Are You Bullied by Purchasing Departments?
Little Johnny was a Bully in Third Grade, Now He’s a Purchasing Agent
Are there Bullies in the Purchasing Department
New Sellers are Falling Victim to Bad Guys Dressed as
Purchasing Agents
All three of these were considered as titles for this
article. I like them all, but I don’t
like what purchasing people do to new sellers across our land.
Throughout my life, I have dealt with hundreds if not
thousands of purchasing departments.
Purchasing departments come with many different monikers – Purchasing,
Procurement, Supply Chain Management, Sourcing Group, Resource Management,
Indirect Supply Management, and probably a dozen more. For simplicity, let’s call them purchasing
people. Their main role is to handle the
administrative side of the products needed by their company with one large
additional task. Many purchasing people
are also charged with buying those products at the lowest possible price.
Most purchasing people imply that they are the decision-makers
for the products their organization orders.
The purchasing person will mislead you into believing they alone hold
the key to making headway within their organization. While this may be the case when referring to
commodity products, it never applies to the kinds of products we sell. With our types of products, the purchasing
person generally processes orders for products and services specified by
others. The others are generally –
engineers, maintenance people, safety professionals, quality technicians, and
occasionally someone in management.
While you should always maintain a good relationship with
the purchaser, never consider them the primary and most important contact for
any of your customers. Focus your
selling efforts on those noted above.
It is best not to start your initial call with any
company at the purchasing level. Starting
at this level does little to further your goals and often puts you at a
disadvantage for the next few months.
You will be encouraged to sell based on price rather than the features
that drive value to your customers.
There are situations where the purchasing person can
impact your life. Let’s review two
situations:
Situation 1:
Other distributors have the same manufacturer’s products
(or a product that can be cross-referenced) as your company.
Here’s the situation: You speak to an engineer
about a problem they are experiencing and after some research, you recommend a
solution that consists of several parts from a manufacturer who also sells
through a local competitor. After the
engineer agrees to buy your recommended product, the purchasing person places
the order with another distributor.
Later, the purchasing person tells you the other distributor provided a
lower price.
Potential options for turning
this situation into a viable future sale:
·
Ask the engineer if they can insist on buying it
from you because you offer after-the-sale support.
·
Determine if you can create an SPA with the
manufacturer so that you go into these situations with a price advantage. This will also serve as a tool to verify if
the manufacturer already has an SPA with the other distributor.
·
Quote a package instead of specific catalog
numbers. For example, a sensor, bracket,
and hardware could be made into a package that is labeled as a “conveyor sensor
system” which includes a sensor, all mounting hardware, cabling, and two hours
of support. This would cause the
purchasing person to go through extra work and unless the price is over a
thousand dollars, you will get the order.
·
In the case of cross-referencing, ask the
engineer to specify your product with no equals. This locks out the other guy.
Perhaps related to the above, but not exactly the
situation.
The purchasing person calls you or asks you to
visit. During the interaction, they say
the following:
“I know you invested a lot of
time and effort in helping our engineering team select the right stuff for this
solution (they are likely to call it parts).
I want to reward you with the order, but quite frankly, I found the same
products online for much less money.
Would you be willing to match their price so that I can give you the
order?”
What do you do?
Ask the purchasing person the following questions:
·
Are you sure the parts are genuine? Most of the time they are, but you should ask
anyway.
·
Does the online seller have support in case the
engineer has issues in making them work?
·
What happens if the parts don’t work right?
·
Are the delivery times the same?
·
Does the other company have local inventory in
case something is broken or needs to be replaced once in the application?
·
Does the other company handle warranties the
same as we do?
·
You acknowledged that we helped the engineer
ahead of the sale. Are you willing to
give us credit for the time spent talking about your needs and finding the
right product?
Remember This:
Purchasing people are paid to drive down the prices they
pay. Their ideal situation is to buy
products from the company with the best service and pay the price of the
company with the worst (or no) service.
Situation Two:
The Purchasing Person says they are required to go
out for three bids on every purchase.
Here’s the Situation: After working with a maintenance foreman to
find a solution to their problem, you’re told your solution is the perfect
answer. The order is then passed to the
purchasing department for processing. In
a follow-up with the person responsible for placing the order, you are told all
orders must be sent to three companies for competitive bids.
These types of arrangements are common with governmental
organizations.
What do you do?
Ask the purchasing person the following questions:
·
Does this rule apply to all orders regardless of
size? Many times, there is a threshold
for example, all orders over $500 must be sent out for bid. If there is such a threshold it may be
possible to break orders into component parts and get around the rule.
·
Do you realize that I spent considerable time
helping your maintenance group determine the right part to order? Will this effort be incorporated into the
bidding process?
·
Are freight costs and other fees included in the
consideration of the bidding process?
This may allow you to configure your price more attractively.
·
How will you select the other bidders? There have been instances where the
salesperson can suggest other companies for bidding. These might be resellers who purchase from
your company. If so, you can stack the
deck in your favor. The same applies to
your suppliers if they are known to quote such requests at the list price.
Other considerations:
If the customer must absolutely follow the three-bid
rule, you should question your ability to be fairly compensated for the work
you do as a solution-providing salesperson.
Further, unless your company is dedicated to price selling, you may
discover the gross margin dollars generated will never catch up with the
efforts put into helping the account.
Simply put – the customer will never be profitable unless you set some
ground rules. Here are some suggested ground
rules:
·
Explain to your non-purchasing contacts that you
cannot be sure your efforts in assisting them will be followed by an
order. The three-bid rule sets the stage
for a competitor who provides no support to capture the order because they have
nothing invested except shipping products.
·
If approached by the customer to provide
anything other than a part number, insist on a purchase order for your
time. This would include your time,
technical support time, specialist time, and any training provided to the
customer.
·
Some salespeople have found that technical
support does not fall into the normal purchasing requirements. This allows for alternative ways to make
money for their company.
An alternative to three-bid quoting
When technical skills are required to help the customer
determine which products are required, the distributor bills the customer for
the technical effort with the agreement the technical fees are subtracted from
whatever the final purchase price is based on the distributor’s quote.
For instance, the distributor charges $200 for initial
technical work. Their final quote for
the products is $1,000 but the customer can subtract the technical fee of $200
from the invoice – making the final price to the customer $800. This type of scenario is commonly used in the
consumer market with activities like home renovations. The companies who design the layout of the
room specify the layout and type of cabinetry to be used. The consumer can shop around, but if they
make the purchase from the organization doing the layout, the design fee is waived.
Recapping purchasing department dealings.
In our industry, purchasing people rarely select the
product. This activity is handled by our
main, and often technical, contacts.
Purchasing groups do select where the order is sent. A cordial relationship is required but should
not be confused with actual value-added, solution-based selling.
I will be publishing more situations tied to purchasing
to aid new sellers in their journey to sales mastery later. Stay tuned, and if you haven’t read my latest
book – The New Sales Guy Project. Check it out on Amazon.
a consultant. He serves as a personal coach to industry leaders across many lines of distribution. He has authored 5.5 books (one is almost done) and has written hundreds of articles for national trade magazines, including IMARK Now Electrical Magazine.
Frank is also a sought-after copywriter of marketing materials for technology companies. His charismatic, yet laid-back, easy-to-follow manner makes him a favorite among public speakers.
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