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Procurement: Challenging Sales Propositions from Value to Price.
- 1. Procurement: Challenging Sales Propositions from Value to Price This webinar will give you insights and a tool to help you manage the customers that generate most of your revenue or most of your profit. What leading companies are doing to respond effectively
- 2. Which is the best value? If I offered to hire you for one month (30 days straight!) and offered to pay you: $ 500,000 in the hand right now or 1 cent on the first day, but double your wages each day, Which would you accept?
- 3. Which is the best value? Total payout $500,000 vs. $5,368,709.12
- 4. Suppliers need to be able to articulate which option is really the best value. Collaborating with suppliers like Jones Lang LaSalle. Reduced shared services costs as % of sales by 33%. Delivering 75% more scope than 7 years ago. 36,000 documented & customer validated case studies. Deep & broad engagement with customers. Extensive customer operational data & insights. Used UPS expertise in telecommunications to write specification saving US $600,000 in telecommunications consultancy costs.
- 5. Strategic forces in business Products & Services Becoming harder to differentiate Product innovation slowing Competition Intensifying Price focused Big getting bigger Niche & generics Pricing Pressures Long-term strategies to reduce costs Increasingly knowledgeable buyers The rise of procurement Customers Revenue from a small number of large customers Different decision makers Demand for information & insights Your company
- 6. The rise of Procurement 2000 Less than 20% of spend managed by procurement Today More than 50% of spend managed by procurement 78% of CPOs report to C-Level Avg ROI 280% Best in class 700% Direct Indirect Services
- 7. “We (Procurement) never buy value. That’s not our role. We are there to drive costs down.”
- 8. 3 lessons from the best
- 9. How are procurement measured?
- 10. What do procurement care about? Logical Issues Emotional
- 11. “We would never buy on price alone. Price will never make up more than 50% of our criteria for a buying decision” Head of Procurement $70b retailer “We need help from suppliers to articulate value delivered (to Treasury, who only want savings)” Government Procurement Executive
- 12. Avoid getting trapped Account’s Business Contacts Your Internal Resources Procurement Contact Procurement want to control the relationship: One-to-Many
- 13. Avoid getting trapped Account’s Business Contacts Your Internal Resources Broad/deep relationships so you can communicate value: Many-to-Many
- 14. Does price = cost?
- 15. Price vs. Total Cost – Price $10.00 It’s about measuring all the factors… $30.25 VALUE Price $15.00 Increased Lubrication Increased Energy Increased Inventory Longer Installation Less Uptime Lower Reliability TCO Less Lubrication Less Energy Less Inventory Faster Installation Longer Uptime Higher Reliability TCO $87.25 $57.00 $5.00 Investment Creates $30.25 in Increased Customer Value
- 16. How do your customers define Value? • Not in terms of product and service features… • but in terms of delivering Results Improved Customer Outcomes Improved Operational Productivity Improved Asset Productivity Reduced Risk
- 17. “We (Procurement) never buy value. That’s not our role. We are there to drive costs down.” “That doesn’t mean we (the Company) would never buy on value. Procurement would never stand in the way of a line executive who felt they had identified the business solution they needed.”
- 18. 3 lessons from the best 1. Know how procurement are measured 2. Avoid getting trapped
- 19. Maintain focus on Value
- 20. “Opportunity is missed by most people because it is in overalls and looks like hard work” Thomas Edison
- 21. “There is no silver bullet. Organisations must do many things well to respond effectively to the rising influence of procurement.” Mark Shonka & Dan Kosch Selling Value in the era of Procurement
Editor's Notes
- As the trade becomes increasingly global your products and services are becoming more commoditised. There is more competition than ever to retain them. It is not just about retaining them, but retaining them profitably. The skills, knowledge and insights from your organisation are your only real source of unique value.
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