How to approach procurement
If your sales team chases large, quota-busting deals, you've probably run into procurement – the dreaded department that enters at the very end of the buying process.
When procurement gets involved, sales cycles take longer, pricing and favorable contract terms get depressed, and in the worst-case scenario, the status quo and competitive quotes get reconsidered. Some senior executives believe…
“Procurement should be the most hated function in any company.”
…recounts David Swift, a seasoned procurement leader with experience at companies like Novartis and PwC. Procurement can kill a deal if sellers are unprepared to navigate a department that exists to make it as difficult as possible for the client to spend money.
And yet, I don’t think B2B SaaS sales and marketing teams understand procurement very well. We often leave it to the account exec and their manager to get the deal ‘through procurement’ without capturing learnings when things go well vs. not so well. Meanwhile, in one online poll, more than 88% of B2B sales professionals report dealing with procurement before closing a deal, and 60% said that 7 or more of their deals go through procurement every year.
Why aren’t more sales and marketing teams talking about procurement?
In this post, I’d like to change that. I will walk through what I learned about procurement from this excellent Modern Sales Pros webinar–which goes inside the mind of a procurement leader at Mercedes-Benz (I highly recommend watching the webinar from front to back). And I’ll suggest actions that marketing teams can take to enable their sellers when they face procurement.
Let’s find out how to work with procurement rather than have them work against us.
Insight 1 of 4: Procurement doesn't only care about saving money. They want to create value for the business.
That’s an important starting line. Why do procurement teams exist? They help large companies with big budgets make sound buying decisions. Cost minimization is one dimension, but it’s not the only thing that matters. After all, procurement teams are a group of professional buyers, and it’s their job to spend the company’s money. But they’re looking for opportunities that offer their company an advantage by aligning with the company’s priorities and overall business strategy.
Enable your sales team with the insights and tools they need to build a solid business case. Making a business case isn’t a silver bullet but a necessary part of any toolkit for working with procurement teams. I know the importance of building a business case isn’t lost on anyone (especially in today’s economy). Now you have one more reason to finally up-level your ROI game.
Arm your sales with the tools and frameworks they need to identify business drivers and create a tailored business case that justifies investing in your product. Consider arming your sellers with insightful discovery questions, templates, talk tracks, what to look for, and how to develop a solid business case based on their collected insights.
Insight 2: Giving a discount upfront does more good than harm
Procurement leaders want to work with vendors who can make their lives easier. Although there’s more to procurement than negotiating the lowest price, it helps your case when you show pricing flexibility right out of the gate. Contrary to popular belief, giving a small/good faith discount doesn’t put you in a weaker position. Instead, a small discount signals that you’ll be easy to work with. Procurement departments need to show wins on their scoreboard too. If you understand that, you can see how an upfront discount can position you favorably in the minds of procurement leaders vs. your competitors.
Here are 4 ways you can design your list pricing to take advantage of this insight:
- If the market can bear prices within a range, set your list price in the upper end of that range, so you have some room for a small discount right off the bat. Use that discount flexibility when pricing deals you know must go through procurement.
- Find your competitors’ list pricing and share your competitive insights with procurement, so you can show that you’re offering a real discount and that you haven’t set artificially high prices to fool procurement. I know researching competitive pricing is easier than done, but it’s worth the cost and effort!
- Rather than having ‘one simple price or all-in pricing’ for everything your product or service offers, consider an ‘unbundled’ pricing strategy. Charge separately for the numerous ways you create value for clients. Unbundled pricing could be a win-win for everyone involved, offering more transparency for buyers and giving you some flexibility when you need to provide clear discounts in working with procurement.
- Unbundled pricing also makes it easier to offer a menu of ‘give-get’ discounts. You can offer your procurement stakeholder the option to avoid certain charges in exchange for something else. For example, you can define how procurement can unlock the implementation fee waiver by agreeing to shorter payment terms.
Insight 3: Reputation and actual performance matter, not just pricing discounts
How do we know that Procurement teams don’t single-mindedly focus on the lowest price? Because they hold themselves to a host of KPIs, such as supplier performance, business productivity, risk reduction, and sustainability. If you can show how your product performs, improves productivity, and reduces risk, you’ll likely succeed in gaining procurement’s attention and support. This insight aligns with insight number 1, that procurement is hungry to show how they’ve enabled the company to innovate, move faster, and capitalize on opportunities–all representing opportunities for outstanding sales and marketing teams.
In addition to building a solid business case or using strategic discounts, find ways to deliver critical proof points based on customer data. Show your procurement stakeholder how your product performs on a variety of dimensions:
- Time to implementation
- Activation and usage rates
- Customer satisfaction rates
- Customer service response times
- Customer outcomes (innovations, speed, overhead cost reductions enabled by your product)
- If possible, show data from other customers in the same industry
- Bonus: find ways to subtly message how specific competitors or categories of competitors may fall short on the dimensions above and why
Make the bullets above come alive through various formats, including customer stories, reviews, product data, and survey data. For some dimensions above, I suggest conducting the data collection and analysis by a neutral third party, which adds an extra layer of credibility and robustness.
Insight 4 of 4: Involve procurement ‘soon after day 2’ rather than at the last minute
Procurement teams are often brought in at the last minute before the contract needs to be signed. That puts pressure on the team, making them less likely to prioritize your deal or give you the consideration you think you deserve. For example, the procurement team of just four people at Mercedes-Benz R&D in North America touches over 1,300 deals every year. If you navigate the procurement question with your champion well ahead of time, procurement can act as a tailwind. In some cases, if procurement is engaged from the get-go, they can actually help find budget when needed.
Here are three ways you can help your sales team drive success by bringing procurement to the table early:
- Interview procurement leaders in your category to understand how they approach buying decisions for solutions like yours. Treat them like another persona in addition to the usual suspects like IT and Finance. I guarantee your competitors aren't doing this.
- Equip your sales team with collateral to help educate their champion about procurement’s role in other organizations that have bought your product. At the very least, ask and remind your champion about the process required to get a contract signed and when procurement may get involved. Champions often forget or aren’t aware of the full buying process within their organizations.
- Create specific collateral for procurement leaders who get involved early in the deal cycle. Build compelling messaging and sales enablement assets targeted to the needs of procurement. The same needs you uncovered through interviewing procurement leaders in your specific category.
An investment never wasted
Good news: any marketing or sales enablement investment that resonates with procurement will also resonate with your champions and their other stakeholders. As a result, the time, cost, and effort invested in your ‘procurement strategy’ (no matter how big or small) can have a lot of leverage. The difference is that procurement teams are professional buyers who evaluate vendors for a living, unlike champions who may complete one or two purchases a year. So if you can show robust messaging, proof points, and documentation that's a cut above, you’ll likely stand out from your competitors.
I hope this article dispelled some myths about procurement and serves as your mini-handbook the next time you need procurement working with you rather than against you.