Sales and procurement need to work with each other to generate value for their individual organization. By sales, we refer to the vendor sales team.
However, there is no shortage of sales advice on the internet from sales gurus on how to avoid procurement in the evaluation process – as if procurement is a plague and you should avoid it at all cost.
We recently heard someone talking about the involvement of procurement. As per them, once procurement is involved, you have an economic buyer in the room. They will always try to commoditize the product.
Some even talk about tactics to work with procurement.
Sorry to break the news but this is outdated information, and in this blog post, we would like to bust this myth that salespeople should try to avoid procurement as much as possible.
Instead, we provide the counter arguments and suggestions on how to work with procurement. We are not sales experts, our expertise is in procurement, so a lot of these suggestions are more from the procurement viewpoint.
Also, this is our viewpoint and it is possible that there are other procurement folks who might not agree with our viewpoint. And that is OK.
Salespeople stop trying to learn new ninja moves to work against procurement and focus on how to better work with procurement.
Let’s look at some specific areas on how sales work with procurement and we will provide arguments as well as solutions for each one of them.
OK, we have personally heard this multiple teams in our procurement career and we see this advised even today.
The great sales advise goes something like this
“Reach out to the prospect early and build the relationship and rapport so that you can avoid the RFP process.”
Is this true? We would say this still works for a small commodity purchase.
If the dollar amount is so small that decision can be made by a single owner or stakeholder, then yes this approach makes sense.
And if you sell a commodity product at a low price point, godspeed.
For the rest of the salespeople who sell a medium or large dollar volume deal, this is not true.
Here is what we have seen as the sequence of events playing over and over
Salespeople or Account executive reaches to the top stakeholder to talk about the problem and their solution’s value proposition.
Assuming that your prospect has this problem, they will
1. Reach out to their team and pass down your information or you would be asked to reach out to them.
2. In some cases, the stakeholder even arranges for a meeting where they call their team to look at the solution. Let’s call this person – champion.
3. Unless your champion micromanages every project, they are going to set up an evaluation team to look at the solution and put together a business case.
4. If they like your solution, You would be asked to provide a budgetary quote so that they can build the business case.
5. Is the deal done? Nowhere close.
6. If the champion finds the money to invest, then that’s great otherwise they have to go through the budgetary process to get the necessary approvals.
7. Assuming they can justify spending money on the product you are selling, they would probably do a quick market scan.
8. Now whether it is a formal RFP or just quick market scan through an RFI, it happens most of the time.
You have a better chance of winning that customer if you help then think through the evaluation process rather then approaching it with the mindset that you need to avoid the RFP at all cost.
Pro tip: Don’t avoid the RFP process, embrace the RFP process. RFP is the opportunity for you to educate the whole evaluation team (including procurement) on why your solution is the best.
2. The Myth of Commoditization – Procurement always want the lowest cost
First of all, if you are selling a commodity product then it would be treated as such unless there are other soft factors which are important for your customers or stakeholders. For example, lead times, warranty and post-delivery support etc.
So even if you are selling a commodity product, you can create a differentiator by aligning yourself with prospects who care about your soft differentiators.
Fr example, if you are selling office supplies, then I don’t think employees care from where they get it until they get it on time.
If you are selling office supplies, you can focus on your guaranteed next day delivery ( if you have one) and create a differentiator for yourself. Don’t agree with us, here are some tips!
Now let’s look at the case of non-commodity products
Let take an example of a product which might be a commodity but still, there is a lot of differentiation. CRM – Customer relationship management.
A quick search on Capterra shows that there are 598 vendors who provide CRM software.
Of course, it is tough to sell in this market but do you think that every product is treated equally by your prospects.
The answer is of course No.
First of all, there are different categories of software and they sell to different segments of customers. For example, a customer who needs enterprise-grade software might look at Salesforce and a startup looking at a CRM software might go with simple and affordable options like Pipedrive.
(Disclaimer: we don’t have any affiliation with any of these companies).
Your customer might be evaluating 3-5 vendors at any time and procurement help drives the evaluation process.
But it is not true that the lowest cost vendor always wins. In our experience, that only happens for commodity products.
During the evaluation process, good sales teams get the opportunity to better understand the prospect requirements and ask questions to better understand their needs.
Good sales teams understand their prospects operating environment and what is required to make the software a success at your company.
An RFP is your opportunity to help your prospect understand what is the total value of your solution as compared to just cost of your solution.
Our assumption is that any good salesperson would understand the difference between total value and cost.
Procurement role is to help their stakeholders pick the best value for the company, not make decisions on their behalf.
Pro tip: Focus on not your product differentiators but value differentiators. A commodity product can always be sold at a premium price if it is aligned with the business objectives of the customer. A successful sales team is always able to paint the path to success for their customers.
Salespeople are always looking for this answer, who is the decision maker so that they can bug the hell out of that person and somehow influence them to take a decision in your favor.
In our experience, there is no single decision maker, especially for large purchases.
Most of the decisions are the outcomes of a group decision. A group or team which comprises of different stakeholders who represent different areas of business.
There is obviously a sponsor of the project who secures the funding for the project but she is not going to take a decision in a vacuum without consulting her team.
Let’s stick with our CRM example and walk through the evaluation process through the lens of the customer.
Let’s assume that the sponsor of the project is VP of Sales. He is looking to automate the sales process to drive the productivity of the sales team and gain better information about their prospects and customers. A typical team would include representatives from following areas
1. Sales – Sales is the main driver of the project.
2. IT – to ensure that the product can be implemented and integrated with other systems.
3. Marketing – Marketing would like to understand how the new system would help them with other marketing automation initiatives.
4. Security – In case there is sensitive customer data which needs to be stored in the system then security needs to evaluate the security provisions in your system.
