By David Chapnick, Michael Kalikow and Liz Rayer
The influence, control and sophistication of procurement organizations over their companies’ buying processes have been increasing exponentially for years. Whether companies are selling commodity products, new technologies or highly differentiated professional services, sales professionals consistently report that the rise of Procurement has contributed to making their sales more difficult, time consuming and complex.
As salespeople come to terms with this evolving selling paradigm, they will be forced to address different challenges from Procurement that will only become more common and pronounced with time. We’ll address five of the most common ones.
#1 Procurement as gatekeeper
While end users typically still play a significant role in decision mak- ing, more and more corporate policy now requires end users to go through Procurement to make their purchases. But treating Procurement as “the enemy” will quickly make them your enemy. Better to put yourself in their shoes to help understand what drives them. But how?
· Engage the procurement professionals responsible for the product or service you sell, perhaps as a facilitator or convener in conversations with end users. This will help them fulfill their goal of maintaining a degree of control over the buying process, while simultaneously ensuring that they get to hear firsthand from your end users about the value you provide to their organization.
· Explore ways to help Procurement become trusted advisors to their end users. For example, you could provide them with an overview of what you are seeing in their industry, share with them what you are hearing from their internal customers or tell them about ways you have been a resource to your other accounts.
#2 Selling value when Procurement seems only to care about price
Try to engage in conversations with Procurement, end users and other “coaches” within the organization to better understand what the customer’s procurement organization cares about – both in general and specific to what you are selling. For instance, you might discuss with them:
• What end do they ultimately hope to achieve, and what impact do quality, convenience, features, service or other differentiators play in the organization’s ability to achieve their desired results?
• To whom is Procurement accountable, and what are they being asked to deliver?
• How are they being measured?
• What supply chain risks keep them up at night?
• Are they open to working together to uncover cost savings, to refine pro- cesses and to innovate?
Ultimately, the more you learn about Procurement’s role and what they care about, the easier it will be to frame your solutions, your organization and the data they care about from their perspective – rather than from your perspective or that of your end users.
#3 Negotiating when it feels like Procurement has all the leverage
Salespeople often view negotiation power as a function of who needs the deal most. Since walking away from the deal is rarely a viable option for most salespeople, Procurement is perceived to have the power. In fact, research from Vantage Partners indicates that more than 75 percent of all sales and procurement respondents studied believe that the other side has more leverage during negotiations than they do.
Always think about potential sources of negotiation power you may have overlooked. For example, how long will it take for end users to get up to speed on a different supplier’s technology or get used to working with a different service provider? What risks to their supply chain are posed by a switch that doesn’t work out or moving down the learning curve with a new supplier? Are there costs with a competitor that will lead to increased total cost of ownership that they have not thought through?
#4 Managing Procurement’s reliance on the RFP process
If you have built trust- ing relationships with end users and Procurement alike, then you may at least know a request for proposal is coming. You may even be able to get in front of it and help shape the request by initiating a dialogue with your customer about some appropriate criteria to use when making buying decisions around your product or service, or by sharing market intelligence you have.
By far the best way to frustrate Procurement in a response is by submitting standard or canned information, answering questions that you preferred were asked versus ones that actually were asked, or, even worse, submitting endless, disorganized marketing materials that were not requested. It is critical to consider the actual questions and make sure these are answered directly. Paying attention to what is being asked will provide valuable intelligence about Procurement’s interests and the key criteria they are using to evaluate proposals, and your responses should be framed accordingly.
#5 Dealing with threats, stalling and other hardball tactics
Procurement often engages in some of the toughest negotiation tactics: threatening to put the business out to bid, insisting on excessive or unreasonable demands, misrepresenting the facts, getting angry or emotional, and even making personal attacks.
The trick in responding to the difficult tactics themselves is, first, to not react. Then, remain firm and constructive. All too often, the supplier simply gives in and makes concessions in order to close the deal. But research from Vantage Partners has shown that making such exceptions can lead to a precipitous drop in average selling prices for all customers over time.
Ultimately, you should not grant a price concession on its face without connecting it to something you are getting in return — or to something they are now not going to get as a result. That might mean re-scoping, chang- ing volumes, extending timelines or decreasing add-on services.
For the foreseeable future, Procurement will continue to expand its role in the buying and negotiation process. Getting into Procurement’s shoes and developing skill in negotiating with them are essential competencies for every account manager working today. Likewise, all sales leaders need to equip their teams with the data, processes, preparation and tools they will need in order to standardize engagement with Procurement and ensure that positive outcomes are not just possible but repeatable.
- “Extreme” Negotiations with Customers - August 3, 2020
- Creating meshed relationships: A conversation with Arpedio co-founder Ulrik Monberg - July 9, 2020
- Positioning your value for maximum impact with customers: An interview with a former CFO on how companies make investment decisions - June 18, 2020