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The Capitalist versus the Communist

April 13, 2009

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“Comrade Smith, we in Corporate Purchasing have ways of getting discount. My friend, you will pay up 5% on multi-year data storage agreement.” Ah yes the socialist ideals that brought down an empire are still alive and well in the procurement department of the average Fortune 500 company.   Commoditization, 5 Year Plans, Product Harmonization Codes, a fanaticism for hand-signed documents in the age of eSignatures…. They’ve got them all.

Procurement, or Contracting as it known by old schoolers, is the final step in the sales process, and often the most frustrating. Historically deals were rarely lost at this late stage but our margins frequently got royally screwed. In today’s recession hit economy though, get a deal stuck in procurement for too long and we’re liable to lose our funding in yet another round of budget cuts.

When working with a new client, our deal sponsor is often the best source of insight / folklore on how to get a deal wrapped up. “Judging by current weather holding patterns over at HQ we’re probably looking at a 2-3 weeks to get to this signed.” Honesty is the best option when relaying this information back to our peers, nothing stinks more than our own team asking daily “are we there yet, are we there yet?”

So what’s the best way for a Closer to survive an encounter with those friendly bureaucrats in corporate sourcing? First off, realize what we can and can’t influence. In sales we talk with puritanical zeal about “working hard to make the numbers” and for many aspects of selling such as prospecting this is true. However we’re kidding ourselves if we think we can push a deal through procurement with mere work hard work; at best our influence is limited to nagging… and maybe a little street smart.

A few simple tips definitely make life easier and get deals inked quicker. First up remember who the big boy is. If our client is a multi-billion behemoth and the 8th largest economy in the world don’t plan on making too many changes to their Master Services Agreement (MSA), The more changes we make, the longer it will take to get through the legal dragon’s den. Be pragmatic and only push for amendments when they’re essential such as restrictive Non-Compete clauses. Also make sure we’re using an appropriate MSA for our business type; if we’re supplying this year’s Holiday greeting cards we probably don’t want to get landed with the contractual requirements expected of an IT company hosting sensitive client data.

Next, remember our contact in procurement, while a still sworn Red, is probably extremely busy with 10 other vendors all clamoring for their attention. Pick up the phone and ask “what can I do to make this transaction easier.” Often this mean helping out with preparing a first draft of the Statement of Work for everyone to review; we can usually complete this simple task quicker than the overworked soul in procurement and win valuable kudos points in the process too.

And finally be prepared for that dreaded last discount: procurement’s piece of the pie. Regardless of how many weeks of excruciating price negotiations have already gone on with our business sponsor it’s never too late for procurement to ask for an additional discount. Certain customers are notorious for it (a German CRM supplier springs to mind), bight your tongue and get ready to pay up… well a little bit any. Ways of protecting our margin include factoring the procurement discount into our initial pricing, sharing transparent costing data with procurement and never giving up more than 5% (any more and “you’ve been royally had my friend” as they say in London).

Once we’ve graduated from vendor scum to approved supplier it’s worth keeping on the good terms with our new friends in procurement. Sometimes the internal marketing restrictions placed on a supplier can feel like a violation of our constitutional right to freedom of speech. “Doug, did you spam our CEO? No? Then what’s this email from his admin… you naughty, naughty little boy.” Sometimes it’s better to beg for forgiveness than ask for permission

Regardless of what promises are made don’t expect procurement to sell for you, the approved vendor network is usually the last place a department goes to when they’re looking for a supplier. Our best bet is to share just enough information on potential new deals to build trust without getting into a situation where we need permission to sell to our client… or even contemplate sending an email to an executive.

In summary, we can avoid a Cuban Missile crisis with these five simple tips:

  • set realistic expectations on how long a deal will take to get signed
  • make sure the MSA is appropriate for our business
  • offer to help out with preparing the SOW
  • price up front for procurement’s price discount
  • keep procurement in the loop but never lose control of our internal marketing

And remember before you spend next month’s commission check, a deals not done until the paper work’s signed.

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4 Comments leave one →
  1. April 13, 2009 1:44 am

    Nice writing style. Looking forward to reading more from you.

    Chris Moran

  2. April 13, 2009 6:17 pm

    “Pick up the phone and ask “what can I do to make this transaction easier.”

    As the person on the other side of the deal….I have to say thank you for saying that. It almost never happens.

    At the end of the day, everyone just wants to close the deal and move on. Thanks for taking an extra step.

    • April 13, 2009 8:19 pm

      Cheers!

      There is no reason why the vendor can’t prepare the SOW on behalf of their company using the client’s templates for a first review of the contract. Voila instant value add beyond simple nagging!

      Keep in touch

  3. April 17, 2009 10:21 pm

    If your product/service isn’t differentiated in the mind of your prospect, the only point of negotiation will be price. And since procurement people pride themselves on commoditizing products so that the only thing that distinguishes them from one another is price (seemingly), then value has to be created elsewhere, e.g., in the relationship.

    As for socialism bringing down empires…Socialism didn’t bring down the USSR. Communism did. Every time you sit on the toilet, you’re a socialist.

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