Procurement Demands vs Vendor Requirements

Ian, welcome to the same side selling podcast. I am

your host. Ian Altman. On this episode, I want to talk about

procurement and how people deal with procurement and some of the

biggest mistakes that they make, and what you can do instead. So

during one of our live coaching sessions in our same side

selling Academy, someone brought up this notion, and they said,

Look, I'm dealing with procurement. I gave them some

different suggestions to handle. And they said, well, we can't do

that because their procurement people insist that we do things

a certain way. They insist that we give them line item pricing.

They insist that we tell them what our cost is so we can

justify why we're charging more. And the question I asked was

this. I said, So, so what are the things that are non

negotiable from your perspective as a vendor, as a supplier, as a

seller, what are the things that you demand? And they said, Well,

what do you mean? I said, Well, so what you just told me is you

have to provide line item pricing for every single item,

and you have to disclose your cost basis for each of those

things. Presumably, they also need to know your shoe size,

your inseam, whether or not you dye your hair, and when's the

last time you had a physical examination? Because if we can

let our customer make unrealistic demands, then there

must be no limit to what demands they can actually request. But

instead, what if we start thinking about what is in our

customer's best interest? So if we allow ourselves to be

commoditized, then we could easily say, look, here are a

bunch of line items, and here's what I charge for each one, and

here's how much profit I make for each one. And now our our

customer, their procurement people, in essence, now dictate

what your profit margin can be and what your value might be.

That's a trap. It's a mistake, and that puts you into the role

of an order taker, not as a subject matter expert. So the

first thing is that we can't get into this situation where we

accept unrealistic demands from our clients or prospects,

especially from their procurement people. The second

thing is that people will say, Oh, and here are the rules. You

have to follow our rules. Well, that's fine. Those are their

rules for procurement. But what are this? What's the structure

that you suggest to your clients that helps them achieve the

greatest results overall? Well, that's a totally different

discussion. So how do we do that? Well, early on with we

want to engage the line of business people. And if you

start with procurement, you might say, look, here are some

things that we look at that really dictate success with our

clients. We want to understand how they're going to use this

what's worked and hasn't worked in the past, because it might be

that our organization would just replicate the same mistakes you

had in the past, or there might be things that we would do

differently to give you a better outcome. But if we can't

understand those, there's a chance you could spend money

with us and not get a great result. How could we engage

these other people to make sure that what we're doing is

actually going to move the needle? Otherwise, you're better

off just using whoever used in the past. More than half the

time, the procurement people are going to say, No, we can't do

that. And the reason why is they already have a preferred vendor,

and it's not you, but a subset of the time they're going to

say, Oh yeah, that makes a lot of sense, which now shows that

they actually might have a genuine interest in what it is

that you do. Now we want to start articulating what those

things are, what matters to your client, what would you measure

for success? What worked well and didn't work well in the

past? What do they wish they would change? And that allows us

to now focus on the things that could be the differentiators for

your business compared to what they've experienced in the past.

Let's think of it this way, if you're 5% cheaper, but your

client doesn't have a good outcome? Was it a good deal? The

answer is no, it wasn't a good deal if they don't get a good

outcome. So we need to shift the focus from price to results. So

how do we do that?

Well, it's simple. We ask questions like, just because you

spend money with us doesn't mean we're successful. What would you

and I measure together six months down the road, a year

down the road, to know that we're successful? And they'll

give you an answer that question and then say, Okay, so let's say

we did everything we said we would do what might prevent you

from getting those results down the road. And they'll use. You

identify their own deficiencies, in which case you might have

services that would complement or overcome those deficiencies.

Now, when procurement comes back to you and says, Well, I need to

get a line item of every single thing, you might come back to

them and say, look, here's what you said. You're going to

measure for success. That's what we want to be held accountable

for. So if you want us to be the single point of accountability,

then delivering all of these products and these services

together and delivering those results, here's what the cost

is. Now I will give you line item pricing for every single

thing on there, which I'll probably list the retail pricing

for everything, and the combination of all those is

going to be less. So it might be that I, with you, listed

everything individually. It might total $200,000 you might

tell the client, if you do all this through us, it's $175,000

and procurement might say, Well, how's that broken down? Say,

Look, if you want, you can say it's 175,000 or $174,900 for all

the product and it's $100 for the services, or you can flip it

the other way. Really doesn't matter, but if we're ultimately

accountable, we're going to be accountable for the whole thing

at that rate. And what you're doing is you're showing that

you're really buying the solution, not just the items.

Now you might get a client who truly is coming to you just to

buy commoditized items. They're just trying to buy widgets from

you. Now you have to decide, are you okay selling based on price?

Because if you don't provide any services, if you don't provide

any differentiation, then why would they pay more with you

than with somebody else? So when you get in that situation where

your client says, oh, here are the rules that we have, what you

want to counter with is, here's the path that we have found

drives the greatest results for our clients. How do we need to

adapt that for your purposes? So their non negotiable was, here's

the way we want to buy stuff, and your non negotiable is,

here's the way we deliver success. And now let's have a

discussion about how we need to modify our formula for success

to fit the way you want to buy. And more often than not, your

client will come around to see that the way you're approaching

things for success is actually in your mutual best interest.

There are topics you'd like me to cover. Just drop me a note to

Ian at Ian altman.com I'll see you on the next episode of the

same side selling podcast. So long you.