Buying group programs in Canada are opt-in for the most part Estimated time from the negotiated signed agreement to the launch stage and communicating with members and realizing revenues can be longer than expected Direct contact to members are not allowed unless permission is given by the group management, which is the nature of buying groups in Canada Engagement of the group management to market the program to their members must be part of the equation There are Canadian laws against email marketing to companies without expressed permission 12
Buying Group Strategy Summary Increased volume revenues Overall increased profits Better competitive positioning Increased scope of business, industry visibility Market Value Proposition in products and services 13
Buying Group Strategy Appendices 1. Information sources 2. Info-Canada Data, Ontario Buying Group sample 3. Info-Canada cost estimate 14
Appendix 1 Buying Group Strategy Information Sources Info-Canada Next Level Purchasing; PurchTips - Edition #109, By Charles Dominick, SPSM David Clevenger, VP, Corporate United Group Buying, Innovate M Strategic Buying Group Consortium, UK Prime Advantage Buying Group 15
Code Category Count Code Category Count Code Category Count 154210 BUILDINGS METAL 141 641111 INSURANCE-AUTOMOBILE 125 804301 PODIATRISTS 465 174101 MASONRY CONTRACTORS 566 641112 INSURANCE 3316 804922 PSYCHOLOGISTS 712 179502 DEMOLITION CONTRACTORS 307 641122 INSURANCE-PLAN ADMINISTRATOR 1 804923 SPEECH & HEARING THERAPY 7 484101 TELEVISION-CABLE & CATV 70 651202 OFFICE BUILDINGS & PARKS 165 804924 PSYCHOTHERAPISTS 409 503206 CONCRETE BLOCKS & SHAPES (WHLS) 47 653108 REAL ESTATE MANAGEMENT 2179 805102 HEALTH CARE FACILITIES 3 508803 SHIP BROKERS (WHLS) 2 653118 REAL ESTATE 3312 805904 RETIREMENT COMMUNITIES & HOMES 1236 514102 FOOD BROKERS (WHLS) 317 729997 CONSUMER GROUP BUYING 2 806201 MEDICAL CENTERS 5 542102 FOOD PLANS 9 734902 JANITOR SERVICE 1115 809904 HEALTH MAINTENANCE ORGANIZATIONS 4 551102 AUTOMOBILE DEALERS-NEW CARS 1168 738919 BUILDING INSPECTION SERVICE 133 832259 HEALTH CARE INSTRUCTION 115 596102 INTERNET & CATALOG SHOPPING 413 738973 TELECONFERENCING SERVICE 12 836102 HOMES-ADULT 5 596301 PARTY PLANNING SERVICE 239 799915 BRIDGE CLUBS 3 836109 FOSTER CARE 7 602101 BANKS 3118 799934 GUIDE SERVICE 205 836116 GROUP HOMES 239 616201 REAL ESTATE LOANS 1396 799992 HUNTING TRIPS 1 861102 ASSOCIATIONS * 5007 628207 MERGERS & ACQUISITIONS 5 801101 PHYSICIANS & SURGEONS 7659 861104 CHAMBERS OF COMMERCE 6 632402 HOSPITALIZATION PLANS-MEDICAL & SURGICAL 18 801104 CLINICS 1620 869903 ORGANIZATIONS 492 637103 EMPLOYEE BENEFIT & COMPENSATION PLANS 216 802101 DENTISTS 5215 869909 ANIMAL PROTECTION ORGANIZATIONS 82 641106 INSURANCE-HEALTH & ACCIDENT 5 804101 CHIROPRACTORS DC 2110 874213 MARKETING PROGRAMS & SERVICES 424 641108 INSURANCE GROUP 253 804201 OPTOMETRISTS OD 1177 874216 EMPLOYEE BENEFIT CONSULTANTS 37 809907 HEALTH SERVICES 704 809911 MEDICAL GROUPS 2 874242 HEALTH CARE MANAGEMENT 1 832201 COUNSELING SERVICES 66 832202 CHILD GUIDANCE 4 874854 AUTOMOBILE-PURCHASING CONSULTANTS 32 832233 SUPPORT GROUPS 2 832239 HEARING IMPAIRED SERVICES & FACILITIES 38 16 InfoCanada Search Buying Groups (ON); Total: 46,744 *Boards of Trade are included in Associations Appendix 2
Appendix 3 Info-Canada List Cost Estimate Cost estimates on purchasing the Ontario listings from Info-Canada for buying groups is approximately $10K Full listing company name, full mailing address, contact name of a decision maker (where available), SIC code with description, telephone number, employee size, sales volume, credit rating, etc. 17

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Buying Group Strategy1- Max

  • 1. Buying Group Strategy Concept Document Prepared by Max Kirschner March 2015 1
  • 2. Buying Group Strategy Contents 際際滷 Executive Summary 3 What is a Buying Group 4 Buying Group Benefits 5 Strategy Benefits 6 Graphic Representation of Some Buying Groups 7 Pricing Strategy 8 Working with Internal and External Resources 9 Tactical Implementation 10-11 Key Assumptions to Qualify 12 Summary of Strategy Benefits 13 Appendices 14-17 1. Information Resources 15 2. Info-Canada Data 16 2. Info-Canada List Cost Estimate 17 2
