Why Sales Needs to Understand a Potential Client’s Procurement Process
We have all received that cold call/email where the individual is solely offering a product for your organization, with zero context on how it will actually address your organization’s specific pain points and needs. These emails will usually be ignored, as they lack the context needed to really push an individual to be interested. Even if the product truly is amazing - what does the sales individual actually know about what the organization needs?
Identifying Your Potential Customer’s Needs
Sales usually fall short within this area, as blindly sending out emails and calling people up has always proven to generate poor results. This is where a little bit of research allows an individual to identify the pain points within a business and strategically phrase their sales pitch to showcase how the product can cater to their customer’s needs. Here are a few examples of some areas that may showcase where to target your product:
Search recent articles (e.g. major layoffs tell you there is a strong focus on OPEX management)
Check job openings (e.g. there is a first-time procurement manager hire and the job description states a focus on building procurement systems, indicating there is an interest in purchasing procurement systems)
Check LinkedIn bios (e.g. look at the bios for employees who would be using your product/service)
Once the pain points are defined, decide on your target. You want to aim for the individual who would utilize the product and understands its capability and not just any random person who works at the company. If you are selling a software solution for dynamic discounting for Accounts Payable (AP), you may be thinking to target the AP manager, but they may be reluctant and seek to avoid any change management. It may be more beneficial to target the CFO or FP&A head that has a razor focus on OPEX and will see the value of dynamic discounting to save the company money every year. This is why it is critical to direct your focus on who will resonate with your product/service and that it addresses the needs of the business.
Understanding the Roles
Okay, so you got yourself through the door and now the company is interested. Now, you need to establish who the decision maker is and who has the power to pull the trigger on your sale. Asking questions like “What is the role of Procurement, Finance, and Legal?” can help you with understanding where to go next. More than likely, the business owner will be the one who makes the decision, but Procurement’s role would be to facilitate the sourcing process. With that being said, Procurement’s role may only be to push through the procurement request while the business owner is driving the sourcing process. If the numbers exceed a certain dollar value, then Finance will have to get involved as well with reviews/approvals.
Finance would want to ensure that the business owner is purchasing only what is required, which is why it is important to not get too excited when the business owner initially agrees to platinum customer support at $80,000 a year when finance says Silver Support at $40,000 would be sufficient. Understanding these roles ahead of time will beneficially impact your approach to the future client.
If Legal gets involved with business terms, then this will likely prolong the process and make it much more complex. Try to avoid this as best as you can and ensure the business terms are decided by the business owner and procurement. Legal will likely solely focus on legal terms and the critical path, alongside information security (Infosec) if infosec data is impacted. Infosec validation will vary by company, which is why it is critical to be well-prepared with any answers to their questions on information security.
Drilling Into the Sourcing Process
Thoroughly understanding your sourcing processes is essential and you will need to drill down on each step. While the process will vary based on the client, the key steps include the following:
Initial call - This call will be to gain a better understanding of your product/service. Try to have a video call rather than a phone call to ensure a better connection with your future client. Try to include a program manager on the call in addition to sales, as the program manager will have in-depth answers that sales will lack.
RFQ/RFP - The client may be using an RFX toolset or spreadsheets, in which the RFQ/RFP would be broken down into three key sections: requirement summary, sourcing criteria questions, and cost. It is important to only answer questions that are asked and try to be as objective as possible. Don’t sound robotic and provide cut-and-paste answers, instead try to tailor the answers specific to your client’s needs.
Follow Up - You made the initial cut and your product is looking like a contender to the company. On the follow-up (either face-to-face or in person), do not have the sales individual drive the call but rather the program manager. This is critical, as your future client will know who they are working with once the deal is closed. Focus on how your solution supports the functionality needs of the client. Be proactive and try to answer any questions about the potential risks that the client may bring up. This will ensure that there are no surprises and you can address how these risks can be abated.
Negotiation - You need to understand your leverage position on your pricing strategy. Are there competitors who have a similar product and/or is your product a better solution? Feel out who else the client may be talking to and assess what advantages you have compared to others. If the business owner is the primary negotiator, try to speak to the business owner’s biases (e.g. price is not likely a top priority, but more important is functionality fit and customer support). If procurement is the primary negotiator, then procurement is more of a neutral party with the primary bias to get the best deal possible.
Contract - Aim for a multi-year commitment and ensure there is clarity on price escalation on renewals. Entice them with reasonable fees for professional services and have a clause for client reference but only after you have proven yourself. While you may prefer to use your own paper, do not be surprised if you use the client’s paper for the contract. Have legal on standby to review any differences between the client's paper and your own. Lastly, ensure that SLAs can easily be measured without any disagreements between the two parties.
Understanding this process is critical when generating the sale, especially as you fine tune your sales strategy to lock it in. Once you are in the contract phase you are in the home stretch, you just need to ensure that when receiving the client paper everything is aligned and there are no gaps or “open to interpretation” concepts that aren’t being accounted for.
Determining the Buyer’s Price Ceiling
One of the most frustrating things about sales is that you have no idea what the buyer’s pricing ceiling may be - and no way to find out. It is likely that the price ceiling is being budgeted by the business owners with finance. Let’s look at an example:
Each year with quarterly updates they generate/revise the budget. There is going to be a software purchase in ‘23, in which in December ‘22 you would have a budget item for the SW purchase. The business owner enters $400,000 into the budget line for the SW purchase. The issue when FP&A reviews the ‘23 budget as a whole, then they might need to reduce it by 5%, in which the business owner may decide to reduce the $400K budget item. Therefore, the price ceiling is likely what the business owner decides to load the budget as and the methodology utilized to determine this would be subjective.
If there is a significant amount of OPEX pressure, then FP&A will be sure the business owner doesn’t exceed the budgeted dollar amount (e.g $400,000). If there is no OPEX pressure, then there will likely be flexibility if the $400,000 is exceeded. When the PR is submitted by the business owner (on approval workflow), FP&A will check to be sure the PR dollar amount does not exceed the budgeted dollar amount. Therefore, it really is hard to gauge what the price ceiling would be, but you could tactfully say to the business owner “what do you have budgeted for this purchase?” to help you get a dollar value to help gauge pricing.
Again, remember to keep in mind who you are negotiating with, as pricing can vary based on the individual. The business owner will likely allow a higher price, considering their focus is to best meet their business needs. If you are negotiating with procurement, their motivation will be to maximize cost savings.
Maximizing Your Sales Approach With Procurement
It is easy to lack the insight needed to effectively negotiate with procurement on pricing, which is why it may be beneficial to seek outside counsel to provide the thorough insight needed to advance your sales strategy.
Mike Glass runs GPC (Glass Procurement Consulting), a procurement consulting firm focused on optimizing a company's spend. Mike has worked in senior procurement management positions at NVIDIA, Google, Meta, Fitbit, and Flextronics. Mike would enjoy getting your insight on any procurement topic, feel free to contact Mike at mike@glassprocurementconsulting.com.
