webinarsbuying-groups-chapter-1-what-is-a-buying-group eCommerce What is a Buying Group? A Buying Group Definition for Businesses Updated January 19, 2024 | 7 min read Ron Halversen, vice-president of sales and marketing at Clarity Ventures, answers the question, "What is a buying group?" Part 1 of a 12-part series RON HALVERSEN: Hi. Ron from Clarity. This webinar will be the first in a series of about a dozen or more short webinars covering buying groups. We'll cover defining and creating groups, features and benefits of a buying group marketplace, the marketplace technology, and much more. So to kick this off, let's start with defining, "what is a buying group?" Well, a buying group is a collection of people that qualify by some feature, membership, or similarity to get a benefit from a vendor for belonging to that group. For example, my parents always banked at the credit union, getting low rate loans and no fee credit cards because both of them were college professors. My uncle gets free healthcare at the VA since he served in the military. And me, I get free two-day shipping with my Amazon Prime membership and I get more cookies than I need with my Costco membership and its bulk-purchasing benefit. So as you begin to consider the needed functions and features to building your marketplace, buying groups can be a very lucrative solution to look into. Essentially, a buying group is a set or a group of people that receive some sort of benefit by purchasing goods with a vendor on your marketplace platform versus buying retail somewhere else. So what are the basics of selecting our buying group? First off, we need to decide who would be interested in the products and services we're selling. Once we understand the who, now we start thinking about, "can these potential buyers be segregated into groups that we can then market to, to drive more sales?" So we start by defining the different grouping characteristics. For example, if we were selling tools on our websites then contractors would be the most obvious buyers. But plumbers could be their own group, electricians could be a group. And you can see how it would be easy to differentiate them and sell and market different tools to each of those two groups differently. Next, we have to decide how we're going to sell to these groups. Is at one big marketplace with all tools to make it easier to market to everyone in construction? Or do we segregate the storefronts into a plumbing store, an electric supply store, a lumber store, and then market to those groups individually? Also, do the potential buyers see themselves in the same groupings or the same way you do? Do handymen think of themselves as plumbers, electricians, neither or both? Finally, how does a buyer sign up for the group benefits? For example, my parents had to show their teaching certificates when they opened their account at the credit union which is how they qualified to sign up. What will be your verification process for your buying group or groups on your marketplace? So now that we have our groups and our group buying software, how do we increase our sales and conversions by using and selling to buying groups? Well, in my opinion this is the best part of having a buy group marketplace in the first place. Consider how difficult it is for Amazon developers to know what changes they can make to their website that would either help or hurt their sales. I mean, they're literally selling to every person, company, size, and country. They have to be so careful that any changes they could potentially implement that would increase sales for direct consumers could potentially hurt business accounts. But you don't, that's part of the reason you build a buying group marketplace. It allows you to analyze and make adjustments to the user experience directly targeted at your specific groups' behavior and buying patterns. For example, do your sales happen mostly after the 15th and 31st of the month right after the contractors get paid? Well, then you could either run your promotions around those dates right before then to get them excited and ready to buy and capture more of that money that's burning a hole in their pocket when they get paid. Or you potentially run the sales opposite those times because they're going to spend anyway, and if you run them in the off times during the month, that could help level out your sales throughout the month by offering promotions in the middle of the month. Again, your choice. Just knowing their buying patterns helps you come up with the different strategies to use to help increase sales. Knowing and understanding your buying group helps you be more intelligent about how you're going to market to that group and which media channels to use. Home businesses love Pinterest, contractors don't. So why spend time building a huge Pinterest presence if your buyers don't use it? Selling goods versus services can also require different features and strategies. Selling on account can increase sales dramatically. Providing self-service reordering, invoicing, purchasing on account, payments and more can positively affect buyer conversions and loyalty. So knowing how your buyers search, purchase and reorder your products and services can help you define what features we add or remove from your marketplace. So the next step is to talk about those features that are designed to help your buying group specifically. One very important feature of a buying group marketplace is the granular access that can be defined. Since a contracting company may be a part of the group, how easy is it to add workers to be able to purchase on that company's account? Does your team have to do that for every single person or does the group buying platform allow each organization to add and manage their own members? Do their users get the company discount but they can't purchase on the company account? Or does it allow them to purchase up to $500 a month on account but anything larger than that gets forwarded to a procurement manager for approval on the B2B procurement platform? What about the catalog? Well, most buying groups that get a discount on products know what they want. So does the platform allow them to easily reorder what they ordered last month? Can they simply type in a SKU, select a quantity and add to cart for a hundred different SKUs? How do they find pre-owned tools that are used with less than a thousand hours of use on them? Products and services displaying and buying experience can be very different for buying groups. The chosen marketplace platform