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Buyer Myopia and Value Destruction

The unintended consequences of taking an exclusively economic view of value is described by David Farmer (1997), in the European Journal of Purchasing and Supply Management, as Purchaser Myopia. This idea refers to a short-term fixation with cost to the exclusion of all other considerations. Perceived, relational and experiential value are ignored, and all that matters to the professional buyer is the cheapest price.

We recall the example of a buyer of integrated circuits who worked for a electronic games manufacturer. He believed he could purchase an apparently identical product from a new supplier at a better price. He didn’t consult with the design engineers, and whilst broadly compatible the integrated circuit was not as reliable, lacked certain facilities and created problems in terms of continuity of supply and quality assurance. Furthermore, the long-term relationship with the incumbent supplier was fractured, and almost irrevocably lost, as confidential idea-sharing and joint problem-solving ceased.

The idea of value destruction relates primarily to the supplier and occurs through dysfunctional behaviours, such as rudeness, lack of attention and so on. However, value can also be destroyed if the customer is deliberately awkward and disengaged.

Of course money matters, and so we shouldn’t run away with the idea that value is all about image, experience and relational warmth factors. But at the same time we don’t think it’s just about economic impact. An optimal balance needs to be achieved that is appropriate to the customer and the market sector, even to the extent of the supplier being candid about whether a particular customer is desirable as an account. Not all customers are good to do business with, as unthinkingly buying into the idea of customer centricity might lead you to believe.

 
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