Type and hit ENTER

  • Home
  • Articles
  • About
  • The Book
  • Media
  • Speaking
  • Subscribe Free
  • Advisory
  • Contact
GET CONNECTED

 

"Witty, clever and extremely relevant in these godforsaken Zoom times." Zoë Foster Blake

Book on sale now from Penguin Random House.

  • Home
  • Articles
  • About
  • The Book
  • Media
  • Speaking
  • Subscribe Free
  • Advisory
  • Contact
The Raccoon Bypass: Outflanking Procurement
Share
Articles

The Raccoon Bypass: Outflanking Procurement

May 13, 2019
-
Posted by Ian Whitworth

Why not listen instead? 8 mins.

Taste The Bin Juice

For those of us in business-to-business world, there’s nothing quite like your long-term corporate client telling you the purchase decision is out of their hands, and is now in the sinister clutches of the procurement department.

So their corporate memory of those times you saved their ass from self-inflicted disaster has evaporated, replaced by cold benchmarking of you against a clutch of cut-price randoms.

The procurement people use all the right words. They promise to take a “holistic” view that values “quality and service metrics”, not just a brutal reverse auction down to the lowest, bottom-feeder price.

After due consideration of the 200-page document you prepared over nights and weekends, they choose: the lowest, bottom-feeder price.

I’m sure the Institute of Certified Procurers would argue with this, and could send me a raft of case studies where some company chose quality at a higher price to better meet their needs. But in 100% of my tendering experiences, and those of people I know, those procurers are down on all fours like raccoons, scratching down to the absolute bottom of the scraps bin, lickin’ up that tasty bin juice.

(Hi to the several nice, professional procurers I know, you do not drink bin juice but you know exactly who I’m talking about.)

Stop Saying Quality and Service. Focus On Risk.

It’s partly our own fault for letting our product fall into exactly the same decision category as ring binders and paper towels – apologies if you actually are in those fields. Those are seen as low-risk decisions, with no serious consequences if the product fails. And risk is at the core of being able to sell your stuff at a decent price.

Not quality. Not service. Business people love to talk of their quality and service. They honestly believe it, and it may even be true. The client doesn’t believe a damn word of it, thanks to the wild exaggerations of all the supplier sales people who have come before you. Corporate clients assume that all the competing suppliers are 100% the same.

Their motivation is risk. The art of selling, pitching and tendering is all about creating fear of the uncertain. If all your business is tendering on a level playing field, you will have a break-even business, forever. Unless you’re in fields like construction, where you tender at razor margins, then give the client a savage waterboarding on every slight variation.

To understand risk, you must be able to put yourself in the shoes of the client. Most suppliers are too close to their own product to do that. To use my own field of events and conferences as an example, suppliers always focus on the expense budget: the actual money spent on airfares, venues, food and beverage, AV and all the other items they juggle around the spreadsheet trying to meet the magic number.

And if the raccoons think they can get that number down another 2.5%, you’d better believe they will. Their bonus is riding on it.

What’s The Opportunity Cost?

But how much cash is actually at risk when they choose the cheapest supplier? Consider a two-day sales conference for 500 people. With travel, they’re out of the office for three days. Let’s be conservative and assume an average sales salary of $80,000. With on-costs, that’s about $60 per hour. Multiply that over three days and the client is spending $720,000 on salaries alone.

That’s the opportunity cost of the event, putting a value on all the things those staff aren’t doing because they’re in a ballroom being motivated. It’s quite a chunk of cash. Plenty can go wrong, and it’s a one-off event. There’s no “come back tomorrow, it’ll be all good then”. Miss that window and the client has burned north of a million dollars.

A bad batch of paper toweling procured on the cheap can be sent back to the distributor with little consequence. There are no documented instances of a company brought to its knees by paper towel failure (which sucks because I’d really like to write about it). An event? Keynote presentations can be killed stone dead with a chip failure in a single device, the sort of thing that happens around the office every day.

Even if nothing goes terribly wrong, an event that’s just drab and pedestrian means nobody’s behaviour will change as a result. If I was the client spending that much, I’d want them walking out of there punching the air with excitement after two days of inspirational thrills.

The client’s upper management care about these issues. The procurement department thinks you’re just scaremongering to jack up the price.

You Have More Competitors Than You Think

So it really helps to have a relationship with upper management. Then you can understand their real commercial motives. Follow the money trail. Find out how people get their bonuses. Ask your client to get you meetings with the people above them. It takes time, you can’t establish trust overnight, but it’s an essential long-term project.

Because in the example above, their goal isn’t a conference, it’s a fired-up sales team to shift more product. If they could spent the million dollars on increased commission payments, espresso machines in their stores, or incentive trips to Disneyland, any of those things might achieve the same result.

Those are your competitors as much as the companies that do the same thing as you.

If you can talk to upper management about higher-level strategic issues, you become more of an adviser than a sales hustler. You begin to understand their real risks better. So they’re far less likely to put the next decision through the procurers.

Upper management have the power to do a raccoon bypass if they really want to.

