Bridging the Generational Gap of B2B Procurement

Millennials are poised to become the majority of the American workforce by 2016, and the supply chain should take notice. A new study from IBM reveals that millennials approach procurement decisions differently from their older colleagues. Whether businesses like it or not, these evolving buying habits will force firms to embrace new social media channels for sales, research and collaboration.

Millennials value collaboration

Born between 1980 and the early 1990s, millennials have had a lot written about them as a tech-savvy, hyper-connected, socially and environmentally conscious generation – and much has been written about how they are changing the workplace.

But less often discussed is how millennials bring these personality traits to their business decisions. The IBM Institute for Business Value surveyed more than 700 millennials, Gen X-ers and baby boomers who influence the B2B purchasing decisions of their companies to explore this phenomenon.

The results show millennials see things differently. Unlike baby boomers (born between 1964-1964), Gen X and millennials do not make decisions in insolation. Fifty-six percent of millennials and 64 percent of Gen X (born between 1965-1979) believe they make better business choices with the input of others. Following along those lines, the majority of millennials feel that team consensus is also important in the procurement process. Conversely, less than half of baby boomers consult their colleagues and even fewer seek their buy-in.

Data, Data Everywhere

Study author Carolyn Heller Baird, Global Research Leader in the IBM Institute for Business Value, wrote that “data is a key ingredient in millennials’ decision-making process.” Therefore, manufacturers and suppliers looking to attract the business of this demographic must have data and insight easily available. More than half (53 percent) of millennials surveyed by IBM cited analytics as helping them make better business decisions. Digitally native and Internet enabled, millennials are used to having information at their fingertips. More important than availability, the relevancy of information is considered crucial to millennials who want to be able to be quickly accessed on multiple devices.

Buying Habits

As consumers, millennials rely heavily on online and peer reviews. When shopping for personal needs nearly all read online reviews before making a purchase, according to research from AdWeek. Offline, this younger generation is influenced more by peers than direct marketing messaging. When choosing a product, 89 percent believe their friends’ comments more than companies’ claims. Word-of-mouth is also the most powerful tool of persuasion, as more than 90 percent of millennials bought a product after hearing about it from family or friends. Personal networks clearly carry a lot of weight in personal buying decisions. When it comes to business, millennials want to interact directly with vendors at the beginning of the sales process.

Hands On, Hands Off

In a business environment, millennials demonstrate a buying process a bit more complex than simply consulting a friend. Research shows that, more than Gen X or baby boomers, millennial buyers look for face-to-face communication when researching products.

But in the early stages of procurement, their most trusted sources are vendor representatives, trade shows and colleagues, not third-party websites, social media recommendations or friends and family. Baby boomers also value direct communication while researching products, but are more likely to trust articles and blogs written by external experts.

The information-seeking phase is led by face-to-face contact, but once millennials are ready to purchase, convenience becomes the No. 1 concern and in-person interactions become a burden – not a benefit. Buyers say they want sellers’ operations to reflect that.

Still, face-to-face meetings continue to be the dominant way all three generations interact with vendors. But when asked how they would like to communicate, millennials would prefer email and telephone communications and are open to virtual meetings using video chat and text messaging, including mobile apps like WhatsApp.

The importance of social media is expected to grow as younger millennials enter into decision-making positions in larger numbers. Younger millennials (ages 21-25) surveyed by IBM are already using social media to communicate with suppliers and manufacturers. Forty-one percent of young millennials are currently using social media to communicate, while only 18 percent of older millennials are using social tools.

The opinions of peers don’t affect millennials during the research phase, but when it’s time to buy, the Top 2 purchase influencers are data analysis and the recommendations of friends and family – just like in their personal buying habits. In contrast, neither Gen X nor baby boomers turn to personal networks. Instead, they look to personal experience to make the correct choice, research suggests.

Millennials also consider their personal experiences, but turn to data and recommendations first. This reliance on outside opinions can pose a challenge to suppliers and manufacturers looking to court millennial buyers. Supply chain professionals need to consider not only how their goods and services are perceived by potential buyers, but look for ways to extend their reach and positive impressions to the personal networks of potential buyers as well.

Online Reviews

As consumers, millennials share purchasing experiences online, both positive and negative. As B2B buyers, the group is extremely likely to share positive experiences directly on the websites of sellers, but is far less likely to publicly share when their expectations are not met. Less than 10 percent of millennials surveyed said they would post a negative review to a company’s website, social media profiles or third-party website. The survey’s findings point to the fact that millennials have firsthand knowledge of how quickly something can go viral. For workers still in the beginning of their careers, the satisfaction of venting is not worth the risk.

Gen X and baby boomers are also very likely to share positive reviews widely through various channels, but are twice as likely as millennials to share negative complaints.

A New Generation of Supply Chain Tools

The outdated systems currently in use across the supply chain won’t do. Modeling B2B sales channels after what millennials have become accustomed to as consumers is a good place for suppliers to start. Millennials value transparency and want to collaborate with suppliers and manufacturers. Communication is vital, but it must be convenient and easy. To keep pace with millennials, the supply chain must embrace technology. Millennials are looking for hassle-free, personalized, multi-channel purchasing experiences.