Most companies ignore the relationship between their sales
and procurement teams. For instance, a company’s sales team is tasked with maximizing
gross profit on sales, while the company’s procurement team is tasked with
reducing the costs of inventory ownership. One creates profit by standing firm
on prices, while the other protects profit by reducing prices. One generates
sales and increases market share, while the other reduces the costs of
financing and inventory management. Both impact gross profit and both are
responsible for improving your company’s bottom line. The question you must answer
is the following: Is there anything your sales and procurement teams can learn
from each other in order to help your company attain its gross profit
objectives?
Bringing Two Opposing Views Together
Perhaps the best example of the inherent relationship between these two business functions is to reflect upon how both teams respond to price negotiations. Your sales team protects pricing by outlining a product’s features and benefits, while at the same time trying to get customers to ignore competitive bids. Your procurement team focuses on reducing pricing by moving the discussion away from a product’s features and benefits, and by getting vendors to be more aware of competitive bids. It’s natural that both can benefit from each other’s experiences.
Sales can better understand how customers perceive price negotiations, how they view competitive bids and some of the strategies employed by customers to get sales to give in to price demands. Procurement can better understand how vendors try to focus the conversation around a product’s features and benefits, and how they push procurement away from direct competitive bid comparisons. Now, why is all of this important, aside from the obvious benefit of how each party can generate profit and improve your bottom line?
The above video is from the post: Sales Negotiation: Defend Price, Customer Scare Tactics & Managing Concessions
Reducing the Costs of Sales and Procurement Training
In order to answer this aforementioned question, think of the high costs of sales and procurement training. Think of the costs of hiring sales coaches, the costs of negotiation training and most importantly, the costs of generating and closing qualified leads. For procurement, think of the costs of vendor management and acquisition, the costs of inventory management and the training costs and expenses that accompany procurement courses. All of these costs can be eliminated simply by getting your internal departments to train one another. So, how can you ensure both your sales and procurement teams benefit from each other’s knowledge and business knowhow in a natural, non-confrontational way? To answer this question, here is a simple five step process to improving the skillset of your sales and procurement departments.
1. List of Sales Strategies: First, have your sales team come up with a list of their best sales strategies, ones they use to focus the discussion around the strengths of your product offering. A good idea is for these strategies to focus on defending a product's price against lower competitive offers. Instead of giving in to price concessions, salespeople should focus the discussion around other ways to save their customers money. In addition, have your sales team come up with another list that outlines the most common concessions requested by customers, and how they are handled by your sales team.
2. List of Procurement Strategies: Second, have you procurement team produce a list of their own strategies. It should be focused on the strategies they use to move discussions away from a product’s main selling points, and onto a comparison of competitive pricing. For instance, how does the procurement department structure their argument around the need for vendors to reduce their price? Finally, have your procurement team come up with a list of the most common concessions sought by vendors, and how these are handled by procurement.
3. Role Play Negotiation: Each party will use their lists within a role play negotiation. You should have no problem coming up with a negotiation role play exercise that best defines your market, one where both your sales and procurement team can use their lists and negotiation strategies to full effect. The ultimate goal is for both parties to better understand how to generate and protect your company’s profit through their individual strategies. Again, your sales team focuses on protecting pricing, while your procurement team focuses on reducing pricing.
4. Debrief: Once the negotiation is complete, take the time to perform a simple debrief. It should outline the strengths and weaknesses of each party’s approaches and summarize how the negotiation unfolded. It should also include a period of reflection where each party sees each other’s list. This will help both sales and procurement better understand how each view the negotiation process and the strategies each party employed during the role play exercise.
5. A New List of Concessions for Both Parties: Your sales team will have a greater appreciation of customer perceptions once the role play negotiation is completed. Your procurement team will better understand the tactics employed by sales. Ultimately, you want both to come up with an entirely new list of concessions, ones that can be used to generate profit for sales, and ones that can be used to reduce costs for procurement. Your sales team’s list will comprise concessions that reduce customer costs without lowering your product’s prices. Your procurement team’s list will focus on reducing prices by granting concessions pursued by your vendor base.
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