Big 4 Accounting Shows How It’s Done

This is why every service imaginable that generates chunky fees is now being vacuumed up by the Big Four accounting firms. They’ve now started to eat advertising and marketing, promising an accountable, businesslike alternative in a profession that terrifies clients with its madness and witchcraft.

They’ve managed to go direct to the boss across corporate and government. I’ve lost track of the number of people I know — expert consultants in advertising, project management, quantity surveying, construction, engineering, education and other fields — who have had corporate clients move their work to the Big Four.

Where those clients happily pay much higher fees for the work.

Because risk.

It’s a genius business model, and given the Big Four’s ability to sniff out heavy-fee opportunities, it’s only a matter of time before they come for the plumbers.

The Art Of The Deal

For some actual expertise (for once), I spoke to Cian Mcloughlin, whose company does win-loss analysis for major tech and telco tenders. He has actually witnessed a decent number of sales won by higher-priced bidders, “when they were able to draw a direct correlation back to their ability to manage and mitigate risk.”

His advice: every client likes different things. They have different ideas of what “value” is, and it might not be what you think it is. Take the time to get to know what those things are, and build your pitch around them.

“Then when procurement comes in swinging the axe, you can loop in your key sponsor and ask them which of those hard fought concessions they would like to remove in exchange for a 2.5% additional discount.”

Your client probably still wants all of the things, so you can negotiate on the basis that you’re the best option. And those raccoons can stay behind the wire where they belong.


Hey reminder to subscribe if you came here from some non-email source. It’s free, it’s painless, it’s every Tuesday.

May 13, 2019

Related News

Other posts that you should not miss.
Articles

The Sales vs Operations Cage Fight: Some Refereeing Tips

February 4, 2019
-
Posted by Ian Whitworth

Actually delivering for the customer is the strongest way to build your brand, and for that, sales and operations must learn to get on.

Read More
February 4, 2019
Posted by Ian Whitworth
Articles

Too much information: 5 things your website doesn’t need

July 18, 2022
-
Posted by Ian Whitworth

Does more website information mean more sales? Or is it a distraction, burying your core advantages beneath a mountain range of generic info-spam?

Read More
July 18, 2022
Posted by Ian Whitworth
Articles

Low-hanging fruit & the helicopter view: people are not idiots

November 29, 2021
-
Posted by Ian Whitworth

Other people's jobs are harder than you think. When you use these phrases, it reveals you underestimate other people, and that leads to bad decisions.

Read More
November 29, 2021
Posted by Ian Whitworth
← PREVIOUS POST
Working For Mister Stalky: Why Staff Surveillance Is Counter-Productive
NEXT POST →
Marketing To An Audience Of One: The Radiohead Quest

3 Comments

on The Raccoon Bypass: Outflanking Procurement.
  1. Jason
    May 14, 2019 @ 5:07 am
    -

    Another example of finding out what your client wants to buy, instead of you offering what you want to sell. Gimme some of that bin juice.

  2. Ian Whitworth
    May 14, 2019 @ 7:21 am
    -

    It’s bin juice hour! ??

  3. NINE TIPS ON HOW TO MAKE MONEY FOR SMALL BUSINESSES - Business Wise
    December 12, 2020 @ 11:05 am
    -

    […] The further up the management ladder you can contact on the client side, the better chance you’ll have of getting some business out of them. (Read how to do that here). […]

FREE E-BOOK

SUBSCRIBE
MOST POPULAR
  • Last-minute grocery businesses are a massive bag of dicks
    June 27, 2022

    It’s a business model that seems to have cherry-picked all the worst, hardest, most expensive elements of running a business.

  • Scotty Marketing
    3 post-Scotty lessons: good marketing is not like that
    May 30, 2022

    Don't be a product that people only buy once. How to make marketing a force for honesty and profitability in your business instead.

  • Undisruptable South Korea deal
    Undisruptable’s first international publishing deal
    January 31, 2022

    Undisruptable will see its first international release later this year and it's not in a country you'd expect.

  • “An Australian business classic.” Reviews of Undisruptable
    July 12, 2021

    The reviews are in and they are very good.

ABOUT IAN WHITWORTH

Ian Whitworth is a reformed advertising creative director turned entrepreneur with a successful national group of businesses that he doesn’t work in day to day. Read more

POPULAR TAGS
management
branding
Sales
Marketing
jargon
Persuasion
Covid 19
Nickelback
Pitching
Coronavirus
strategy
MBA
startup
Copywriting
Motivation
Business
CEO
Design
Graphic Design
Business Travel
Elon Musk
Frequent Flyer
David Attenborough
Advice
Lacey Filipich
Saxton Speakers
Scene Change
Penguin Random House
Gary Vaynerchuk
Sales Pitch
Tendering
Planning
Conversation Skills
Customers
Customer Service
AI
Shingy
LinkedIn
Simon Sinek
Success
Presentations
Mr Pigden
Motivators
Entrepreneur
Ian Wright
Archives
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • Contact
  • Subscribe
  • Privacy
  • Terms & Conditions
© Whitworth Communications 2020
The Raccoon Bypass: Outflanking Procurement - Undisruptable