Public Or Private Sector Buying?


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In this article we will see that while many public and private organizations still conform to the stereotype, a growing number do not. To overcome this challenge we will provide a new way of looking beyond the public-private dichotomy to get to the core of how different organizations buy.

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Public Or Private Sector Buying?

  1. 1. Retail Price: $9.99Public or Private Sector Buying?Does It Really Matter? Everybody knows that selling to the public sector is different to selling to the private sector. But the old public-private dichotomy is blurring and that means sellers should be cautious about letting it prejudice their sales process. “The public-private distinction can In this article we will see that while many public and private hide as much as it organizations still conform to the stereotype, a growing reveals.” number do not. To overcome this challenge we will provide a new way of looking beyond the public-private dichotomy to get to the core of how different organizations buy.
  2. 2. Is The Public-Private Dichotomy Out-of-Date?Trends in modern buying mean that the old ways of looking at thedifferences between public and private sector buying are beingundermined. The reality is that the public-private distinction can hideas much as it reveals. That is not a problem however as there is abetter way to look at the issue.It is important to go beyond the superficial public-privatedistinction to examine the style of buying. That involvesexamining dimensions that are more relevant and meaningfulfor the salesperson instead of trying to decide what salestechnique to adopt.We have developed a tool that will help you to get to the coreof an organizations approach to buying. It is called the 4Procurement Styles and involves placing an organization, publicor private, along a spectrum that examines key dimensions ofprocurement best practice:  The Focus of Procurement – Some procurement organizations are focused on achieving results, while others are more concerned with complying with the rules.  The Role of Procurement – Some procurement teams try to control all buying decisions, while others seek to enable, coach and support those closest to the decision.P a g e |2© The ASG Group 2012
  3. 3. Where an organization fits along these two axes determines theoptimal way of selling to them – as shown in the diagram.Why Map Procurement This Way?There are many dimensions of best practice procurement, but thetwo we have chosen (i.e. Role and Focus of procurement) are ofparticular importance to sellers. They determine so many aspects ofthe buying decision, including the: − Level of interaction between buyer and seller, − Degree of sensitivity to risk, − Formality and structure of the buying decision, − Decision making criterion, − Composition of the buying team.As a result the two axes (the Focus and Role of procurement)determine the best way to sell to the organisation in question. “Traditionally, it was easy to tell the differenceThe Traditional View Of Public-Private Buying between publicTraditionally, it was easy to tell the difference between public and and privateprivate sector buyers and to predict how each would act. That made buyers.”selling easy.Public buyers were generally assumed to be rules obsessed - focusedon the lowest price and somewhat controlling in their approach. Atthe other end of the spectrum private sector buyers were expected tobe more results-focused, with a greater degree of flexibility when itcomes to buying.P a g e |3© The ASG Group 2012
  4. 4. It is fair to say that compared to the private sector, public sectorbuying is dominated by procedures and regulations. Indeed, when itcomes to the Procurement FOCUS, compliance is the true North forpublic sector buyers.When asked for his views on the difference between public andprivate sector buyers, one sales manager joked ‘it is about 10,000pages of regulations backed up by directives and even treaties!’In the public sector there are rules, lots of them, and everybody mustapply them. It is not a voluntary code and there are penalties for noncompliance. In the private sector the rules vary from company tocompany, but more important still; compliance is (with a fewexceptions) not generally mandated by law.Of course some public sector buyers would rightly argue that youcannot have results, without rules, however the dominant view ofpublic procurement would be that rules come first and results comesecond.P a g e |4© The ASG Group 2012
