Guess who's been invited to the C-Suite?
From cubicles and offices salespeople have been taught to avoid at all costs, the procurement and sourcing professionals have surfaced…and they've become the savior for many CFOs and CEOs looking to reduce costs in this challenging economic storm.
They talk in a language that leaves most of us running for cover—consolidation, spend control, normalize costs, vendor elimination, cost categorization, commoditization, RFP, and the most feared of all terms: online reverse auction. I got a chill just writing it.
This is their time. They are in executive committee meetings. With impressive charts and graphs they are telling the story of how better times allowed departmental execs to get sloppy on supplier negotiations. Tighter process is needed—a tighter procurement process. More charts and graphs. Impressive margin impact on full display. Long lists of suppliers are presented. It's time to let those who know how to buy get this situation under control.
Ok, that's a bit dramatic (although not too far from reality), but the involvement by procurement on sourcing decisions is definitely on the rise.
More and more of our clients and prospects report having to navigate buying processes managed by sourcing and procurement (S&P) professionals. For those who sell within the world of tangible products or more commodity-oriented offerings, working with procurement is not new. For those in the non-tangible or services space, many are being introduced to the world of procurement for the first time in their careers.
Either way, strategic procurement initiatives are in full steam like no other time. And we're not talking about the purchasing guy you remember sitting in the windowless office next to the facilities manager, who you avoided at all costs. It's a new day.
According to "Fred," an S&P executive in the professional services industry, "There's a window of opportunity right now [for procurement professionals] to impress the CPO (Chief Procurement Officer) and expand their landscape." Fred asked to be anonymous for this column out of fear his S&P peers may forever label him a traitor.
I can vouch for his expertise in this area, as he works within one of our client organizations and now spends his time helping his organization better understand how to navigate the increasing involvement of procurement within their client environments. Recognizing procurement is a key buying influence in more and more buying processes, I interviewed Fred to get a firsthand perspective.
As Fred points out, "expanding their landscape" means it's no longer about the typical nuts-and-bolts commodity sourcing, but is expanding into non-tangible goods. This is putting many sales professionals into scenarios they've not experienced before. Here are the top three takeaways from our conversation:
Know the process. Ask early and often about the exact steps of the buying process and know at what point potential negotiating will take place. Fred notes many sales professionals assume they've finalized pricing and payment terms, only to find out there's an additional step with no room for further negotiating. It's also important to understand the nature of the relationship between S&P and the business owner. Fred suggests there are typically four types:
• Sourcing leads/business follows.
• Business leads/sourcing follows.
"You have to work both sides of the street effectively," says Fred. In order to do so, he advises, you must understand how the two will work together during the buying process. This also helps you better understand how well their buying process aligns with some of your better-fit customers. Knowing this early could potentially help you identify which opportunities are better fits to your ideal customer profile.
Get a sense for the "maturity" of the procurement organization. More mature organizations will have well developed processes, are well partnered with the users/business owners for the goods or services, display a strategic vision, communicate clearly, and are transparent about the process. More mature organizations will even factor a value to "in place" suppliers by looking at the potential costs or risks associated to transitioning to new suppliers. This is important to know if you are a current or incumbent supplier. Less mature traits are those that provide roadblocks to the users, have a confusing or poorly executed process, appear much more tactical in their approach and seem to be disconnected from the business owners.
Fred suggests organizations might want to rethink applying sales resources against opportunities where there is strong control by procurement with less mature traits. This would also be the one scenario in which going around procurement, especially when your contact is unreasonable, may be the only way in which to gain a win for both sides.
Be prepared and well organized. Know your value proposition and how you differentiate. "If you're one of 20 options that look the same, it's going to be brutal," says Fred. Standing out requires making sure you have a solid understanding of what your product or service is helping to fix, accomplish, or avoid for the business owner that is unique. And no, your calendars and logo-emblazoned coffee mugs don't count as differentiators.
Fred recommends every organization have a strategic pricing plan and to know the walk-away point. "Any good procurement professional will want something of value from you to claim as a win," says Fred, although he points out it isn't always price. It's important to have a well thought out hierarchy for what you're willing to trade that's of value. Fred says you need to ask yourself, "What are you willing to give to get what you want?"
Elements like longer payment terms, discounts in exchange for longer contract terms, or payments up front are all examples of approaches that should be explored. This requires sales professionals that can collaborate with internal resources, like their CFO or finance executive to come up with creative deal structuring. "The best know how to improvise, adapt, and overcome," says Fred.
Lastly, demonstrating professionalism with well-organized verbal and written communication can be both a differentiator…and keep you out of trouble, as savvy procurement executives keep detailed records on what you've presented. Be accurate and consistent when it comes to conveying pricing and terms. Any deviations or discrepancies will come back to bite you.
While this column is focused on how best to understand the procurement buying influence as it's a rising influencer for many deal pursuits today, it's important to have a similar understanding for all of the buying influences involved in an opportunity or the renewal of an existing contract. Know the process and what roles will have even the smallest amount of influence. Consider procurement as one of potentially multiple buying influences playing a role in the selection or renewal process.
Thanks to our new ally, Fred, you should be a little better prepared.
SMM columnist Bill Golder is executive vice president of sales at Miller Heiman. Available for keynote speaking opportunities, he can be reached at firstname.lastname@example.org or 877-678-0397.