Procurement: Challenging Sales Propositions from Value to Price.
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Transcript of Procurement: Challenging Sales Propositions from Value to Price.
This webinar will give you insights
and a tool to help you manage the
customers that generate most of
your revenue or most of your profit.
Procurement: Challenging
Sales Propositions from
Value to Price
What leading companies are doing to respond
effectively
Which is the best value?
If I offered to hire you for one month (30 days
straight!) and offered to pay you:
$ 500,000 in the hand right now
or
1 cent on the first day, but double
your wages each day,
Which would you accept?
Which is the
best value?
Total payout
$500,000 vs.
$5,368,709.12
Suppliers need to be able to
articulate which option is
really the best value.
Collaborating with suppliers like Jones Lang LaSalle.
Reduced shared services costs as % of sales by 33%.
Delivering 75% more scope than 7 years ago.
36,000 documented & customer validated case studies.
Deep & broad engagement with customers.
Extensive customer operational data & insights.
Used UPS expertise in telecommunications to write
specification saving US $600,000 in
telecommunications consultancy costs.
Pricing Pressures
Long-term strategies to reduce costs
Increasingly knowledgeable buyers
The rise of procurement
Products & Services
Becoming harder to differentiate
Product innovation slowing
Competition
Intensifying
Price focused
Big getting bigger
Niche & generics
Customers
Revenue from a small
number of large customers
Different decision makers
Demand for
information & insights
Strategic forces in business
Your
company
The rise of Procurement
2000
Less than 20% of
spend managed by
procurement
Today
More than 50% of
spend managed by
procurement
78% of CPOs
report to C-Level
Avg ROI 280%
Best in class 700%
Direct
Indirect
Services
“We (Procurement) never buy
value. That’s not our role.
We are there to drive costs down.”
3 lessons from the best
How are
procurement
measured?
What do procurement care about?
Logical Issues Emotional
“We would never buy on
price alone. Price will
never make up more than
50% of our criteria for a
buying decision”
Head of Procurement
$70b retailer
“We need help from
suppliers to articulate
value delivered (to
Treasury, who only want
savings)”
Government Procurement
Executive
Avoid getting trapped
Accou
nt’s B
usin
ess C
on
tacts Y
our In
tern
al R
esourc
es
Procurement Contact
Procurement want to control the relationship: One-to-Many
Avoid getting trapped
Accou
nt’s B
usin
ess C
on
tacts Y
our In
tern
al R
esourc
es
Broad/deep relationships so you can communicate value: Many-to-Many
Does price = cost?
Price vs. Total Cost –
Price $10.00Price $15.00
Increased Lubrication
Increased Energy
Increased Inventory
Longer Installation
Less Uptime
Lower Reliability
TCO
Less Lubrication
Less Energy
Less Inventory
Faster Installation
Longer Uptime
Higher Reliability
TCO
$87.25
$57.00
$5.00 Investment Creates $30.25 in Increased Customer Value
$30.25 VALUE
It’s about measuring
all the factors…
• Not in terms of product and service
features…
• but in terms of delivering Results
How do your customers
define Value?
Improved
Customer Outcomes
Improved Operational
Productivity
Improved Asset
Productivity Reduced Risk
“We (Procurement) never buy value. That’s
not our role. We are there to drive costs
down.”
“That doesn’t mean we (the Company)
would never buy on value.
Procurement would never stand in the
way of a line executive who felt they
had identified the business solution
they needed.”
3 lessons from the best
1. Know how procurement are
measured
2. Avoid getting trapped
Maintain focus on
Value
“Opportunity is missed by most
people because it is in overalls
and looks like hard work”
Thomas Edison
“There is no silver bullet.
Organisations must do many things
well to respond effectively to the
rising influence of procurement.”
Mark Shonka & Dan Kosch
Selling Value in the era of Procurement
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