Whether a deal is worth $50K or $5M the need to engage procurement early and often is something I’ve seen the most accomplished sales executives avoid or stumble over. The question I am left asking many is simply, ‘Why did you wait so long to start talking to procurement?’ The response is too often silence; however, it does not need to be. One of the critical factors today is figuring out how to engage procurement to win your deal.
Procurement’s role in an organization, regardless of size, is rather simple — to ensure the company purchasing the goods or services is getting a solution that will provide ROI to the company at a fair and reasonable cost. There are companies that have teams of people in the Procurement department and smaller organizations that have one individual focused on cost control and validating return. In either case, there is one critical component — there is a person on the other side of the equation.
It is favorable that goods, services or works are appropriate and that they are procured at the best possible cost to meet the needs of the acquirer in terms of quality and quantity, time, and location.
– Weele, Arjan J. van (2010). Purchasing and Supply Chain Management: Analysis, Strategy, Planning and Practice (5th ed.).@ArjanvanWeele
All of us who have sold complex, enterprise class solutions or lead teams of sales people have experienced that moment where we are feeling great about a deal — the business owner ‘gets it’, we’ve socialized the solution and numbers with their team, everyone acknowledges the value, even the difficult to find influencer is on board and we update our forecast feeling bullish. Then the email or phone call comes in and you’re pushed towards an often faceless person with an email address that is talking in spreadsheets, analysis and equations attempting to reduce costs.
There are a myriad of tactics Procurement utilizes from leveraging the fact ‘they are who they are’ (a well-known brand that shouldn’t have to pay full price) to the latest tactic of pulling erroneous data from places like Glassdoor.com and informing you the quoted prices are far above market value. The person on the other end of the email address doesn’t know you, in some cases may not know the business owner you are dealing with and cares about things or has goals never considered or explored during the sales process.
Even more unfathomable are the times when Procurement departments have trained their business owners to request discounts or price reductions which make a provider no longer able to do business with them — simply because their ‘job is to reduce prices.’ The business owner and Procurement lose sight of the value that has been provided, they focus on the trees rather than the forest, and will kill a deal or replace a vendor never caring or realizing about the impact to their timelines, quality, business and customers. They lose sight of the ‘value’ provided to them that in turn allows them to provide value to the market. (And many wonder why the largest companies out there have horrible, disconnected experiences and drive customers away.)
Procurement often attempts to discredit or decouple all of the value you have worked so hard to build with the business unit buyer.
5 Tactics to Use With Procurement — @RayAMakela
There is little argument over the need to understand a company’s ‘buying process’ — even in a world where 70% of buyers (read here business owners) have already educated themselves on available solutions. Yet the concept of the ‘educated buyer’ often forgets there are, on average, over 5 people involved in the final decision-making process and their levels of ‘education’ will vary dramatically.
At least one of those people will be from the Procurement team and just as sales executives spend time working to understand the challenges, goals and metrics of success for their ‘buyers’, they should invest just as much time working to understand Procurement’s role in the organization, how they are motivated and measured and most importantly, who they are as people.
Looking back over my career the largest roadblocks to engaging in this approach seems to be fear or hubris — fear of the power of Procurement, of not knowing how to talk to them or fear of the effort necessary to develop a mutually-beneficial relationship. ‘Fear is the mind-killer’ (can anyone name that reference?). In other cases the lack of engagement can be traced to a certain sense of hubris —’what I’m selling is so valuable Procurement can’t touch me.’
[From the Procurement and Sales survey]
— nine in ten (92 percent) of the Sales executives were skeptical of Procurement’s willingness to share company requirements, business plans, processes, and product usage, including information regarding current forecasts/trends.
Yes, engaging with Procurement comes with a unique set of challenges, but if you are not able to overcome those hurdles or the natural skepticism from Procurement leaders, perhaps sales is not the best career choice. Individuals in Procurement have families too, they care about many of the same things you do and they have a job to do. I know from experience spending the time to understand their position, to help educate them on the larger picture pays dividends.
Just as conversations with business owners must focus on ‘value’ and the relationships must be built on trust, so too with Procurement. The trick is realizing ‘value’ means different things to different people. Most sales executives seem to view Procurement as nothing more than a cost-control organization and in some cases this is true, yet if you can work with them to help them understand how your solution fits into the landscape of other solutions they are being asked to vet, the sales process has a tendency to go much smoother.
"A recent survey found sales executives believe total cost of ownership (TCO) or total value (TV) are taking a backseat to price-only decisions."
Today I urge my sales executives, and when needed remind myself, to engage with Procurement as soon as a lead becomes ‘Qualified’, not wait until the business owner is asking for a proposal. Procurement can provide insight into the dynamics of the organization, how trends in organizational transformation are materializing and what other competing initiatives are being considered. In the end, forgetting about Procurement continues to destabilize not only deals but entire pipelines and by extension — business decisions in your own company.