  • 3. Buying Group Executive Summary What is a Buying Group Positioning a winning scenario Putting a framework around the opportunity with empirical information on buying groups in Ontario A sampling of some buying groups. Tactical implementation outline 3
  • 4. Buying Group Strategy What is a Buying Group A Buying Group is responsible for sourcing and managing supplier contracts on behalf of a group of companies. Most organizations are responsible for buying 150+ different categories and those responsible for indirect procurement simply cannot handle that level of volume. In managing less strategic categories, like office supplies, office equipment, or safety supplies, (buying groups) allow the internal resources at these organizations to tackle more of those strategic, larger spends. Buying Groups see the strategic value in partnering with a pre- approved supplier for their specific needs 4
  • 5. Buying Group Strategy Buying Group Benefits Working with a pre-approved supplier (open purchase orders, guaranteed quality standards, special terms of payment, etc.) Established re-order points for increased efficiencies Turnkey solutions; flexibility to address the groups needs Favorable pricing (better than individual company purchasing) Increased support and better account servicing Predetermined discounts based on contracted spend Committed volumes; spend reporting and analysis Improved delivery scheduling 5
  • 6. Buying Group Strategy Vendor Company Benefits Higher revenue streams; forecastable based on agreements Separate line of business with a dedicated team Less Sales & Marketing costs: Working with a Group vs. Individual companies Develop an on-line portal specific for buying groups Contracted volumes of business spend, specific agreements Greater management of resources and account management Dealing with a single entity, streamlining support and delivery 6
  • 7. Buying Group Strategy7 Boards of Trade. Chambers of Commerce, Municipalities Real Estate, Automobile, Franchisees & Distributors, Electronics, Telecom Health Care, Medical & Dental Suppliers, Pharma.Service Groups, Travel Groups Affinity, Sports Buying Groups Brand Name Retail Groups, Insurance, Associations Construction, trades, Developers; Manufacturing Planning Groups Some Buying / Purchasing Groups There are some 46K entities that can be considered Buying Groups in Ontario (InfoCanada, appendix 2)
  • 8. Buying Group Strategy Value-Based Pricing Strategy (Custom / Dynamic) In Theory Price Points to be lower than regular B2B pricing by 10% + Buying Group minimum annual spend is $150,000 per group Incentive volume discounting Supported by business margins and profitability 8 Annual Dollar Spend Percentage Discount* $150,000 0% $200,000 1% $300,000 2% $500,000+ 3%
  • 9. Buying Group Strategy Work with Internal Resources Marketing, to create materials for this market; Value Proposition development; positioning the message that partnering with a designated supplier / vendor, is a strategic decision Finance: pricing elasticity and financial triggers Contract management: processes and procedures Reporting and analysis, processes for this market Create a communication strategy; Social Media information sites for Buying Groups, on-line portal, segment and sub-segment strategies External Resources List managers on creating target lists of buying groups, e.g. Info-Canada Reach out to companies with similar strategies to determine best practices and success models 9
  • 10. Buying Group Strategy Tactical Implementation Evaluate Buying Groups in Canada and alignment other markets, review best practices; establish a local prospect list Review online portals being used in regional markets, possibly mirroring them, work on IT requirements of buying groups; account set-up and processes Develop a contact strategy or rent/purchase the file records from Info- Canada; (perhaps the data can be downloaded into Salesforce.com) Work with Marketing: media opportunities, social media, collateral materials, market pricing and establishing auto-discounting Begin to qualify the top ten buying groups on the target list; needs analysis, custom opportunities; uncovering requirements, etc. 10
