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StreetSmart: How to Speak the Language of Procurement
5 Plays10 minutes ago
In this episode, Brian Dietmeyer talks to Carrie Welles about mastering the language of procurement. They explore the crucial skills sales professionals need to effectively communicate and negotiate with procurement departments. This insightful discussion delves into strategies for shifting conversations from price-focused to value-driven, understanding the internal metrics of procurement success, and the importance of aligning sales strategies with procurement processes. A must-listen for anyone in sales or sales management looking to enhance their negotiation tactics and build stronger relationships with procurement professionals.
Click here to open/download the article referenced, "Speaking the Language of Procurement."
Timestamps:
00:26 - Introduction to the language of procurement and its importance in sales.
01:42 - Brian's personal experience and evolution in understanding procurement.
02:50 - Key aspects of procurement language and initial client experiences.
04:47 - Strategic relevance of procurement and internal customer satisfaction.
07:31 - Discussion on the share of spend and its impact on procurement's strategic relevance.
09:17 - Exploring the effectiveness of lowest bidders in procurement deals.
11:08 - Aligning sales strategies with procurement processes.
13:19 - Common misconceptions about professional buyers and strategies to overcome them.
16:25 - Closing thoughts and additional resources on procurement language.
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Transcript
Introduction to Business Negotiation
00:00:01
Brian
Hello and welcome to another episode of Street Smart, The Negotiation Podcast. I'm b Brian Dietmeyer CEO of Think Inc. Business Negotiation Redefined.
00:00:11
Carrie Welles
Hello, Brian. I'm Carrie Welles with, of course, ThinkInc. I am a VP and a founder. What am I? I don't know.
00:00:21
Brian
it's it's it's it's much It's Monday, I can tell.
00:00:21
Carrie Welles
Anyway, it doesn't really matter.
00:00:25
Brian
What are we talking about today?
00:00:26
Carrie Welles
That's a totally funny thing. What's important is what we're talking about today. All right, so
Speaking the Language of Procurement
00:00:30
Carrie Welles
let's get to that. So we are speaking about speaking the language of procurement, which many of you who are watching, if you're in sales or you're a sales manager, we know this is a really important topic for you. So let's get started. All right, so Brian, let's start with, because you've written a lot about this, a lot of articles, you've written books. So why is it important to speak the language of procurement?
00:00:54
Brian
Because, well, the the the conversation they want to have with us most often, we're going to learn more about this later, but apparently the conversation they want to have is price, right? Your competitor's cheaper, you need to lower your price. and And so then we, you and I, I think on one of the last episodes talked about anchoring, then we and we start to have conversations reacting to that conversation about price and the competitive offering and that sort of thing. And what, what I've noticed over the years, and it includes me and probably you to a degree, you and I have both grown up in sales sales, leadership, sales consulting. We didn't know a lot about procurement. And if you don't know a lot about procurement, you end up having that really bad tactical level discussion they want to have. If you, if you, as you learn more, you can change that conversation to what's really going on behind the scenes.
00:01:41
Carrie Welles
Yeah, yeah,
Understanding Procurement from Industry Experiences
00:01:42
Carrie Welles
very true. Okay, so so in your experience, as you said, you you have been a long time sales consultant and how did you learn about procurement?
00:01:50
Brian
so So, you and I have both done this, but you know, I remember our our first procurement client was American Airlines in, you know, I don't know, 15, 17 years ago. And it scared the heck out of me because as a lifelong seller, but I find with procurement folks, we, you and I bring benefits to them because we understand the sales side. So I apologize to all you sellers that we have actually armed the enemy, but we have. So we've consulted to a all state American Airlines, Chevron, Ford,
00:02:18
Brian
I also wrote a negotiation book for buyers with a supply chain expert. So over the years, we've gotten a lot of chops on what happens behind the scenes at procurement. And I will say the primary reason we do it is to really understand what's happening with procurement, right? It's not a big part of our business, but it really gives you insight into how they work.
00:02:38
Carrie Welles
Yeah. Yeah. Okay. That's
Internal Customer Satisfaction vs Cost-Saving
00:02:40
Carrie Welles
great. So talk to us about one of the key things. So one of the key things about or what we need to know about procurement language.
00:02:48
Brian
Yeah. Well, the as I mentioned, the first client we had was American Airlines. and And I walked in and I was sitting in the procurement lobby and Carrie, there was a magazine. I think it was like procurement today was the magazine or something. So if you're really bored, read procurement today. But it was sitting on, of course, on the coffee table in the lobby and the name to American Airlines is the procurement organization of the year. And I'm thinking, what, what am I going to do to help these guys? And then I looked up on the wall.
