For a software seller, the economic buyer is as crucial as insurance is for a homebuyer. This role serves as a safeguard against all kinds of unforeseen events. The economic buyer is the individual within the organization who has the ultimate authority to say “yes” or “no” to a purchase decision. Therefore, they deserve special attention.
Definition of an Economic Buyer
Often, the definition of an Economic Buyer (EB) is limited to being the person with the ultimate power to say “yes.” This narrow definition would always point to the CEO or the board of a company, which can be misleading. Therefore, I want to expand the definition slightly. The Economic Buyer is someone with discretionary access to and control over funds to the extent necessary to close a transaction with you. This means they are ultimately responsible for the decision and can reallocate budgets and resources as needed to finalize the transaction with you.
Econoimc Buyer in MEDDICC
Given the importance of the economic buyer, the focus on them is extremely high within the MEDDICC framework. Gaining early access to the economic buyer is crucial for several reasons: it provides more control over the deal, secures sponsorship to accelerate engagements, and ensures that you are investing time in a priority of theirs. This approach limits the risk of pursuing the wrong opportunities.
Identify the Economic Buyer
Given our two definition criteria:
- Can ultimately say yes or no.
- Has discretionary access to funds (to the extent necessary to close a deal).
You need to start by understanding your customer. Identify the person ultimately responsible for the part of the organization you are targeting, and understand how much budget they manage overall.
Important: Just because a person controls a budget does not make them the Economic Buyer. A budget holder does not equal an economic buyer!
How to Identify the Person Who Can Ultimately Say Yes or No
When breaking down an organization chart, you will find that each level has specific responsibilities derived from the strategic objectives and initiatives of the organization. To find the person who is ultimately responsible and has the authority to say yes or no, identify who truly owns the branch of the org chart you are operating in.
For example, if you are selling HR software, the likely Economic Buyer (EB) would be the Chief People Officer (CPO). The Board selects a CEO, who then hires people to take on responsibilities within their departments. The head of HR or CPO, as long as the software purchase is within their financial means, would typically have the authority to make that decision because the responsibility and accountability rest with them.
Another example could be the purchase of a machine for a manufacturing plant. Depending on the organizational setup, the EB could be at different levels. If the plants are centrally organized and equipped uniformly, the EB is likely at a C-level, such as the Chief Manufacturing Officer. However, if each plant owns its P&L, the EB could be at the plant level, such as the General Plant Manager, who is fully responsible for production and related finances.
Always aim to understand whose head is on the line if the decision goes wrong.
How to Identify the Person Who Has Discretionary Access to Budget
In some cases, the person ultimately responsible for the decision might not have sufficient budget or access to funds. You need to consider the flow of money and how it is distributed within the organizational hierarchy. Each organization receives a budget distributed based on business needs.
If you have identified your ultimate responsible person (e.g., the Chief People Officer) and your solution offers a significant business benefit through the People organization, but the HR budget is too low, you need to look to the next higher level in the organization. Determine if they have sufficient funds at their level. This process continues up the hierarchy until you find the right organizational level with enough budget to secure your deal.
In some cases, this might indeed be the CEO or Board, but this is not always the case. This is why it is crucial to first understand who can ultimately say yes or no (who is responsible) and then consider budgets and funds to determine if they can accommodate your proposal.
Ask the Right Questions
Be strategic about the type of questions you ask and whom you ask to understand the overall power base and budget situation.
Access the Economic Buyer
Due to their high position in the organization, Economic Buyers (EBs) are even more shielded than champions, making access to them challenging. Understanding who the EB is early on is critical so you can plan how to reach the right person.
If you have a true champion who trusts you, sees the value in your product or service, and understands why a joint meeting is critical for their success, they can help you access the EB. In other situations, it might be necessary to leapfrog to the EB. In this case, it is important to carefully plan how you gain access and position yourself to avoid burning bridges and damaging relationships.
Accessing the EB is an art in itself. If you want to learn more, please feel free to reach out to me directly.
Role of the Economic Buyer in a Deal
As the ultimate decision-maker, the Economic Buyer (EB) needs to understand the case for change you are presenting. Therefore, when interacting with the EB, it is paramount to build credibility by making every meeting an exchange of value. Provide insights and seek their support and sponsorship to drive your agenda within their organization.
To provide the highest possible value, you need to understand the metrics by which the EB is measured and how you can help improve these metrics. Deeply comprehend the negative implications of the current situation, focusing closely on these numbers. Once you understand these aspects, and know how you can mitigate the negative impacts while providing additional value in their most strategic undertakings, you have a high probability of winning their support.
The worst approach is to rely solely on cost without understanding what truly drives them and their business.
Engaging the Economic Buyer in Later Stages
In the later stages of a sales cycle, which involve significant resources, such as investing in a proof of concept requiring multiple organizational resources, it is critical to secure the EB’s buy-in. Confirm that the capabilities being tested align with their goals and strategic objectives. If this confirmation is provided, ensure you also get a commitment on a contract if the tests are successful. With a clear agreement and sponsorship, you can count on the EB’s support when it comes to closing the deal and navigating through the organization’s procurement and controlling processes.
Build a Relationship with the Economic Buyer
Once you have established initial contact and possibly even closed a first deal, it is important to invest in relationships with Economic Buyers (EBs). EBs are the individuals with whom you can build a real strategic partnership. They are responsible for executing the strategic objectives of their organization and bringing to life the vision of where the organization wants to be in the future.
Being involved in their planning process and gaining insight into their roadmap and agenda allows you to truly shape the development of their organization and have a real impact with your solutions and services.
To me, this is the ultimate goal of every customer relationship: building the understanding and earning the trust that enables me to have a seat at my customer’s table and be part of their long-term plans. Having a clear picture of how I can support them and being trusted as the right partner for their journey is essential.
What about you? What are your ultimate goals for a customer relationship & your career?