7 minute read
Net Procurers First
When I first started trying to win new business, in a company and industry far away from anything I’m doing today, an older and wiser colleague gave me some advice. “When anyone from procurement says they want a partnership,” he told me, “what they really mean is: cut your price or kiss the opportunity goodbye.” In 25 years of selling and bidding I have always thought that was an unfair characterisation – procurement people in my experience have always sought to bring value and advantage to their organisations.
Those 25 years have also produced a good deal of research into procurement behaviour. And having worked with procurement teams to help with their negotiation skills, we know that sales and procurement people have more in common than we might realise. Neither group is exactly revered by their own corporate hierarchy. A recent Huthwaite International survey found that only 24% of business decision-makers considered salespeople to be heroes in their company. Procurement people have it worse: only 9% of business leaders give them the all-star rating.
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Earlier research underlined these findings. A survey we conducted of 124 procurement professionals discovered that 68% of them thought that dealing with people within their own company was the biggest problem they faced (compared with single digit scores for issues like supplier management or technical challenges). And when, in collaboration with the Management Consultancies Association (MCA), we asked people in the UK’s top companies how powerful they thought their procurement colleagues were, over half saw them as no more than an administrative function.
One indication of what a company really thought of its own procurement people cropped up when I was asked to sell to a leading IT services company. I found the principal buying category manager for training, and her team, in a windowless office in a basement, behind the post room. So, we’ve plenty of evidence that procurement isn’t appreciated as it should be. Out of this indifference, perhaps, we can fashion something of value for ourselves and the organisations we serve. The issue for the sales community is that procurement can be a very important gateway to our chief mission in life: selling things. How, then, can salespeople work better with procurement departments to improve both their own sales success and procurement’s standing and leverage in the business? INVOLVE THEM EARLY At the meeting that launched the MCA’s Consultancy Buyers’ Forum, two senior chief procurement officers – one from a leading healthcare company and one from a world leading telecoms provider – both said the same thing: “Why do you always leave us till last?
Why do you try and avoid us? Are you surprised, after you have sold your ideas to your friends inside our business, that procurement then comes along and tries to take 15% off all your prices? If you don’t build the value for us, why wouldn’t we seek to destroy value for you? Let us in, and let us see your value.” Both of these executives told the forum that in many ways they should be the first people you call on, even when there is no sale in sight. And, of course, they are
right. They might be in the phase of the buying cycle that we call “changes over time”, when a sale is not even yet in progress. Why is this? Because the “user-buyers” (the people inside your clients who actually need to buy and use your IT services, or telecoms equipment or machine tools or consultancy advice) are finding reasons not to buy, and indeed not even to see you – because they are cautious about budget.
But their colleagues in procurement never stop reviewing, refining, updating and rationalising their preferred supplier lists. When that userbuyer does eventually go to procurement and asks them to organise a competitive tender or RFP process, you want your name at the front of their brain, and at the top of their list. EDUCATE THEM If you actively engage with the procurement folk, and have some kind of relationship before and during the account lifecycle, you are in a better position to help them see the value (rather than just the cost) of your solution. I think of the case of a medical devices client of ours who took the hospital procurement category manager into an operating theatre where the surgeons were using that supplier’s coronary valves. The doctors explained as they were performing the procedure why they were better for the patients (which in time, of course, is better for the hospital budget). Unsurprisingly, they found fewer price objections from procurement later in the sales process.
HELP THEM LOOK GOOD Given what we know from the new research, it might be that procurement could do with some better internal public relations. When, rather than delaying the conversation until it becomes mainly price-focused, you take the initiative and talk pre-emptively about return on investment (RoI), don’t just talk in the usual RoI generalities. Use the kind of language that their bosses speak. Give them price proposals that express value in terms of comparative net present value, current cost of capital and discounted cash flow – the kind of measures that will make their finance director or chief financial officer stop and think: “Hang on, our procurement people are really asking the suppliers the right questions and making my job easier.” If you’re the only supplier helping procurement in this way, they will be better disposed towards you. SELL CONSULTATIVELY Anyone with a serious sales career knows that success comes from uncovering needs, finding where they are strongest, and then presenting a solution that satisfies them. But how often do sellers apply this process to procurement? What are their needs, fears and exposures – things that might never appear in black and white in an RFP? If ease of supplier management is important to them, or a particular billing schedule makes a difference to how their bonus is paid, you might be well advised to find this out and think about how your solution matches up. BREAK THEIR RULES, BUT WITH THEIR PERMISSION For a formal RFP or ITT process nowadays, the brief is often written by procurement, not the users, and increasingly there is only a very short open period when you can discuss things with the people you know inside your potential customer – sometimes there’s none at all. Then there’s a semi-open period of competitive dialogue – published Q&As from all the competing vendors, for example. Then, contact is forbidden and everyone must simply answer the questions (sometimes via an online template) and stay at arm’s length. Leaving aside the preparatory relationship-building you have been doing to this point (including, as we have seen, with procurement), does that mean any real opportunity to uncover needs and find areas for differentiation is now at an end?
The chances are that the business doesn’t want that to happen. After all, the user-buyer wants the best solution to be sourced more than they want a process to be followed. But if we’re trying to support and assist procurement people, not undermine them, we cannot simply subvert that process. Our research has shown that, in the vast majority of cases, there is no harm in a polite and reasoned approach in which a vendor makes the point to the procurement department that there is still much to discover from the users that will potentially deliver a better solution, and produce more value. The users almost always value this. The key is to do it with permission, not surreptitiously. One word of caution: this is advice that does not apply in most UK and EU public procurement exercises. There, you really must abide by the letter of the law.
In our negotiation skills training, we often use the phrase “power is in the head”. Many sellers, when they confront procurement people, would do well to remember that internal perception is just one reason why professional buyers are not as powerful they might believe. And that knowledge – coupled with the exercise of some skill – can be a source of power for you.
DAVID FREEDMAN is head of business development at Huthwaite International, a consultancy specialising in achieving behaviour change for people who sell and negotiate. Visit: www.huthwaite.co.uk
