The Kinnek platform provides small businesses with a number of quotes for supplies and equipment they’re looking to purchase. Giving small businesses the ability to compare quotes could be seen as a potential margin shrinker for suppliers, especially in a market where prices tend to be pretty opaque. But this led us to consider how much price actually matters anyway.
We took a look at all the quotes on Kinnek since 2013 that resulted in a purchase, and found that the quotes with the lowest unit cost actually won only about 45% of the time.That was pretty surprising to us.
More importantly though, it indicated there was much more to a quote than simply price alone. We removed quotes the buyer marked as irrelevant, which mitigated some reliance on the sub-optimal price on fit between the buyer’s request and the quote itself. To gain deeper insight tho, we needed to understand just how varied winning quotes are in price compared to the cheapest quote.
Other Factors At Play
What’s plotted is the distribution of winning quotes by price difference. For winning quotes where the minimum quoted price didn’t win, it shows the probability (density) that the quote was a certain % difference from the minimum (0-100% shown).
Price is clearly important, but not as much as you might expect. A narrow peak around 0% would indicate winning quotes are pretty competitive on price with the cheapest quote, but the slow decline we see shows that other important forces are at work here as well. This seems to indicate there's a lot of room left for customer experience when it comes to determining which suppliers win business. We suspect the quality and level of detail of the the quote, in addition to logistics and customer support, are big determinants of buyer decision making.
Now I know what you’re thinking: “Oh give me a break, would you? You can’t compare a quote where the unit cost is pennies to one in the thousands of dollars. Two quotes for $0.10 per unit and $0.20 per unit will have a 100% price difference, but on an order of 500 units would only have a $50 absolute price difference. Another request may have two quotes for for $20,000 and $25,000 per unit for one unit, a 25% price difference. But $5,000 is a much more important consideration than $50 for an SMB.”
Good point - though you made it a little rudely. Nevertheless, it turns out if we look at that same statistic split between winning quotes over $1000 and those under $1000, we get fairly similar distributions. In fact, the more expensive items have an even broader price spread. Perhaps it's large purchases where price is even less important, due to the greater impact of making a bad purchase. This is an even stronger indication that the buyer’s overall experience should be considered, as well - not just the quote price.
Forget About the Price?
SMB aficionado Jessie J made a similar point in her 2011 hit about small business purchasing. And while we won't go so far in saying price doesn’t matter, a detailed quote and a bit of charm can certainly still take you a long way.
In our forthcoming posts, we’ll be looking more in depth at what it is that makes a successful quote on Kinnek. Stay tuned! Subscribe to our blog to get the latest Kinnek news.