They may take our goods, but they will never take our profit margin!
You may not have heard of Dr Reed Holden, but he reckons he knows all about you.
In fact, he says he understands the way you work so well that he promises to “tip the power in negotiations away from procurement and back to sales people and senior executives”.
In his role as a “pricing thought leader”, he believes vendors “in all industries” are threatened by “the pricing buzz saw of procurement”.
“Our basic premise is that when sales and procurement interact it’s a negotiation, not a surrender,” he says, perhaps positioning himself as the sales profession’s William Wallace. “Procurement’s top objective is to get a lower price. It’s the job of sales, pricing and marketing to build confidence in price and defend it from further erosion.”
Of course, Holden has a vested interest in whipping sales people into a frenzy with his rhetoric – given he has a book out on this topic and is promoting a series of podcasts purporting to minimise the effects of purchasing on prices.
He admits his tactics to deal with this nefarious procurement involvement are “simple and easy to learn”. They include making sure you are suitably prepared in advance, consider what tactics purchasers may use and be patient, rather than rushing into a deal. “Don’t get frustrated with delay – it’s a tool procurement uses to cause desperation pricing. If they delay, you delay more,” he writes.
At first glance the tone seems contrary to the findings of our survey where 82 per cent of buyers said they now have a closer relationship with their key suppliers than five years ago.
But if Holden is an accurate representation of the marketplace feeling, asking the same question of sales people might reveal a different perception – especially if they were among the 64 per cent who were asked to cut the price of a negotiated contract in the past 12 months.
Purchasers may have convinced themselves and their peers that relationships are the critical factor in modern procurement, but it seems they are yet to convince their suppliers.
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Och aye, yet another shot fired in the battle between buyer and seller to grab value. And why not?
..we have yet to convinve our suppliers and even more importantly those that train them!
I attended a workshop recently where Roger Harrop (@theceoexpert) stated exactly the same Paul – he even demonstrated with a graph what he felt procurement professionals would try to do. I said in my email response after the event that his comments just proved how far we in procurement had to go in changing our stakeholders perception of us.
Using something Kriss Akabusi said last week at the CIPS dinner our stakeholders are perhaps still “residing in the past” rather than realising we’ve moved on and having taken “reference from the past” have changed our ways. The challenge has to be getting the message out there that we’ve changed.
Perhaps Dr Reed Holden has missed the Procurement Press over the last ten years?
Surely the challenge to buyers is to convince stakeholders (and a seller is a stakeholder in a transaction) that we can elicit better value rather than a cheaper price.
The cheapest solution may not be the better solution. The more comprehensive the offer, the more receptive the buying organisation should be to considering it.
Perhaps the message should be “instead of providing the minimum specification and attempting to upsell, contribute to the better value debate with a rounded offer”. This route provides opportunity for discussion and negotiation.
I suggested to someone offering sales training that he subscribe to Supply Management, however, on the whole they wont be reading our mags and visiting our blogs. It’s the media our stakeholders (internal or external) read that we, as procurement professionals, need to start to impact.
Although if as you say Dave we have all changed our ways over the last 10 yrs you’d think that our actions would be speaking louder than they obvisouly are.
I’m ertainly looking forward to getting our stakeholder views in the new Supply Management mag – including those where it’s not working as well as it could.
Just seen this blog which would suggest Sales is trying to change how they are seen too:
http://seanweafer.blogspot.com/2011/03/governance-in-selling.html
I dont see the fuss.
Pricing is a dark art.
Sellers want profits.
No amount of hand holding and kum-by-ya is gonna change that.