5 Tactics to Clear Procurement Obstacles in Sales
At a recent private equity conference, a group of company presidents asked some lively questions after my speech about the challenge of negotiating with procurement.
We’ve all witnessed it. Procurement departments are now more powerful and more sophisticated than in the past. Salespeople tell me procurement managers are bent on commoditizing every aspect of a solution. For sales, the procurement process is an ongoing struggle comprised of negotiations, blind RFPs, reverse auctions, commodity pricing, and high-pressure negotiating tactics.
Let’s say you receive a blind RFP. However, with no strong relationship with anyone in the company, you decide to pass. If you decide to respond, here are some tips from our white paper: Add Brilliance to Your Marketing Strategy – Treat RFPs Like Unpolished Diamonds. Or watch our eLearning video Unseat the Incumbent.
Take a Pro-Active Stance
You must target those companies for which your solution will be a good fit. Then, you need to develop a relationship within the company, long before the procurement process takes a bite out of you.
I want to discuss today how salespeople can prevent their solutions from being commoditized. Begin by understanding the true role of procurement. Then, focus on what this individual, team or department wants to accomplish. When you know their objectives, you’ll be better positioned to work with procurement to reach a successful sales outcome.
Take a moment to study these five common objectives of procurement with corresponding counter tactics you can use in response.
1. Procurement Objective: Neutralize Your Value Proposition
Procurement Goal: Procurement wants to place your products and services on a level playing field with others so it can easily compare your price with other vendors. Procurement prefers to focus on the product itself instead of the overall solution. That way, it compares the least common-denominator pricing to get the “best” deal.
Counter Tactic: Here, you must be proactive and build a marketing strategy with companies in your target market. Using LinkedIn, for example, you can connect early with those people in the company who stand to be most impacted by your solution. If relationships at the company already exist, and the RFP states: “Do not contact anyone on the buying team,” you can continue to communicate with those you know to get coaching. Although a fine line, I have found this tactic successful.
2. Procurement Objective: Commoditize and Control All Responses
Procurement Goal: Procurement prefers to control every aspect of the buying process so it can manage the pricing evaluation in an apples-to-apples comparison. But your apples are different. You need to convince the user buyers and technical buyers they’re different in the first place, or you will never move past the comparison spreadsheet.
Counter Tactic: Focus on your value proposition (How to Write a Killer Value Proposition and Win New Business) to quantify the overall solution value. Present a total solution that cannot be dismantled into component pieces, then commoditized. Educate procurement, the business unit leaders and user/technical buyers why your solution is different and restate your value proposition often.
3. Procurement Objective: Block You from Access to Others
Procurement Goal: Again, procurement wants to control all aspects of the deal including communication with others. Procurement hates surprises, particularly by an executive or business unit leader whose purchase decision could undermine or supersede the procurement process.
Counter Tactic: Build a strong network within the organization. Leverage inside and outside resources to help you get the lay of the land before procurement restricts access to others.
If you are told you cannot contact anyone outside of the RFP process, your decision to proceed carries risks and rewards. Only you can decide if they are worth it. Most business decision makers aren’t aware of these rules and may not agree with them. Also, don’t forget relationships you have with other vendors who service that prospect. Look to their trusted advisor network to see if you have relationships you can leverage. If you’re responding to an RFP and don’t have any other business relationships within the organization, you should seriously consider your chances of success in this deal. Blind RFP responses seldom produce desirable results for the responding party.
4. Procurement Objective: Use Competitors’ FUD or Your Past Performance Against You
Procurement Goal: Procurement covets as much ammunition as possible in their arsenal to use against vendors to drive down prices and negotiate a commodity deal. Procurement managers are trained to research background information on each vendor to determine if information exists that “can and will be used against” the vendor.
Counter Tactic: Again, you must be proactive. Anticipate issues and concerns before they arise and prepare your responses in advance. Consider a pre-emptive strike to disclose negative information, so you gain control of the discussion. Return the focus to sales negotiation on the deal at hand and reiterate the overarching value proposition your solution brings to the business.
5. Procurement Tactic: Control Information Flow and Minimize Surprises
Procurement Goal: Procurement wants to keep the power and leverage on its side, so it controls the data flow and keeps you on your toes by adding more requirements to meet. This power play strengthens as it continues to learn new information in its buying process. Vendors must play a guessing game, and then they’re often forced to renegotiate the deal late in the game when the clock is ticking to get it done.
Counter Tactic: Work hard during your discovery phase to determine the identity of all decision makers and what buying process they follow. Get your arms around the decision-making process and the anticipated timeline. In doing so, you will highlight any additional steps to address upfront.
What’s more, procurement wants to keep all the vendors in the game as long as possible to create leverage against the competition—remember, procurement wants us present. Typically, we have more power in this situation than we acknowledge.
While these five procurement objectives form a brief outline of the whole picture, you, as the sales professional must be prepared to counter procurement’s tactics: Plan well, leverage your relationships, reinforce shared interests, and communicate your value proposition repeatedly.
Remember, prospects buy for one of three reasons. They want to fix, accomplish or avoid something. You are selling a solution that will help your prospects accomplish their business objectives.
Do not allow your sales mission to be diminished or commoditized by the procurement department.
See you on the upside,Bill
For more information, go to www.pleinairestrategies.com
Or call William L. MacDonald in San Diego at PleinAire Strategies LLC at 760.340.4277 or 213.598.4700