  • 11. Buying Group Strategy Tactical Implementation, continued Develop a criteria-set to qualify which buying groups to go after as prime prospects Scoring metrics to evaluate the size of the business opportunity Group membership size and fees (if any) Membership hierarchy; parent company, partnership, etc. Type of businesses that are member companies Business revenue aggregate of the member companies Are they currently set-up to work with pre-approved suppliers Co-marketing and joint program opportunities to access group members 11
  • 12. Buying Group Strategy -- Key Assumptions to Qualify Buying group programs in Canada are opt-in for the most part Estimated time from the negotiated signed agreement to the launch stage and communicating with members and realizing revenues can be longer than expected Direct contact to members are not allowed unless permission is given by the group management, which is the nature of buying groups in Canada Engagement of the group management to market the program to their members must be part of the equation There are Canadian laws against email marketing to companies without expressed permission 12
  • 13. Buying Group Strategy Summary Increased volume revenues Overall increased profits Better competitive positioning Increased scope of business, industry visibility Market Value Proposition in products and services 13
  • 14. Buying Group Strategy Appendices 1. Information sources 2. Info-Canada Data, Ontario Buying Group sample 3. Info-Canada cost estimate 14
  • 15. Appendix 1 Buying Group Strategy Information Sources Info-Canada Next Level Purchasing; PurchTips - Edition #109, By Charles Dominick, SPSM David Clevenger, VP, Corporate United Group Buying, Innovate M Strategic Buying Group Consortium, UK Prime Advantage Buying Group 15
  • 16. Code Category Count Code Category Count Code Category Count 154210 BUILDINGS METAL 141 641111 INSURANCE-AUTOMOBILE 125 804301 PODIATRISTS 465 174101 MASONRY CONTRACTORS 566 641112 INSURANCE 3316 804922 PSYCHOLOGISTS 712 179502 DEMOLITION CONTRACTORS 307 641122 INSURANCE-PLAN ADMINISTRATOR 1 804923 SPEECH & HEARING THERAPY 7 484101 TELEVISION-CABLE & CATV 70 651202 OFFICE BUILDINGS & PARKS 165 804924 PSYCHOTHERAPISTS 409 503206 CONCRETE BLOCKS & SHAPES (WHLS) 47 653108 REAL ESTATE MANAGEMENT 2179 805102 HEALTH CARE FACILITIES 3 508803 SHIP BROKERS (WHLS) 2 653118 REAL ESTATE 3312 805904 RETIREMENT COMMUNITIES & HOMES 1236 514102 FOOD BROKERS (WHLS) 317 729997 CONSUMER GROUP BUYING 2 806201 MEDICAL CENTERS 5 542102 FOOD PLANS 9 734902 JANITOR SERVICE 1115 809904 HEALTH MAINTENANCE ORGANIZATIONS 4 551102 AUTOMOBILE DEALERS-NEW CARS 1168 738919 BUILDING INSPECTION SERVICE 133 832259 HEALTH CARE INSTRUCTION 115 596102 INTERNET & CATALOG SHOPPING 413 738973 TELECONFERENCING SERVICE 12 836102 HOMES-ADULT 5 596301 PARTY PLANNING SERVICE 239 799915 BRIDGE CLUBS 3 836109 FOSTER CARE 7 602101 BANKS 3118 799934 GUIDE SERVICE 205 836116 GROUP HOMES 239 616201 REAL ESTATE LOANS 1396 799992 HUNTING TRIPS 1 861102 ASSOCIATIONS * 5007 628207 MERGERS & ACQUISITIONS 5 801101 PHYSICIANS & SURGEONS 7659 861104 CHAMBERS OF COMMERCE 6 632402 HOSPITALIZATION PLANS-MEDICAL & SURGICAL 18 801104 CLINICS 1620 869903 ORGANIZATIONS 492 637103 EMPLOYEE BENEFIT & COMPENSATION PLANS 216 802101 DENTISTS 5215 869909 ANIMAL PROTECTION ORGANIZATIONS 82 641106 INSURANCE-HEALTH & ACCIDENT 5 804101 CHIROPRACTORS DC 2110 874213 MARKETING PROGRAMS & SERVICES 424 641108 INSURANCE GROUP 253 804201 OPTOMETRISTS OD 1177 874216 EMPLOYEE BENEFIT CONSULTANTS 37 809907 HEALTH SERVICES 704 809911 MEDICAL GROUPS 2 874242 HEALTH CARE MANAGEMENT 1 832201 COUNSELING SERVICES 66 832202 CHILD GUIDANCE 4 874854 AUTOMOBILE-PURCHASING CONSULTANTS 32 832233 SUPPORT GROUPS 2 832239 HEARING IMPAIRED SERVICES & FACILITIES 38 16 InfoCanada Search Buying Groups (ON); Total: 46,744 *Boards of Trade are included in Associations Appendix 2
  • 17. Appendix 3 Info-Canada List Cost Estimate Cost estimates on purchasing the Ontario listings from Info-Canada for buying groups is approximately $10K Full listing company name, full mailing address, contact name of a decision maker (where available), SIC code with description, telephone number, employee size, sales volume, credit rating, etc. 17