Elements of Sales Strategy: How to Negotiate With Cost-Cutting Procurement Teams

 

As we think about refining key Elements of Sales Strategy for 2020, we may tell ourselves and our sales and pricing teams that we need to sharpen our pencils on pricing and refine our negotiation skills with procurement teams.

 

It is certainly the case that procurement teams are growing in importance in Australian organisations. Many procurement officers are actively seeking to increase their skills and knowledge of sales and pricing to generate better outcomes for their businesses.

 

Without a doubt, many procurement teams are across the detail and looking for their customers to demonstrate value. However, there are a lot of procurement teams out there who are quite happy to be “uninformed buyers” – completely disinterested in the value suppliers are offering the business and only focused on costs.

 

Now, as a lot of sales directors know, it’s incredibly difficult to introduce value-based selling as key elements of sales strategy when your teams are faced daily with cost-cutting procurement officers only interested in cherry-picking prices at line item.

 

Sometimes, no matter hard you try to demonstrate the value of a deal, some procurement officers will deliberately not listen to what you’ve got to say; and will repeat over and over again: “Your prices and margin are too high; we’ve got a fixed budget; come back with a price X% lower than your competitor X and we’ll think about doing business with you.”

 

So much for demonstrating the price-value equation with this sort of procurement officer…

 

So, in this article, I wanted to discuss how the standard procurement approach of just buying ‘stuff’ from suppliers for the lowest prices possible is not only destroying value for the business and its shareholders…It’s putting the suppliers and the procurement teams businesses at risk: Risk of increasing costs, risk of product failure and serious risk of supply chain failure  – not to mention zero innovation and technical support.

 

I will start by sharing a humorous and real case example that an old colleague once shared with me. This case study shows a funnier, more undeveloped but realistic side to procurement whereby price management and value is not even on the agenda.

 

I will argue that sales teams should not lose hope with value-based selling and pricing (even when dealing with cost-cutting procurement): As procurement continues to grow in importance within the organisation, they will also be required to prove they have generated more value for the business (beyond reducing spend). They will also be required to show they have worked productively with sales to drive innovative growth initiatives for the business.

 

In simple terms, procurement teams really need your help now to show their businesses how valuable they are at creating shareholder value.

 

The main contention here is that: a large amount of “savings” procurement teams have made in the past often were corrections of past failures in managing supplier relationships. And, that a key element of sales strategy in 2020, therefore, should be helping procurement explain the total economic value of your deals to their businesses – as this is really the only common ground between you both and the best way for procurement to drive value creation in their own businesses.

 

 

 

 

Pricing  Sales Strategy – an example of a real-world procurement meeting

 

A funnier procurement story told to me by a pricing manager from a large food manufacturing company in Sydney.

 

“ I arrived at the meeting having been provided with no agenda by the account manager. I realised this was a major error from the get-go. As a rule, a pricing manager should only attend a meeting with a clear agenda in place and an understanding that the meeting will describe more value-adding strategic discussions.

 

The meeting did not start well as the client kept us waiting for c.40mins (eating into a scheduled 2-hour meeting). I would usually walk away from a meeting if a client is 15 mins or more late but in this instance, I stayed against my better judgement and passed a message to the client that we had to leave on time and so the delay was eating into the time for any productive discussion.

 

The client procurement team arrived and had no understanding of our category or our brief. The procurement manager even stated they did not know the detail (as if it was a matter of pride!) and then launched on personal attacks.

 

We were accused of being liars – despite no examples given, of being a rip off merchants (despite admitting our services were excellent). Weird instances were when he accused me of looking at my watch too often as I was keen to leave the meeting; I pointed out that I was not wearing a watch!

 

He also admonished us for not taking enough notes as he was talking!

 

The strangest thing was that he never once asked for a discount, a change in service or increased value. It seemed as if he just wanted to bully us.

 

We left the meeting saying – “this contract seems more secure than when we went in”. He also seemed surprised when we defended our company’s offering and value proposition – but off course he did not know the detail so could not comment on that.

