Procurement is now recognized as the biggest, baddest buyer around.
And one of the first things Procurement does before putting a service contract out for bid is to decide whether that spend is a commodity or in a complex category of spend.
If they decide your service is a commodity watch out. You’re likely to be put through the wringer for some or all of the following, and the list ain’t pretty:
- Competing against lots of bidders
- Greater focus on lowest purchase price
- Less focus on total cost of ownership (TCO)
- Very short time from RFP release to bid submittal
- Less care & effort in creating the RFP
- Online reverse auctions of “qualified” bidders
- Unshakeable belief bids are apples-to-apples
- Strong arm negotiations with final top 2 bidders
- Belief suppliers can easily be replaced quickly
What Seller doesn’t want to be in a Complex Category?
Unless you’re selling a commodity, you’ll want to help position your service in Procurement’s mind as one belonging to a complex category.
Complex categories are “strategic” spends. In the facility service arena they are services that can have a tremendous impact on the customer’s business if it goes wrong.
For example, the security service lets an unauthorized person into a secure area and it results in Intellectual Property being stolen. Or a cleaning service failure that contaminates a food production line, or clean room environment.
As a seller, you’ll have to do this positioning with Procurement long before the RFP comes out. To do that means introducing yourself to them, gaining credibility, building relationships, and communicating your value before the spend takes place. Sound familiar?
These are all typical sales activities that at one time were needed only for your contact. Now, you have to get further into the customers organization and sell to Procurement as well.
See it from Procurement’s Side
There’s an excellent post on Spend Matters, “The Sexy Side of Strategic Sourcing: Complex Categories” that illustrates a few of the challenges facing Procurement.
More importantly it also provides a high-level outline of what Procurement can do when buying services in complex categories.
Start with Procurement’s Perception
There can really only be three possible scenarios in which Procurement can see/judge your service:
- Scenario 1: Your Service is in a Complex Category
- Scenario 2: Your Service seen in Complex Category but bought like a Commodity
- Scenario 3: Your Service is seen as a Commodity
Moving the Needle from Commodity to Strategic Service
Here are some tactics sellers can attempt for the three scenarios listed above. This is a long, slow, sophisticated sales process but if the contract size is large it’ll be worth it.
Scenario 1: Your Service is in a Complex Category
Lucky you. You’re done and ready to participate in the RFP when it’s released. Next!
Scenario 2: Your Service seen in Complex Category but bought like a Commodity
This is a direct educational play. Help your buyer gain “category expertise”.
Educate while developing credibility with the buyer by sharing articles, posts, white papers, etc. that educate them about the category, such as the post “The Sexy Side of Strategic Sourcing: Complex Categories” .
80-95% of this shared information must come from third parties. Industry associations are the most credible, although consulting firms can be useful as well.
If the bulk of this educational info comes from your firm it will look self-serving and can easily end up being ignored.
Scenario 3: Your Service is seen as a Commodity
Of course this is the hardest scenario and it’s all up hill. As a result it will require a long lead time before seeing progress. You’ll determine if it’s worth your sales investment based on the desirability of the contract.
This tactic is an indirect educational play.
That means you’ll have to get meaningful information to your buyer through sources that don’t feel as if they’re being sold – and that’s generally not directly from you.
So, how might you get that info to the buyer without delivering it yourself?
One way is to get your contact, the buyer’s stakeholder, to work on the buyer themselves.
Provide your contact with “category expertise” info and guide them in handing it off to the buyer. You can do this by giving it to your contact once a week during a call or meeting, such as:
“You know Procurement may want this research from the XYZ trade association. It’ll help them put together an RFP that doesn’t miss out on these critical areas. Wouldn’t want them to have to go through the bid process a second time because of a technicality they’d missed”.
Of course your contact must see your service as strategic. If not you’ve got to get them there, and then get them highly motivated to work on the buyer.
Selling Today Ain’t What It Used To Be
If you don’t like the idea of having to sell to Procurement, if you steadfastly cling to the belief that you shouldn’t have to, then you are on the road to extinction.
This is the new reality for as long as the economic news looks precarious, and that can be the case for many years to come.