Procurement’s Perspective in B2B Sales

In B2B sales, there are various stakeholders you and your team need to work with to secure business. Research suggests it is at least 6 or 7 stakeholders who get involved in any single purchasing decision.

This number seems to be increasing year-on-year, for various reasons, not least because of globalised teams comprised of individuals who are trusted on particular parts of the business and whose expertise and opinions are relied upon when investing on something new in their area.

Providing the right information in a responsive and comprehensive manner, coupled with a genuine desire to help your stakeholders achieve their goals and reap the value you’ve shaped together, often makes up most of the sales & buying process. However, there comes a time when the formal buying/procurement stakeholders get involved and their motives, goals and understanding of your goods/services are not necessarily the same as the stakeholders you’ve been working with up to that point. Understanding how to handle procurement teams is key to success at this stage.

They are driven by price, risk, and value, yet often notorious for seeking a last-minute price cut or something more than what is on the table. This leads many salespeople to brand buyer/procurement teams as an enemy with whom you must ready yourself for a tough, sometimes gruelling negotiation. However, this need not be the case. They are people, just like you, I, and all other stakeholders in the process. Understanding the key drivers in their role, along with their individual business goals and motivations, is key to building successful relationships with them and ensuring you don’t “lose out” at the last hurdle.

Key Drivers

Cost

Cost is not simply the price you ask from your prospective customer in exchange for goods and services. There are a variety of other costs buyers and procurement need to consider in their assessment of the overall cost and value of your offering. These costs are different for every company, irrespective of whether your price is the same. That’s because what you offer will invoke some sort of change in your customer’s business which comes with its own costs, some of which are higher than others and more expensive for one customer than the other. These include:

·      Opportunity cost – The loss of other alternatives when your good/service is chosen instead. Customers need to consider this and understand what they may be missing out on if they do or do not choose your good or service.

·      Cost of reassigning staff to your project – This relates to the opportunity cost above. What value could those staff members be delivering to the company if not assigned to your project?

·      Cost of training new staff on your tool – This relates to both the time involved and any additional price you charge purely for training. If you sell software or equipment, it’s expected that some services are conducted which include training. However, procurement may focus on the training part and see it as a time investment of individuals who would otherwise be adding value. They also think about the wasted cost if the business doesn’t reap the value you’ve shaped for them.

·      Costs to the business if it doesn’t work – This is measured in opportunity cost (using time and money on something that doesn’t work which could have been employed elsewhere), actual cost of staff & time employed and cost of the good you provide. The last point is likely to be contested and your customer is likely to demand reimbursement if what you offer doesn’t work due to your company’s fault.

·      Cost of hiring someone new to administer what your offering – Does your good/service require new, additional hires to administer or ensure success? While the customer may well have needed those hires in the first place (to ensure they didn’t encounter the problems you’re now helping them solve), it still constitutes a cost that procurement will tack onto the project you’re proposing.

·      Infrastructure costs – This very relevant when selling on-premise software. Does your software require the customer to invest in additional infrastructure or re-allocate infrastructure from one part of their landscape to another? What impact does that have?

You should be mindful of these various costs when shaping the value and ROI metrics for your customers, building an accurate set of data and information with it. While it may stack up nicely, be wary that procurement is tasked with driving down costs on all investment they’re responsible for. Therefore, don’t be surprised if they point out a discrepancy in your numbers or bring up another cost which hasn’t yet been considered. However, this doesn’t mean you should bring down the price of your offering as a result, instead, acknowledge it and provide a new perspective on the value of your offering considering the “new” costs.

Value

The value you’ve provided to the various stakeholders up to now and the value you’re helping them create if they choose to work with you often includes metrics which buyers/procurement teams are less interested in. For example, if you envisage value creation by reducing time spent by staff on manual tasks, you can quantify and monetise this value, but unless you’re proposing a reduction in head-count, it’s difficult to see where this impacts the bottom line, as the cost will remain because those staff will do more elsewhere, not have reduced hours.