 

The key take away for me was:

 

  1. Do not always think procurement are better armed or informed than sales pricing strategy going in. Often they think the same of sales in reverse.
  2. Procurement teams can also have no clear approach – we can often overstate their strategic thinking
  3. Never again attend a meeting without a clear agenda and sales pricing strategy.
  4. Leave a meeting if a client is unreasonably late without a valid reason
  5. Stay focused and delegate account management meetings to the account manager – pricing and commercial managers should implement strategy, define economic value and discuss deal mechanics; day to day account management is not your main focus.
  6. Emphasise that the partner basis of the relationship is based on shared value and long term financial gains for both parties (price management)– i.e. it should never be a master-slave relationship. Customers value you more when you challenge them with insight that will grow their business.

 

Elements of Sales Strategy

Elements of Sales Strategy

 

Simply understanding your customer’s needs is not enough. You need to articulate the risk of them not buying from you as well. You want to build on your marketing and sales plans, and then turn theory into profits. A sales strategy is more than a sales pitch. It’s an opportunity to show a procurement officer why your product or service’s going to create value for their business. They may not listen straight away. But eventually, when you’ve discussed their business in enough detail and have uncovered their pain points; they will come round and actually listen to how you are going to help them.

 

A good sales strategy will help identify and take advantage of the best opportunities for you and your customers.

 

Below are 4 essential elements of a sales strategy that will increase your business sales.

 

  •  Price…. 

Price is one of the most important elements of a sales strategy that influences customer’s purchase decisions. The fact is that customers don’t always want to spend their hard-earned money; and whenever they wanted to, they always make sure they are getting better deals.

 

  • Reviews…. 

Customers rely on ratings and reviews as the authentic voice of the consumer, guiding purchases online and in-store. This why reviews play a major role in getting people to buy from you. You should never joke about reviews whether they are negative or positive.

 

  • Credibility…. 

The issue of credibility is another important element that influences customers’ decision to buy from you. Gone were days when customers would just walk into a shop and buy stuff without asking questions about the seller. A business’s good reputation is one of its most important assets. After all, who wants to buy from a firm with a poor reputation for customer services?

 

  •  Delivery…. 

The delivery of your customers’ goods is the last stage of the fulfilment process and from the consumers’ point of view, the most critical. For customers, there is always a question of when will I get the item delivered? Will I get this item early than I expect? As a business, you should ensure flexibility in your product delivery.

 

 

Two Sales Negotiation Tactics to Use with Procurement

 

  1. Decode the price conversation 

 

The very best professional buyers understand their first task is to fully understand the need they are being asked to help address before they attempt to source the lowest priced solution for that need.

Procurement has to care about more than just price if they want to be effective in sourcing solutions to the business problems their internal customers are trying to resolve. It’s your job to find out what else is driving their negotiation strategy. You have to uncover the driving business and personal interests behind procurement’s requirements for accepting the deal.

 

  1. Be prepared to explain the required capabilities and positive business outcomes to procurement

 

To close a great deal, you have to understand what the required capabilities are to solve their problem and the positive business outcomes they’re looking to achieve. Your traditional discovery questions are only going to get you so far. That’s because procurement managers often lack the subject matter expertise necessary; to understand the full range of complexity associated with the purchases they are being asked to source. Remember, procurement managers, are seldom experts in cloud integration, the software development lifecycle, or whatever you’re selling. They know how to help an organization make wise purchases.

 

 

Implications

 

1. If you know what the business is trying to achieve; then leverage that information with the procurement in a way that helps them understand how buying from you will alleviate risk and help them avoid a buying mistake.

 

 

2. Educating procurement teams on risk can make you a trusted resource for procurement teams. They see you as business advisors or even part of their business.

 

 

3. Value-based pricing and selling expertise can help you create a deal that generates value for your business and their business. They will be grateful that you made them look like the hero in their organisation.

 

 

Conclusion

 

Prepare your sales and pricing teams for the future by finding people with value-based pricing and selling skills.

 

Procurement teams know that getting a great price on a mistake most likely creates a much more expensive problem. But they need great sales and pricing executives; to help them see what the real value of a deal is for them

 

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