What is the difference between a deal or transaction based engagement versus a solution or value based engagement with a customer?
A deal based engagement focuses on immediate gains from that particular deal. Both parties try to maximise their returns in the short term and no energy and time is spent on developing the relationship for long term mutual benefits. It has characteristics of a commodity sale with low margin and high volume.
Compared to this, a value-based engagement depends more on long term gains. Organisations would typically let go off immediate returns to build trust and get repeat business. The idea here is to work as a consultant to the customers and design solutions as per their needs. Value based sale has the potential to impact areas beyond the scope and time of the engagement. Some of it can be quantified and some of it can only be guessed. There is a high degree of trust that needs to be built in accomplishing such a sale.
If there is a difference in the type of engagement, how is it linked to the associated mark-ups that a supplier may include in either of the transactions?
A deal-based commodity sale would be more price, discount and availability based. The products have low entry and exit barriers and hence are more competitive. You give a discount and push your product against competition. You largely sell on price, customer friendly terms and availability.
Whereas in a solution based engagement you try to create value for the customer. You might be designing a product or service and hence can charge a premium. It is a longer term sale that requires upfront investment of time and resources on both the customer side as well as the solution provider side. Research says customers are ready to pay upto 25% more for a better service.
From an end-customer point of view, what are the possible variances in satisfaction levels of deal based engagement and value based engagement?
Variance can be high in both the cases as satisfaction depends on so many things. In a deal-based scenario if the product is robust, pricing is competitive and after-sales service is good, satisfaction would be very high. On the other hand, if both product and service quality is poor, satisfaction levels would be low irrespective of the price paid.
Similarly, for a solution-based engagement, satisfaction is a result of experiences at all touch points with the organisation. An organisation can go completely wrong in understanding a customer’s needs and in designing a solution for the end customer. So satisfaction is a factor of how organisations perform at each touch-point in relation to the expectation of the customer.
Arti Gupta is Managing Partner of Lead On Consultants. They enable B2B organisations to deliver exceptional customer experience.