00:03:17
Brian
And I saw this 83% customer satisfaction. I think that was the number. I know it was it was pretty high. And I didn't have a clue what what that meant. and And it's interesting, too, because in in running some of these workshops with sales reps, I often ask them, what what do you think that meant? Who are there you know internal customers who have given that satisfaction? why why do they give them eighty three Why are they happy with them at the 83% level? And but i'll I'll cut to the chase that The people that are rating them are the people they are buying on behalf of, right? They're internal customers, right? If they're sourcing laptops, it's the sales team, it's technology, it's, you know, and anybody who's interested in in this this particular buy. and And if they simply go out and buy the cheapest laptops available on the market, right, that aren't fast and they they break a lot and don't have good service and support, internal customer stats going to be super low.
00:04:10
Brian
So that's, that, that was a huge wake up call to me cause they'll tell us all day long that you need to lower your place, blah, blah, blah, blah, blah. And, and reality is they really care about the requirements of the people they are buying on behalf of ah procurement doesn't buy for themselves.
00:04:25
Carrie Welles
Yeah. Yeah. I was thinking as you were talking about one of our partners, Rosemary Coates, who does a lot of work in supply chain and procurement. And yeah, she would say, look, if you're not helping procurement be more strategically relevant back to their organization, you that's a big mess.
00:04:41
Brian
Yeah.
00:04:41
Carrie Welles
That's a big mess. And that internal staff is huge.
00:04:42
Brian
Yep.
00:04:44
Brian
Yeah.
00:04:45
Carrie Welles
Yeah. Because it's it's the strategically relevant based on what their internal customers care about and what they're trying to solve for.
Strategic Relevance of Procurement
00:04:54
Carrie Welles
OK, so what else do we need to know, Brian, about procurement language?
00:04:59
Brian
You know, the, the other is, is share of spend, right? So if a company spending, who knows $10 million, $20 million dollars a year on expenses, how much of that is going through procurement?
00:05:10
Brian
and and And they care, you you brought up in the and and the last question talking about strategic relevance. The more value procurement is adding, the more they're going to run their purchases through procurement. And you've been, many many of you have been part of. sourcing something and it's like many of you don't want to get procurement involved. And that's a problem, right? That reduces their share of spend. That the more spend that goes through procurement, the more relevant they are. So, you know, can you, you can imagine running an entire procurement department and if, and these two things are so interlinked, what we've been talking about, if your customer sat slow, your share of spend is going to be low. As your customer sat goes up, your share of spend going up and you become more and more relevant. And again, they do not drive share of spend. They do not.
00:05:56
Carrie Welles
Mm hmm.
00:05:56
Brian
Uh, drive customers sat by simply buying the cheapest thing out there, right? It's got to be relevant to the internal customers.
00:06:04
Carrie Welles
Right. And I know where you're going with this, which is that salespeople need to be better equipped to educate and help them understand their internal customer needs. So I know i know you're going to talk about that.
00:06:15
Carrie Welles
so So let's talk about trends. so So let's get bigger picture just for a moment
Cost Reduction to Value Creation Shift
00:06:19
Carrie Welles
and talk about what we see in trends and procurement today.
00:06:19
Brian
yeah
00:06:23
Brian
Yeah. So there there is that this notion of ah ah aligning with the strategy of the company is is a big deal and it and it's everywhere, right? The old school days of this grumpy old procurement person sitting in the basement, you know, he or she yelling at you about lower your price. I mean, they're they're still yelling lower your price, but the the real trend is is to be more strategically relevant and more aligned with the business, which is where, know, when you've got ah procurement experts who focus in technology or focus in security, that kind of thing, because How can they align with the strategy of the business unless they become like category experts? That's where a lot of that comes from. And there's a quote I just found the other day from Deloitte um from the Global Chief Procurement Officer Survey. And 70% of procurement professionals say their primary focus is shifting from cost reduction to value creation, which sounds an awful lot like what we want to do as sellers.
00:07:16
Carrie Welles
Yeah, yeah. Yeah, that's great, which leads us next me into this next question about the lowest bidder. So we know reverse options. We know about a lot of these these systems or these strategies that procurement officers or professionals will use.
00:07:33
Carrie Welles
How often do lowest bidders win the procurement deals?
00:07:40
Brian
Yeah.
00:07:40
Carrie Welles
So if you're a supplier, how often does that happen?
00:07:40
Brian
So you, yeah. Well, in it and it's kind of, if you haven't carry, you mentioned, uh, reverse auctions and reverse auction is lowest bidder wins. and, and I'll tell you that, that it's, it's, I think the number is about 80% that the lowest bidder doesn't win because what buyers have found out is that people, they give the store away to get the business and then they can't service it.
00:08:03
Brian
So bless you. So, and then the other thing that I will mention is every single procurement organization I've worked with uses a weighted attribute decision matrix to make decisions. And, and so what they're, they're going out to their internal customers, the business, the people we sell to, and they're going out to them and saying, okay, I'm sourcing laptops, whatever it is, what are your needs? How important are those needs? And then they're scoring the suppliers and price is one variable. And, and very rarely, have I ever seen it, the lead variable.
