12 minute read
Knowing your Buyer
Professional buyer TIM USSHER provides the second feature in his series – on really understanding who you’re selling to.
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My introduction to this series in the previous edition asked if sellers really are doing everything they should to impress buyers and highlighted a key question for sellers to ask their prospects: “What do I have to do to win this contract?” In this feature, let’s try to improve our understanding of the buyer and their drivers, and also the vital importance of information and preparation.
UNDERSTANDING THE BUYER The key to all business – what makes it all happen – is people. Understanding the individual personality of the buyer allows you to make the best of each situation and tailor yourself to meet the buyer’s expectations on a business front, and also to build a relationship. Would you volunteer for a boxing match without knowing about your opponent?
What are the buyer’s interests, favourite team, previous companies? For instance, is the buyer a stickler for deadlines and punctuality? I was a buyer at a large cash and carry chain where we often had back-to-back meetings each day, so there was an unwritten rule – a bit harsh I must admit – that any salesperson turning up more than five minutes late for a meeting with a buyer was sent away to reschedule...
I remember one large corporation telling me they built up notes on buyers – nothing too dramatic, and all very professional, such as likes and dislikes and any relevant info on that individual or company. I thought how fantastic that they were going to the trouble of getting to know the buyer. This kind of background detail can now be easily found on the various social or business networks on the Internet. I will always look up a seller coming to meet me, just to see their experience, previous companies and profile. You never know, we may have something in common to help ease the conversation and break down barriers, or I may even find a lever to help me get the best deal from them. Sellers should do likewise.
The buyer’s personality will form the foundation of how they tackle their corporate goals, and understanding what your buyer’s key performance indicators – or KPIs – are allows you to target these in your efforts to impress them and win the contract. Yet, in my entire 30-year career, I can’t remember a salesperson ever asking me what my goals were – so go ahead and ask the buyer.
Here are a few likely ones:
SAVINGS Quality and service are always more important than price – there’s no point in a buyer getting the lowest price for a pen if it runs out of ink and breaks after a day. Yet the buyer’s boss will assume these are a given and will just want to know the buyer is reducing costs and saving the business money. The buyer will have a target.
Make no mistake sellers – the buyer needs to, and will, save money on every spend review and new deal. That’s simply the competitive world we’re in. I’ve never carried out a spend review and failed to make savings.
Given that savings form a major part of the buyer’s drivers, it’s pretty important to ask the buyer what type of saving they want and how it will be measured – fiscal or annualised, net price or volume rebates. Again, I’ve only been asked this question maybe a handful of times. When you do ask, for sure some buyers may spin you a yarn, but they might give you a real hint on the gap that needs to be bridged. Let’s quickly run through the types of savings a buyer is likely to measure:
OUR BUYER TIM USSHER has spent his entire career of over 30 years as a buyer. He began buying for a large retail chain with 1,400 stores, moved to cash and carry and then over to manufacturing. He went on to become chief procurement officer (CPO) for several major companies. In the UK he has been CPO for BSkyB and Virgin Media, where he managed procurement teams of over 75 buying staff. In addition, he has led global procurement organisations of up to 340 procurement staff worldwide for multinationals such as Hilton hotels, Williams security group and Regus office providers In 2002, Ussher won the inaugural Purchasing and Supply Chain Professional of the Year award from the Chartered Institute of Purchasing and Supply (CIPS), the procurement industry’s top individual award. In his current role of independent consultant CPO, he has carried out major reviews and established new or improved procurement functions for the London 2012 Olympics, EMI, Diageo and British American Tobacco. Ussher is passionate about continuous improvement within both buying and selling, to drive up performance and professional standards. As he explains, “I want salespeople to be better at what they do, because sellers on top of their game helps buyers do their job more effectively. That’s what buyers want – brilliant suppliers with outstanding salespeople.” l Savings against current price – the simplest measurement goal is last price paid versus new price for existing goods or services, (multiplied by forecasted volume). l Savings against budget – the business, or often stakeholders with their finance directors, will have assumed a cost for particular goods or services or a project delivery, probably some while ago and more than likely in a rush. Regardless of the accuracy of this estimate, it is left to the buyer now to deliver the goods at a lower-than-budget price and therefore make demonstrable savings against budget. Ask what budgets have been set and you’ll understand the scale of the task the buyer (and you) are facing. l The chief financial officer’s stretch target – this is every purchasing director’s nightmare and often an unrealistic challenge. Initially, the process is reasonable enough – it involves the buyer informing their boss of the cost they can realistically target, backed up by analysis and soul-searching. Then it turns ugly. Without discussion, the chief financial officer (CFO) will dictate that not only must this target be met, but it must be exceeded with a further 40% saving – the famous “stretch target”. There’s no science or understanding involved here, but famously thick-skinned CFOs think they’re doing their job by stretching the team. l Savings against first quote – I have seen some buying teams measure the final terms they have achieved with a selected supplier against the original terms proposed in the first round of pitches or tender responses. l Soft benefits – some procurement teams may also measure all the “other” non-budgetattributable benefits they secure, such as deflecting a price increase request or a contract commitment.
As a seller, while you can’t change their targets and goals, you must understand the extreme pressures that buyers are working under. You’ll need to empathise with them and use all your professional skills and creativity to come up with a strong case as to how you can help them out.
