Article authored by Invigorate Advisor and Procurement Strategy expert, Hannah Tilston.
Successfully navigating the sales process into large companies can make the difference between a mediocre year and a game-changing one. Those hours spent honing sales pitches, getting the branding just right and building relationships ready for when the time comes to close the deal.
Today I want to offer you a different perspective. That of your customer – a Head of Procurement. In my 9 years working for a global business with thousands of employees I worked with plenty of suppliers, so I want to give you a peek behind the curtain to help you next time you’re selling into a large customer.
In this article I’ll share:
- What large businesses really care about when buying from suppliers (i.e. you!)
- How they approach the buying process
- How you can help them say “yes” and make buying from you as easy as possible
What do large businesses really care about when buying from suppliers?
Large businesses want to get the most appropriate product/service for their needs. This boils down to a trade-off between 4 factors:
- Cost – How much do you cost compared to other suppliers?
- Quality – What quality of product/service do you provide, for that cost? Does that match the quality they need? Lower quality could mean unacceptable risk; gold plated could mean prohibitive cost.
- Time – When can you deliver? Is it as fast and/or as flexible as they need?
- Risk – How much do they trust that you’ll meet your commitments? Does your track record and financial history back up that you’re credible? What other reputational risk might your customer be exposed to by doing business with you? Examples might be your environmental credentials, your employment practices or your presence in different regions.
There’s another factor too… driven by human nature.
Large businesses with thousands of suppliers have to be as efficient as possible in managing their supply chains. Therefore they standardise processes as much as possible. Procurement departments are measured on their cost of procurement. In other words, for every £ or $ paid to suppliers, how many cents or pennies are spent paying for the procurement team to manage that supplier relationship?
Therefore, the easier you make it for procurement teams to do business with you, the cheaper their cost of procurement and the more likely you are to be considered on a shortlist of potential suppliers.
Individually, each Procurement Manager in a large business may be managing many contracts, all at different stages, from negotiating through the delivery phase to closing the contract. Whilst trying to negotiate a deal with you they may be dealing with a problematic current supplier defaulting on their deliveries due to Covid shutdowns and another with cashflow issues.
On both a business and a human level, the easier you make it for large businesses to work with you, the more favourable the potential outcome.
How do large businesses approach the buying process?
The procurement process typically consists of 3 stages.
Firstly, in-house there’s a decision about what goods/services need to be bought. Typically they’ll scope out a set of requirements or needs. This is when the balance between cost/quality/time and risk is usually set. Internal budgets and delivery schedules will be major influences – procurement teams often have multiple internal customers they must satisfy. Consider buying automotive components – the procurement lead must buy them for the predictable demand of the production line, and the more unpredictable demand of the service centres.
Secondly, potential suppliers who could deliver the goods/services need to be sourced, often by releasing a request for proposal, quotation or information. These documents usually lay out the requirements in a specific structure. Pay attention to the structure, as it will give an indication about how submissions will be assessed!
Thirdly, the suppliers need to be assessed and down-selected. For important contracts, this might be staged as a long-list and shortlisting process. It will include 2 elements – assessing how well your proposal fits their requirements (and comparing to other potential suppliers), and also carrying out due diligence on your company to understand any risks in doing business with you. Assessment usually involves completing a scoring matrix – assessing different elements of your proposal against the requirements. Note that different stakeholders may assess different parts of your proposal – it’s unlikely to be just the procurement lead. For example – if you’re selling HR software it might be HR assessing the user experience, IT assessing the cyber security performance and legal assessing any GDPR implications, with procurement assessing the terms and delivery schedule. Procurement may not own the budget either – in this case it might be HR, so the assessment of cost would be jointly between HR and procurement.
As you can see, the second and third stages can be particularly resource-intensive if there are lots of potential suppliers bidding and a complex stakeholder landscape, hence large businesses often make use of preferred supplier lists (PSLs). These are lists of pre-qualified potential suppliers, avoiding the need to conduct new due diligence for each contract placed. If you’re looking to build a long-term relationship with a large customer, you should aim to be on their PSL.
How you can help customers say “yes” and make buying from you as easy as possible
If you’re selling to a new customer, it’s likely that the earliest you can be involved is stage 2.
Following these tips can help remove friction in your buying process:
- Answer the questions that are asked, clearly and directly.
– The harder it is for your customer to match your proposal to their assessment criteria the less likely you’ll be taken to the next stage. Sales jargon that pushes how great you are whilst avoiding the question will just cause irritation – not great for your reputation!
- Anticipate internal stakeholder concerns.
– Think about the internal customers that the procurement team will need to satisfy. If you’re selling a software it’s going to be the IT department and also the end users. If it’s a physical component it may be the manufacturing and safety team. Consider their concerns and likely priorities.
– If there are negative factors that are likely to appear in due diligence searches, such as unfavourable articles, be prepared to address those concerns openly and honestly.
- Have relevant case studies and examples of how you’ve delivered to other customers.
– This particularly helps to address any concerns about risk. Make them as tangible as possible, with facts and figures.
- Have due diligence paperwork prepared and ready.
– Yes, due diligence is time-consuming and administrative. But it’s essential and you won’t get a contract without it. The procurement team will likely enjoy it just as little as you, so being prepared will help make it as painless as possible all round.
- Expect to negotiate.
– How you negotiate gives a strong indication of what you will be like to manage as a supplier. If you play hard ball and show no willingness to find a win-win situation it’s going to impact your attractiveness as a potential supplier.
– Specifically think back to the 4 trade-off factors of cost, quality, time and risk. Most negotiations centre on one or more of these four factors, cashflow being included in risk. Consider your options and go in willing to collaborate for a mutually-beneficial outcome.
At the end of the day, selection decisions are made on both hard facts and human behaviour. You may have a contract in black and white, but it will be delivered through human relationships with your customer. Bear in mind both of these as you prepare your sales approach.
I hope this article empowers you with the insight to ease the process to the negotiating table and start a long and fruitful relationship. I look forward to hearing about your success.
If this article was helpful and you’d like to discuss your specific business situation with Hannah, please reach out to her via the Invigorate Platform.
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