  5. 5. If rules matter then policing them becomes very important. That oftenresults in procurement adopting a controlling, rather thancoaching role and pushes the organization into Quadrant 1and Quadrant 3 of the grid. In such organizationsprocurement is often seen as the policeman on the beatwhen it comes to buying decisions.Most public buyers will admit to an obsession with the rules,while most sellers in turn see public buyers as bureaucrats.But anybody who says public procurement is not measuredin terms of results achieved would in the case of most publicorganizations be wrong. But do public sector buyers see theresults differently.Cost savings have certainly come to dominate public procurement, butof course getting the lowest price is only one measure of whatprocurement can achieve. By its very nature public procurement ishowever limited in terms of the criteria it can consider (something youcan find out more about here).Sellers will talk of public procurement as being blinded by lowestprice. That is despite the fact that buyers are constantly reminded ofthe importance of MEAT (Most Economically Advantageous Tender)and total rather than lowest cost. “Buyers areProblems With The Traditional Stereotypes failing toIn the past sellers making traditional assumptions about how public conform to theand private buyers would act were generally proven to be correct. long heldBut, that is no longer the case. Buyers are failing to conform to long stereotypes...”held stereotypes and are refusing to be pigeon-holed. They are givingsellers a surprise.Some public buyers are behaving like private buyers: they areinnovating around procurement to achieve new results. Perhaps morealarming still (from the sellers point of view), some private sectorP a g e |5© The ASG Group 2012
  6. 6. buyers are acting like public sector buyers: implementing new rulesand procedures to regulate buying.7 Trends That Blur Public-Private DistinctionsThere are seven reasons why the traditional distinctions betweenpublic and private buying are being eroded:1. There is not just one approach to public procurement, butmany. That is to say there are considerable differences acrosspublic procurement regimes in different countries (the rulesmay be the same across Europe, but that still leaves great scopefor clever approaches to implementation).2. The gap between public and private sector buying isnarrowing, for example: − Buying in the private sector is becoming more rules driven, with managers increasingly being required to follow a defined set of steps or procedures in respect of buying decisions. − Buying in the public sector has become increasingly results and costs focused, with strict targets set for the curtailment of spending across the public sector.3. Public procurement is undergoing a process of review so manyaspects of what define public procurement within the EU are up forgrabs (we have written about the review of EU procurement).4. What is public and what is private can be confusing. Publicprocurement has a wider reach than many would suspect, withorganizations with significant public ownership, or in receipt of publicfunds being governed by regulations.5. Public sector buying comes in many shapes and sizes, for examplethe Utilities directives governing public Telcos and Electrictycompanies provide for greater flexibility when buying. In additiondifferent schedules, classifications and thresholds determine whatP a g e |6© The ASG Group 2012
  7. 7. rules apply and when. To complicate matters even further buyers inthe public sector are increasingly prone to follow EU procurementrules even if they are not mandated.6. Traditionally the private sector procurement executive was betterpaid and had a greater chance of being promoted up the ranks.Procurement in large organization has won for itself a seat at the table “What mattersin terms of senior management decision-making. However, it is thegolden age of procurement in the public sector too and as many more than publicsellers have noticed there are clear signs of increased professional- or private, is theization and sophistication among public sector buyers. extent best7. Public bodies may not be as well represented in the speakers line practice isup at global procurement conferences, but there are organizations, applied.”such as; La Poste France whose stories of procurement best practiceare as inspiring as any other.The bottom line is that it is not whether an organization is public orprivate that matters, but the extent to which best practice is appliedand neither the public nor private sector have a monopoly on that.Equally important is the notion of fit for purpose buying. There is noone ideal way to buy, rather that depends on a range of factors, suchas; the level of risk, cost and complexity involved. Quite simply, youdont buy office stationary the same way you buy a new ERP, or CRMsystem. That is yet another reason why a simple public versus privateview is inadequate.ConclusionThe bottom line is stereotypes can be dangerous. So dontpigeon hole the buyer too soon and let it prejudice how yousell. In todays marketplace sellers must look beyond thetraditional public-private labels and take each buyingorganization on a case-by-case basis.Where do your customers fit on the dimensions shown anddoes it affect how you sell to them?P a g e |7© The ASG Group 2012
  8. 8. The Science Behind This PaperThese insights and tools are based on:1. Buyer Research – our ground-breaking research into how modern buying decisions are made and the implications for sellers.2. Best Practice Research – Over 1 million pages of best practice sales case studies, books and research.3. Common Practice Research – Our peer comparison benchmark of 1,000s of your competitors and peers.The Sales Engine® and SellerNav are trademarks of The ASG Group.The entire contents of this document are copyright of The ASG Group and cannot bereproduced in any format without written permission.Want help in tackling your sales challenges? Contactenquiries@theASGgroup.comwww.theASGgroup.comP a g e |8© The ASG Group 2012