Instead, procurement will often measure value based on the hard bottom line benefits, minus the costs of investment. For example, on how you can increase profitability, reduce costly system downtime, increase revenue or reduce customer churn. ROI and NPV calculations typically get considered.

Therefore, ensure you fully understand the value you can deliver and stick by it. Help procurement understand how it will impact the bottom line, whether directly or indirectly. Build their understanding of the value you’ve built and are ready to delivery, helping them recognise how it can benefit their specific goals and KPIs in their role. For example, your solution could help them drive down costs by replacing a competitor, you could be helping them reducing the number of vendors or you can offer them a pricing discount in exchange for something else of value to you (e.g. a case study) which helps them fulfil their goals while ensuring you get value in another form.

Risk

It is the responsibility of all stakeholders in the buying process to assess the risks associated with investing in your solution and changing processes as you propose. This assessment considers risk in various forms, including risk of impaired operational efficiency, risks of delayed projects due to staff being focused on your initiative, risk of failure and subsequent cost, risk of wasted time, risk that what your offering isn’t any better than what they currently have.

Procurement may not understand all the detail of what your offering and how it may technically impact the department/part of business operations that you’re looking to optimise/change, however, they do understand the risks associated with change and working with new suppliers.

They are tasked with ensuring risks are all identified, manageable and worthwhile considering your proposal. As part of this, they seek to shape the commercial arrangements in such a way that mitigates risks and clarifies how each party is responsible for mitigating those risks.

How to streamline engagement with procurement

Procurement may well be the final “hurdle” before getting an order, but they are key stakeholders in assessing all options in a shortlist. As such, they have influence over the final decision on whether your prospect goes with you or your competitors. Therefore, it’s important to build rapport and treat them with equal attentiveness and respect as all other stakeholders in the engagement.

In fact, if you can learn what the specific procurement individuals are targeted on and shape your engagement and offering to satisfy their needs as well, you can put yourself in a stronger position. Furthermore, there are some key points to consider which make working with procurement an enjoyable and easy stage of the process, not the final, gruelling negotiation stage which many salespeople see it as.

Be responsive

The speed you respond to customer requests and the comprehensiveness of the information you provide makes up your overall responsiveness. A high-level of responsiveness significantly contributes to sales success and it will have played a key role in getting you to procurement ahead of your competitors. At that stage though, you need to sustain the same standard to ensure procurement get the same positive experience their fellow stakeholders have up to this point.

The opportunity could still be competitive and the way you work with procurement contributes to your chances of success.

Be ready

Procurement usually only engage when formally requested and when, having assessed progress so far, they believe everything is in place (approvals etc.) to warrant their engagement. Once engaged, they focus on details and often like to move quickly.

Be ready with all the necessary documentation, detail and ideas on how to move forward. Ensure relevant colleagues are on hand to answer questions and help with paperwork at pace (e.g. legal, your own procurement colleagues, signatories etc.). The more prepared you are, the more responsive you can be and the more agile the whole process.

This helps complete the final stages of the buying process faster and with greater ease for both parties.

Stand your ground when necessary

Given that procurement staff are often targeted with reducing the cost of new and renewable investments, don’t be surprised if they ask for further discounts, longer payment periods or extended warranties at the final hour. Whatever you may have negotiated with the technical or economic buyer up to that point can be disregarded as the procurement staff want more. This isn’t uncommon in B2B software sales.

Be ready for this and prepare well in advance. Recommunicate the value and affirm that your proposal will deliver that value, at the price stated. Any change to the price will impact what you can deliver and therefore change the value, something neither party wants to have to revisit. If you must discount, discount less for the buyers earlier in the stage so you can provide something to procurement which isn’t more than you were expecting to discount overall.

Rather than simply discounting though, think about non-monetary benefits you can trade. For example, in exchange for extended payment terms, request a publishable case study. In exchange for signed paperwork being provided on a set time & date, offer to bring their key stakeholders to the number 1 industry conference all expenses paid for. Be creative, there are many valuable things to trade with procurement rather than just discounts.