THE BOSS Ah yes, the boss is the boss, and the buyer still needs to impress them to help that next salary discussion and indeed bonus. The boss knows better than anyone that a pound saved is a pound profit, and many buyers now get an annual bonus mostly based on savings targets. I can explain all the wonderful best practices, engagement and governance we’ve done, but I know there’s one
thing my boss wants to hear more than any other – how much we have saved.
So, apart from the obvious chemistry and professionalism needed to keep their boss happy, exceeding the goals set for the buyer is of the utmost importance, which brings us back to sellers needing to understand the buyer’s targets.
STAKEHOLDERS These are the real-time voters for the buyer: sponsors, operational owners, budget holders, finance, legal, IT and management. They trust the buyer to run “their” spend review for them, so the buyer wants to impress them. They have a weighty say in the judging and outcome, though a well-run procurement review process should make the end decisions open and obvious.
Sellers should get to know stakeholders and win them over as well as the buyer. Usually, however, deals and contracts can only be awarded through the buyer, and a stakeholder that seems overly supportive of a particular supplier will ring alarm bells. If you try to cut the buyer out, the damage will be difficult to recover.
SELF-SATISFACTION The buyer works in a lonely arena. Their only audience is often the suppliers sitting in front of them, and occasionally another buyer from their team or stakeholder colleagues. While their buyer peers may celebrate their successes and empathise with their problems, they won’t know truly how hard a deal was to reach, and anyway they have their own deals to worry about. We’re always told,
“We need more, and faster!” so knowing how aggressive or not an individual buyer is will help.
OTHER BEST PRACTICE KPIS Any good buyer or procurement manager will have a list of other best practice improvements on their agenda. These may include, for example, buying greener, improving tendering processes and documentation, supplier relationships, credit terms, reducing their supply base, continuous improvement programmes, collating contracts into a dynamic database, faster delivery, compliance and use of preferred suppliers, stakeholder feedback, reducing supplier invoicing errors, zero customer complaints, recording benefits obtained, and so on. Sellers need to know what’s high on the buyer’s agenda and find ways to help them achieve it, hence the need for…
INFORMATION AND PREPARATION Information is power. This is true on the field of battle – and it applies just as much to business. Information gathering plays the biggest part in buying, so sellers shouldn’t underestimate the amount of information gathering and preparation they need to do to stay ahead of the buyer.
The buyer often handles a multitude of categories, products and services, so in theory does not have the time and focus of a supplier who only has their own products and market to be the absolute masters of. But the seller cannot be complacent, as the buyer can put a concentrated amount of pre-review effort into researching a market, often now using real-time and instant information reports and online services, including Google of course. Buyers can also obtain a large “land grab” of information by sending out requests for information to lists of potential suppliers, something sellers can’t really do.
With this, the buyer has the added advantage over the supplier of being able to see all the information submitted by a large number of suppliers during the bidding for a contract. The buyer would appear to have the upper hand already in the information stakes. So the seller will have to put in equal effort to boost their information levels if they are to compete with the buyer’s knowledge power. I have seen situations where buyers clearly know more about the market than the seller, which doesn’t instill confidence – we actually want the seller to be the expert.
I once had a salesman come in and present his firm’s new product to me using a portable flip chart on my desk – yes, this was a few years ago. He started reading out each slide, so I took the presentation folder and sat it on my lap for a better view asking him to continue. He was dumbfounded and, of course, the poor unfortunate soul simply didn’t know what to say. He hadn’t prepared and couldn’t ad-lib. It wasn’t a pretty sight, so his folder was returned...
I’ve seen complacency playing its part with some sellers, and no matter how hard you think you’re trying, there’s always someone else out there trying harder. When the suppliers are paraded in one by one for the buyers to test and probe, the mists part, knowledge and ignorance are both revealed, and suppliers who really know their business stand out.
Sellers should not underestimate the value of undertaking some extra research and analysis of their business surroundings. Some of the topics that a buyer will have researched may include the following, and sellers should also take time to investigate and know them: l Previous years’ spends, volumes and operational profile/effectiveness l The supplier’s company financials, including turnover, profit, credit check, and key comments from the annual report or recent press releases (eg. “Our costs have been significantly reduced, allowing us to be more competitive”) l History of previous negotiations l Notes on the supplier’s key account managers and management l Profiles of competitors to the supplier, including low cost sourcing options, such as Asia l Market and industry body reports, case studies, product and innovation trends l Detailed reports on cost, including possibly an attempt to build a full cost breakdown and therefore margin of your product (many salespeople do not know the full cost make-up of the products they’re selling) l Pricing, raw material and component trends affecting your market/product l Feedback from in-house experts and stakeholders on their views on the supplier, previous dealings, concerns and poor performance.
In the next feature in this series I will cover meeting the buyer and pitching, with the final article looking at tendering and negotiating.
WINNING SELLING... TO IMPRESS THE BUYER! by Tim Ussher gives a concise insight into the mind of the procurement professional, with no-nonsense tips, tactics and practical advice for salespeople. Recently published, it is endorsed by Lord Alan Sugar, entrepreneur and star of the BBC’s The Apprentice, who, having personally sat across the table from Ussher in sales negotiations, describes him as “one of the best purchasing professionals I have come across in business”. The book is available on Amazon as a colour paperback and Kindle ebook. For further information, visit: www.winningselling.com
