Buying Group Strategy

Concept Document

Prepared by

Max KirschnerMarch 2015

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Buying Group Strategy Contents

Slide Executive Summary 3What is a Buying Group 4Buying Group Benefits 5Strategy Benefits 6Graphic Representation of Some Buying Groups 7Pricing Strategy 8Working with Internal and External Resources 9Tactical Implementation 10-11Key Assumptions to Qualify 12Summary of Strategy Benefits 13Appendices 14-17

1. Information Resources 152. Info-Canada Data 162. Info-Canada List Cost Estimate 17

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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

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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

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Buying Group StrategyBuying 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 “group’s” 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

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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

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Buying Group Strategy7Boards of

Trade.Chambers of Commerce,

Municipalities Real Estate,Automobile, Franchisees & Distributors,Electronics,

Telecom

Health Care,Medical &

Dental Suppliers,Pharma.Service

Groups,Travel GroupsAffinity, Sports Buying Groups

Brand Name Retail Groups,

Insurance, Associations

Construction, trades,

Developers;Manufacturing

Planning Groups

Some Buying / Purchasing Groups

There are some 46K entities thatcan be consideredBuying Groups in Ontario(InfoCanada, appendix 2)

Buying Group StrategyValue-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

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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

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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.

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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

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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

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13Buying 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

Buying Group Strategy

Appendices

1. Information sources2. Info-Canada Data, Ontario Buying Group

sample3. Info-Canada cost estimate

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Appendix 1Buying 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

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Code Category Count Code Category Count Code Category Count154210 BUILDINGS METAL 141 641111 INSURANCE-AUTOMOBILE 125 804301 PODIATRISTS 465174101 MASONRY CONTRACTORS 566 641112 INSURANCE 3316 804922 PSYCHOLOGISTS 712179502 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 409503206 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 5542102 FOOD PLANS 9 734902 JANITOR SERVICE 1115 809904 HEALTH MAINTENANCE

ORGANIZATIONS4

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 7602101 BANKS 3118 799934 GUIDE SERVICE 205 836116 GROUP HOMES 239616201 REAL ESTATE LOANS 1396 799992 HUNTING TRIPS 1 861102 ASSOCIATIONS * 5007628207 MERGERS & ACQUISITIONS 5 801101 PHYSICIANS & SURGEONS 7659 861104 CHAMBERS OF COMMERCE 6

632402 HOSPITALIZATION PLANS-MEDICAL & SURGICAL

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801104 CLINICS 1620 869903 ORGANIZATIONS 492

637103 EMPLOYEE BENEFIT & COMPENSATION PLANS

216 802101 DENTISTS 5215 869909 ANIMAL PROTECTION ORGANIZATIONS

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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

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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 3Info-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.