And so on. The reason there is representation from different teams is that each has their own set of requirements.
Keep in mind, not all requirements are equal. For example, IT requirements might be critical because without meeting those requirements, the system can’t be implemented.
But let’s say marketing requirements, do you need to meet each and every requirement? The answer is no but can you completely ignore their requirements – the answer is No again.
Salespeople who are excellent in their trait always consider the requirements of the entire evaluation team and not just one stakeholder.
At the end of the day, RFP responses get rated by the individual team members based on their areas of expertise. And the recommendation is generally driven by the overall rating and not just one decision maker.
Pro tip: Work with procurement team to understand the role of each player in the evaluation process. Don’t ask what can I do to get them on our side, ask what are their key requirements and which requirements are critical.
If you are a salesperson reading this, and you feel it this way. We agree with you and here is why
Procurement is not dealing with one vendor but multiple vendors. The goal of RFP is to do an objective evaluation of the capabilities of all the vendors involved.
The main goal of procurement is to ensure that all vendors get the same set of information and at the same time so there is no inherent advantage from any one vendor.
In others words, Procurement tries to remove the bias from the decision-making process. But, in most cases, there is an inherent bias in the decision-making process.
If you were that vendor who didn’t get the right information at the right time, would you like that?
We don’t think so.
If procurement doesn’t follow the process, how else it would control the inflow of phone calls and questions from different vendors.
If there was no formal process and guidelines, procurement would land up repeating the same information multiple times to different vendors and that is not an effective use of anyone’s time.
Some vendors feel that procurement is hiding information and not being transparent. Well, that is true in certain cases. For example, if you ask Procurement about – tell me your budget!
A couple of suggestions here
a ) Procurement is working with stakeholders to get the most relevant information and then package and distribute it to the vendor base. There is no reason for any ethical procurement team to hide information from its vendors. It doesn’t help anyone.
So what if you think that information is not complete or relevant?
b) Ask questions
If you feel that the RFP doesn’t completely mention all the requirements, then ask the procurement team.
There is always a timeframe set in the RFP for the invited vendors to ask questions. You can ask for clarification or ask for additional information which might be missing in the RFP.
The benefit of submitting questions during the allocated time is that not only you get answers to your questions, you also get answers to questions you didn’t ask because procurement would consolidate the answers to questions from different vendors before sending it out.
That way, you can get comprehensive information about the RFP.
What if you have a question after the allocated time window?
Just ask and most of the procurement teams would be happy to answer the question if that makes the RFP process more actionable or objective.
Some vendors don’t use the allocated time window but then send the questions afterward, that is not a good use of anyone’s time,
Pro tip: Yes, the process is slow and not fast enough for most vendors and internal stakeholders! But if you embrace the process, you can figure out ways to gain a competitive advantage by asking better questions.
It’s not that procurement involvement increases the time it takes to evaluate a vendor. But it is about how a decision is made within a company and the number of stakeholders involved in a company.
The time required also depends upon the process followed by the company for vendor selection and where the company is in their buying cycle
Your first call is the beginning of the engagement, not the sales process
The decision to look for a problem starts with someone championing the cause of the problem, whether that is a senior level decision maker or someone in the middle management who thinks the problem is big enough to be solved. At this time, most people would go out and do research on their own and look at potential solutions. They might or might not engage with vendors at this time.
Some stakeholders would be very enthusiastic about the problem they want to be solved and they might make you feel that they are ready to sign the deal.
That is where good salespeople are effective in understanding where the prospect is in the buying cycle.
The newbies treat this as a sign of customer ready to purchase and when that doesn’t happen, they get disappointed.
When a customer mention they need to involve procurement, that is, in fact, a good sign. That means they are ready to buy – thought it might not be immediate.
In some cases, they are formally evaluating the solutions so that they can put that in the next year budget.
The next step is the formation of an evaluation team who would be involved in the decision-making process.
Generally, that includes procurement representative, the department who is sponsoring the project and other supporting teams who would get impacted by this.
And here is where the process takes time. When procurement creates an RFP document, they are working with different stakeholders to understand their requirements and provide a comprehensive view to the invited vendors.
The challenge becomes when you have 2-3 different stakeholders and each one has a different set of requirement.
The more the number of stakeholders, the more time it takes for procurement to create the RFP.
So when you are working on your next deal, track the time it takes from initial contact to the time the RFP is sent out. You should try to map this to your other engagements and see if there is a pattern.
Is it taking more or less time or is it consistent with your other engagements?
As a rule of thumb, longer time generally means unclear requirements or a very different set of requirements. Sometimes it is just the nature of the RFP. For example – if the RFP requires consolidation and clean up of data, then, of course, that is going to take a lot of time.
The next step which takes time is how the decision is made. Once all the vendor responses are received, the evaluation team goes through evaluating response and assigning their ratings.
Some team members only rate specific section based on their expertise.
Once you have the rating completed, the team generally gathers to review the consolidating ratings and decide next steps.
In small teams and RFP’s, these steps might go pretty fast but in larger RFP’s – this is very time-consuming.
It is difficult to align calendars and ensure everyone is doing their part to keep the RFP schedule on track. We normally see companies slipping on their schedule in this step.
Once you have the rating, then the real horse trading starts, sometimes buyers like a solution they can’t afford! Or it is way out of the budget.
So they start looking at next best and what they need to compromise if they go in that direction.
In most of the well-run procurement teams, the goal of procurement is to find the best value for the company. That in most cases, means a total cost not just the cost of the product.
By working with procurement, vendors can effectively communicate their value proposition and understand what are the critical success areas for the customer.
In the end, a salesperson job is to find the best deal for the company, and procurement job is to find the best deal for their company. By collaborating effectively, they can easily find a happy medium.