needs to be extremely customizable. What about collective buying? If you offer a price break at a hundred units, can the members combine their orders to get the discount? If you say no, what if they all work for the same company organization? Could one of those users share their checkout cart with others and so on so they can all add to it? That way they can increase the sales discount that the buying group would have as a benefit. Can a procurement manager purchase 20 seats to a training course then assign the different users to those seats and the platform automatically notifies all the users that a course was purchased on their behalf? And finally, to close out this webinar, is it easy for a potential member to know if they qualify to join the buying group in the first place? And is the process easy to join and be verified? Our experience has shown that if you lose them at the signup process it's most likely that you've lost them for good. Consider ways to allow organizations to add their own members or to automate the signup of users based on a company's email domain then send the two-factor email to that company address so they can't fake them. Either way, those types of customizations need to be present in group buying platforms. So that's our first of many webinars in this series for buying groups. Next we'll look into business to business, starting with the best B2B eCommerce definition. Click and subscribe to be notified as we continue to produce this series of webinars. You can also reach out to Clarity directly to discuss your buying group marketplace project. Thanks for watching. Continue to Chapter 2 to learn about shopping lists and reordering Increase Your Customer Base Make a name for yourself by becoming the go-to place for those working in a specific industry. Clarity is ready to show you what we've done for our previous buying group clients. Schedule A Demo FAQ What is a buying group? A buying group is a collective association of businesses or individuals who join forces to leverage their combined purchasing power in order to secure better deals, discounts, or terms from suppliers. By consolidating their buying requirements, members of a buying group can negotiate more favorable prices on goods or services than they might individually. These groups can be composed of small businesses, retailers, or consumers with common interests. The primary goal is to achieve cost savings, improve bargaining power, and enhance overall competitiveness. Buying groups facilitate economies of scale, allowing members to access bulk pricing and favorable terms that might be otherwise unattainable on an individual basis. This collaborative approach enables participants to strengthen their market position and optimize procurement processes for mutual benefit. Is a buying group different from a group purchasing organization? While the terms are often used interchangeably, a buying group and a group purchasing organization (GPO) have nuanced differences. Both involve collective purchasing to secure advantageous deals and cost savings, but a buying group is typically formed by businesses or consumers with shared interests, aiming to pool their purchasing power for better prices. On the other hand, group purchasing organizations are entities specifically created to negotiate contracts and secure discounts on behalf of its members, usually within a particular industry. GPOs often serve larger organizations, such as healthcare facilities or businesses, streamlining procurement processes. In essence, while both concepts involve collaborative purchasing, a buying group is a broader term encompassing various collective purchasing associations, whereas a GPO is a specialized organization facilitating group purchasing for specific sectors. Do buying groups and group purchasing organizations have membership fees? Yes, both buying groups and group purchasing organizations (GPOs) typically have membership fees. Businesses or individuals joining a buying group may be required to pay dues or fees to participate in the collective purchasing arrangement. Similarly, GPOs often charge their members membership fees to cover administrative costs and facilitate the negotiation of favorable contracts. These fees contribute to the operational expenses of the buying group or GPO, allowing them to provide value through cost savings and improved purchasing terms for their members. What advantages does a small business owner get from a buying group or group purchasing organization? Small business owners can derive several advantages by participating in a buying group or group purchasing organization (GPO). Here's a list of key benefits: Cost Savings: Access to bulk purchasing discounts and better negotiation power results in reduced procurement costs. Economies of Scale: Pooling buying volumes with other members enables small businesses to achieve economies of scale, leading to lower per-unit costs. Improved Terms: Buying groups and GPOs can negotiate favorable payment terms, credit arrangements, and exclusive deals for their members. Supplier Diversity: Enhanced access to a diverse network of suppliers allows small businesses to explore various options and find the best fit for their needs. Time Efficiency: Streamlined procurement processes and centralized negotiations save time for small business owners, allowing them to focus on core operations. Market Competitiveness: Competitive pricing obtained through collective purchasing helps small businesses stay competitive in the market. Networking Opportunities: Membership in buying groups provides opportunities for networking with other businesses, fostering collaboration and knowledge-sharing. Risk Mitigation: Shared insights and collective strategies within the group help mitigate risks associated with market fluctuations or supplier issues. Access to Resources: GPOs often provide additional resources, such as industry insights, market trends, and educational materials, benefiting small business growth. Strengthened Bargaining Power: Small businesses gain stronger negotiating leverage when negotiating with suppliers as part of a larger collective, enhancing their ability to secure advantageous deals. Still have questions? Chat with us on the bottom right corner of your screen #NotARobot
eCommerce What is a Buying Group? A Buying Group Definition for Businesses Updated January 19, 2024 | 7 min read Ron Halversen, vice-president of sales and marketing at Clarity Ventures, answers the question, "What is a buying group?" Part 1 of a 12-part series