Buyer OCD: The Obsession With Lowest Price
More and more buyers are being diagnosed with Price OCD, or Obsessive Compulsive Disorder. It is causing increased anxiety even frustration among salespeople.
Buyer OCD is a diagnosis offered by salespeople who are witnessing first hand the ongoing buyer obsession with price and the compulsive; price checking, competitive tendering and price re-negotiation, that accompanies it.
…price checking, competitive tendering and price re-negotiation.
For sellers who are positioned on value, buyer OCD can be a real problem. It makes moving the conversation, or more to the point the negotiation, off price and onto value a real challenge. The result is that sellers margins are under sustained attack.
The Rise of Buyer OCD
‘Imagine that your mind got stuck on a certain thought or image… then this thought or image got replayed in your mind over and over again no matter what you did… then along with the thoughts come intense feelings of anxiety…’ That is how the International OCD Organization explains obsessive compulsive disorder.
Now replace the term ‘thought or image’ with ‘price’ and you can see why many sellers are calling the buyer obsession with price an obsessive compulsive disorder.
OCD – The Background
Buyers are inevitably going to be concerned with price, that is except in extreme circumstances (such as where there is an emergency requirement). But, for some buyers price can become an irrational obsession.
OCD or Obsessive Compulsive Disorder is a disruptive psychological illness which some studies suggest affect up to 2.5% of the population. But in an era of sluggish markets and slashed budgets OCD afflicts a much higher proportion of buyers.
…in an era of sluggish markets and slashed budgets OCD afflicts a much higher proportion of buyers.
People with OCD are often aware that their behavior is not rational but nevertheless feel compelled by it. That explains the pursuit of lowest price by many buyers who know that lowest price does not mean best value, or even lowest total cost of ownership.
Price – A Rational Obsession?
For many purchases (or categories of purchases) lowest price is all that matters and obsessing on price makes sense.
For other categories the oasis of lowest price is often a mirage. Short term savings, can obscure long term costs and non-price variables have a major bearing on making the right decision. In these cases obsessing on price is not rational.
There are exceptions however. For example sellers often don’t realize that the procurement professionals with whom they negotiate are incentivized to cut supplier price. Obsessing on price makes sense if cutting the seller’s income, directly increases the buyer’s income.
Short term savings, can obscure long term costs and non-price variables have a major bearing…
Research points to a range of environmental factors at play in OCD. For the buyer the environmental factors that result in price obsession include the absence of; a clear category strategy, or strategic procurement objectives.
There is no known cure for OCD in the general population, but a number of successful treatment options are available. The same is true of an irrational compulsive obsession with price. That means some seller psychotherapy is required, including counselling the buyer around price verus value and the total cost of ownership.
Implications For Sellers
The seller’s challenge is to move the buyer off price and onto value. The problem is that if as the seller you can’t communicate your value – all your value – price is where you are going to get stuck. But in dealing with numbers obsessed buyers you must calculate your value before you can communicate it – something that is discussed here.
…you must calculate your value before you can communicate it.
The seller must interrupt the pattern, when the buyer focuses on prices, he, or she must redirect the focus back to the total cost equation and more broadly onto the value equation. In particular re-focusing the buyer on the end result, or life after the purchase. This technique is what pyschologists call “thought stopping”.
Many sellers think buyers suffer from Price OCD because they are only being called to the table at the competitive tender or call for quotes stage of the buying decision. That may be as much as three quarters of the way into the decision. At that stage the buyer may only to be focused price.
The problem is that if you are only getting involved at the call to tender stage your ability to influence requirements and the specification is going to be limited. It can mean that the only variable left to compete on is price.
OCD is of course a very serious condition and building public awareness of the condition is important for those suffering from it. With that mind you can learn more about OCD from the International OCD Foundation or on Wikipedia.