Selling to Procurement

An interesting insight came out of our interviews with Procurement professionals (Procurement Talks: An Interview with Microsoft and Expedia’s interview to be published next week).

There’s not one style of procurement, but many. From traditional to progressive (my term for high-tech). And infinite hybrids in between. Procurement’s style leads them to operate differently.

And that matters if you’re trying to sell contract services to them.

Procurement’s style seems to be driven by the type of business their company is in. So, let’s look at the two end styles (you’re on your own for everything in between).

TRADITIONAL STYLE PROCUREMENT

A traditional procurement style buys products and services primarily for in-house operations. This style held the informational reins on the purchase, from specifications to sourcing/vetting vendors to bid/negotiation, even through to vendor performance and compliance.

The traditional style buying was done by people who really knew a great deal about what they were buying. This is the world of deep analysis and cost-basis pricing. And the recipients of their buys (business owners) lived and died by procurement’s acumen.

Today, this style lives in manufacturing and industrial businesses – with big spend, complex buys, long lead times, and often limited number of suppliers.

What This Means to Vendors (Contractors)

Contractors would do well to recognize this style of procurement and explore the following:

OPEN KIMONO

Consider presenting full disclosure pricing. Even if the bid doesn’t call for it. Why? Because this is how traditional procurement works. They seek to understand vendors’ cost basis and then back into a vendor’s pricing to see if it’s reasonable.

QUANTIFIED VALUE PROPOSITIONS

In proposals, send only well-defined, quantified value propositions. Tie the value of service into measurable business outcomes, showing clearly where and how it impacts their businesses’ bottom line.

LONG-TERM RELATIONSHIPS

Invest in long-term relationships for developing credibility and personal connections. Churn in procurement in these businesses tends to be more stable, so you’re likely to work with the same individuals for years.

PROGRESSIVE STYLE PROCUREMENT

Again, the term “progressive” is mine. This style is seen in high-tech businesses, particularly software and online services.

The progressive style outsources non-core services as well as buying products for in-house consumption. But here, unlike the traditional style, procurement isn’t the deep knowledge base for what they’re buying.

Progressive procurement doesn’t have time to gain the expertise of all their buys. They’re focusing on their core business buys. For everything else they’re spread thin. Often they rely on their business owners to identify preferred vendors to include on bid lists.

What This Means to Vendors (Contractors)

By understanding the progressive style, contractors can more successfully engage procurement. Consider:

HOMEWORK UP FRONT

Do a great deal of homework up front to know what’s important to them. Don’t waste their time being unprepared.

HYPER-SUCCINCT

Send only hyper-succinct snapshots presenting the vendor’s value proposition. Cut all smoke and mirrors. Include similar clients as references they can contact, and include specific dollar savings or improvements your reference will allow.

DEVELOP CREDIBILITY

Develop credibility with business owners around vendor’s expertise. In both interviews, procurement said their business owners found vendors who were speaking at trade shows and seminars, or publishing articles and blogs. These weren’t self-serving vendor promotions, but education for their clients’ (business owners) industry.

QUANTIFIED VALUE PROPOSITIONS

In proposals, send only well-defined, quantified value propositions (same as the traditional style)

EDUCATE WITHOUT PREACHING

Don’t assume procurement understands the vendor’s business. Procurement wants to know more, so they can buy a better deal. It’s in the vendor’s interests to be the one that helps them do that. But avoid preaching that wraps a vendor pitch in with the goods.

 

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