Wednesday, February 10, 2016

12 Purchasing Comments that Cost Distributors Millions


Last week we wrote about the right activities for tough economic times.  One of our points was the need for improved negotiations training with our salespeople.  At the risk of repeating myself, I
stated:

“….major industrial firms have gone public with their plans to squeeze their supply chain.  Some have noticed, they can get additional discounts just by “asking” for them.  Customer purchasing types are going to negotiate with our sellers and we need to be prepared.  Based on my observations, most distributor salespeople have not received proper negotiations training in recent history.”

Last week I attended one of SPASigma’s inaugural events called, The Battle for Margin, a two-day seminar developed to assist distributors in growing their gross margins.  Much of the seminar revolved around negotiating with buyers. 

During one of the breaks, I had the opportunity to speak to several distributor salespeople who candidly shared their experiences with buyers.  In a short discussion over a cup of coffee, we came up with the twelve most common comments heard from professional purchasing types.  All agreed they had caved into these comments in the past, and swore next time would be different.

 



Sitting here thinking, most distributor sellers are programmed to please.  It’s in their DNA.  Almost all feel that getting an order is more important than driving gross margin.  Yet, gross margin is the life’s blood of their companies. 

In my thousands of sales calls with distributor people, I have only seen a few who stood their ground when they heard one of these comments.  The truth is, most stutter and stumble around on price objections like they were hearing them for the first time.

Purchasing professionals are trained to ask for lower prices.  Even the smallest concession is a win.  What are you doing to train your guys on the answer to these comments?

Here are a few suggestions:
Comment
Potential Answer
Last time it cost less than that…
How long has it been since you purchased this?  There have been a lot of cost changes over the past several months/years/decades.
You’re close, but this is competitive…
I think this is a pretty fair price.  Does our competitor offer all the same features and services?
You’re just a little out of the ballpark this time.
We might not actually be the cheapest on every order but our services and quality of product have to be worth something to you.
Can you do any better on this order?
I might be able to do better if you were to place a blanket order for 100 units over the next few months.
Sharpen your pencil a bit and it’s yours.
I can’t do anything about the price but I could save you money if you were to package in some of the other products you buy.
You’re going to need to better than that…
Is there something else I need to know about this particular order?  Based on what we have discussed so far, I think we are pretty much at a fair market price.
That’s more than I expected to pay…
On what did you base your expectation?  Maybe I could find you a lower cost solution by moving you away from the premium product.
That seems expensive.
Gee, that is the competitive price in the market.  Am I missing something in your specification? 
Your price is too darned high.
What are we high against?  Are we making the right comparisons?  Should we look at value-engineering some of the features out of the solution?
You’re kidding me!
No, this is a good price.  Should we talk to your engineering team about a less feature-rich offering?
Do you want to keep our business?
Yes, your business is very important.  But I can’t sell at a level that costs our company money.  Tell me why you feel I seem like I am not serious about your business.
Come back when you get your costs in line.
We benchmark our business against the best in the industry.  We provide top-quality service at competitive prices.  I want your business so please help me understand why you feel we are out of line cost wise.

Will you occasionally need to adjust your prices downward?  Nearly everybody discovers a situation where selling for a lower margin makes sense strategically.  But, not every time and not when you are providing the best overall value. 

The point of all of this is simple: 
We don’t need to give away margin just because the customer asked – not in tough times, great times or anywhere in-between.
 

BTW – the SPASigma Seminar rocked.

1 comment:

Priyanka Sekar said...

Thanks for sharing this Informative content. Well explained. Got to learn new things from your Blog on SAP SD