Quite often, the procurement department (also called purchasing or supply management) is seen as an obstacle, if not an outright enemy, to the selling process. After all, these are the people hired to say “no” and make the selling effort (and the internal client’s buying decision) more difficult, rigorous, and objective.
From the salesperson’s perspective, it usually seems as if procurement’s job is to shut down or redirect the customer’s buying effort into some other supplier or process different from the product or service you are trying to sell. Therefore, in sales, procurement is more often the problem rather than the solution.
However, value selling can change that relationship and streamline your sales process.
Speaking as a former Chief Procurement Officer (CPO), I can tell you that often (maybe even most of the time), this “rejectionist” mindset within procurement comes from a long history of being burned with unsatisfactory or even unused purchases by its internal client. Frequently, buying decisions are initiated and made at the last minute and without adequate investigation—and the promised benefits to the buying company are nothing more than optimistic projections that are never realized.
Procurement’s concerns often reflect the fears and doubts of the CFO, who finds it difficult or near impossible to link the supposed benefits of a purchase to that department’s budgetary bottom-line (thus the old, “If this offering is going to save that much money, let me deduct that from next year’s budget,” response.) Typically, the buying customer is not willing to commit to that level of confidence in the benefits of the purchase; and hence the delay (or death) of the selling effort.
Value selling can change that equation. By more explicitly defining the benefits and linking those benefits to the purchase, value selling gets at the heart of what the procurement officer and CFO are looking for.
CPOs and CFOs don’t want to stop their internal customers’ purchases—they just want to make sure that they are needed and effective. If that means adding a new supplier or new feature to the corporate portfolio, then that’s okay as long as it truly will add value. The internal customer’s inability to speak (and commit to) the language of value is at the root of the problems he or she faces while navigating the internal purchase-approval process.
One word of warning: selling the value of the purchase without bringing the procurement and finance organizations into the creation of that value model will most likely fail. Procurement and finance are inherently suspicious of supplier-generated value models that promise hard to capture benefits and are based on unrealistic assumptions. Just having the model—and even actual results from prior customers—is not enough. You need the procurement and finance departments “fingerprints” on the model mechanics and assumptions themselves.
Both of those organizations need to spend enough time with the value model to believe that:
- The model is mechanically correct,
- The model’s assumptions are valid and applicable in this situation, and
- The model’s results are actually measurable in that company’s reporting systems.
Customize the model for that specific client if necessary. If you get the procurement and finance groups on board with the model, then you get them on board with the purchase. It's as simple as that.
Martin Salva is the former Chief Procurement Officer at CUNA Mutual Insurance in Madison WI and a former senior purchasing leader at the Ford Motor Company and at Capital One. Currently, as Managing Director of Timber Lane Advisors, LLC, Martin leads his own strategy and procurement consulting business and advises clients in a range of industries in the North American market.