THE FACULTY QUARTERLY

SPRING 2013

Get Smart

 How sales is getting wise to procurement

If procurement has a strong cost focus right now, there’s every likelihood your sales team does too. Anyone connected to the sales side of their business will know that as competition intensifies, it’s becoming much harder to persuade customers to pay a premium, even where the offering is superior.

“One of the most common misconceptions I hear from suppliers is that procurement only cares about price,” says The Faculty’s Managing Director Andrew Cordner. The reason for this might be that ‘old-school’ procurement tactics have tarnished the profession. More likely, however, it comes back to suppliers’ - and in particular, their sales and account management teams’ understanding of the procurement process.

“Sales and Account Management executives have realised there is a key capability gap within their team,” says Andrew.  “Where sales execs may once been able to simply list all the benefits of their offering and spin generic marketing collateral, commercial procurement professionals are demanding new levels of value from their suppliers, particularly when asked to justify a premium price.” 

As cost control initiatives increase, sales teams must not only better understand how they can influence the procurement process, but develop a compelling customer value proposition (CVP) that will allow them to charge a premium price.

“We’ve seen a significant shift within our own client base – more and more, Account executives are approaching The Faculty for help to improve their understanding of the procurement process, and how they can influence outcomes,” says Andrew.

Case in point: The Faculty was recently engaged by Pacific Brands Workwear for insights into how companies manage procurement of Workwear, Footwear and PPE Industrials. Through the interview process, insights were uncovered into how customers are managing this commodity, what pressures and frustrations they were experiencing, and ultimately what they value.  

In addition to this, Pacific Brands Workwear requested training for their Account Management team around fundamental procurement processes and frameworks, covering topics such as:  

• Procurement terminology
• A framework for understanding the procurement decision making process
• Negotiation fundamentals
• Cost modelling
• Insights into customer relationship management.

On what prompted Pacific Brands Workwear to undertake this progressive initiative, Leisa Cashen, National Business Manager, reflects:  “By improving our understanding of our customers’ businesses, in particular what they value, how they measure value and what are their unique requirements are, we can sharpen our CVP.”

The flow on effects of creating a more meaningful CVP are win/win: Equipped with a compelling CVP, the supplier will win more work and may even justifiably be able to charge a premium price for more ‘valuable’ products or services. Likewise, the buyer stands to deliver greater value back to their business through the supplier’s unique understanding of business context, the quality of the relationship, and potentially even lowered costs.

“Through this exercise, we have gained greater clarity around how our customers are defining ‘value’ and can now work to demonstrate and document this more clearly,” says Leisa.  Indeed there are many account managers who purport to be able to save a business money without a robust means of substantiating this.  Providing case studies or cost models which document benefits that existing customers have actually received, will help Sales and Account Management executives demonstrate their CVP at work.

“For procurement, the key take-away from this shift is that your suppliers are better informed about your business and the procurement process than ever before,” says Andrew.

“As procurement leaders, you need to be aware that suppliers are driving this ‘discovery’ right now and ultimately this will translate into the account management side becoming stronger negotiators.  More than ever, you’ll need to have confidence in the capability of your procurement team.” 

Beyond capability, Andrew also highlights opportunities for procurement to partner with more informed, forward thinking suppliers like TWG:  “Procurement professionals should not dismiss a well-crafted CVP as mere sales puffery,” he says.

“The formulation of a strong CVP forces the supplier understand what their offerings are really worth to their customers, smarter choices in developing new products and align them to procurement definitions of value.”