00:08:34
Brian
Bless you. Very rarely have I ever seen it be the lead variable unless it is a pure commodity. If you're buying pencils, right, then okay, maybe. But this weighted attribute decision matrix is again, the needs of the internal customers weighted and then they're scoring the suppliers and they're looking at total cost of ownership or total value. They've got software now that does better. here Here's, I think the the bigger fear is that procurement is I think getting ahead of us now and determining our value versus competitors.
00:09:03
Brian
not Forget the fact that they're just beating us up on price the a lot of the software that I've seen is just an amazing calculations You
00:09:11
Carrie Welles
Yes, yes, yeah, well, that's a really important point.
Aligning Sales Strategies with Procurement
00:09:15
Carrie Welles
Okay, so let's that dovetails into the next question, which is how do sales teams align their strategies with the motivations and the processes of professional buyers? So what do we suggest those who are listening do?
00:09:30
Brian
So you mentioned Rosemary Coates, who is my co-author on the book. And as a supply chain expert and and a sales consultant, you can imagine she she and I had some like back and forth and back and forth. And this is one of the things that we finally found common ground on. My argument is there is massive similarities between selling and buying.
00:09:49
Brian
Right? And we both care about internal customers, right? We say we got to get to the business, right? We need to get to the business stakeholders. So do they, right? We, we both care about the business fit, making sure we're aligning with the company's strategy.
00:09:59
Carrie Welles
like
00:10:02
Brian
Uh, we both, we care about share of wallet. They care about share of spend. There's unbelievable alignment with us. So we're going after and learning the same stuff that they want to know.
00:10:12
Brian
What do my internal customers care about when you're out there doing discovery? You can share that with them and the the sort of punchline I'll give you to how can we align. with them is that we need to start thinking of procurement as a legitimate stakeholder. it I don't know about you Carrie or anyone else listening, but to me it's like there's the business and then get turned over to these guys and they're out there outside of who I consider my stakeholders like no, no procurement. I say they're they're a legit stakeholder, especially with where they're going and we can add value to them and we can change the conversation from price
00:10:45
Brian
to to you know internal customer needs. that's There's a lot more they care about, but we're focusing on internal customer needs because that's that's where we overlap with them and we can share that with them.
00:10:55
Carrie Welles
Yes, you make me think that like any organization, every functional area is siloed. And the great news about a salesperson and account manager is that is that you all listening should be the communication and conduit.
00:11:09
Carrie Welles
You should be the ones who are threading this needle through all of these functional areas, gathering all of the business issues that you're solving for and then helping to educate the procurement team.
00:11:20
Carrie Welles
Because sure, they probably they're you know they're in their silo as well.
00:11:21
Brian
yeah
00:11:25
Carrie Welles
So they often welcome that information of what do you know about about the business needs of these people that I'm buying on behalf of.
00:11:30
Brian
Yep.
Engaging Procurement as Stakeholders
00:11:34
Carrie Welles
So yeah, that's really good advice about inviting them in and not pushing them away.
00:11:34
Brian
Yeah.
00:11:40
Brian
Well, and but Kerry and i I was saying treat them like a legit stakeholder, but you bring up another point, which I do agree with and probably scare the heck out of a lot of people listening. There are times to reach out to them before it gets turned over to them to start to, if you know, what's going to go there.
00:11:55
Brian
begin begin developing that relationship, which is contrary to I think everything else most of us think about procurement is, oh my gosh, if I can just keep it out of procurement. If you know it's going to go there, if your business is such, then you make the point of inviting them in and I think it's a really good idea.
00:12:10
Carrie Welles
Sure, sure. Okay, so then let's let's end with this question. So what are the common misconceptions that sellers have about professional buyers? And give us a couple ideas of how to overcome them.
00:12:21
Brian
Yeah. So, and first of all, it's it's just untrue that price is the leading thing. it it You know, they're going to try to extract their pound of flesh. They're going to do whatever they can, but that's different. That's what they're talking about. What they really care about behind the scenes is, and there's tons of evidence for it. the, the other thing for, for those who are listening, this is really fun. You can do this in your own company. We brought together was probably a fortune 50 company, uh, 10 of their top gams, their global account managers.
00:12:49
Brian
in about seven or eight people from procurement, including the chief procurement officer. And we facilitated a round table. And it wasn't even a round table.
00:12:56
Carrie Welles
Bye.
00:12:57
Brian
It was actually buyers run one side and and the the GAMS like account managers were on the other side and everybody was playing really nice. And I was facilitating this dialogue. And one of the GAMS, she stood up and said, you know what, I just got it.
00:13:09
Brian
And like, she broke the ice. She was she's like, I get turned over to you guys. I hate that when I get turned over to you guys. And, and the procurement folks, this was another huge learning for me.
00:13:19
Brian
They all kind of looked at one another and, and sort of snickered a little bit and shook their heads. And I said, what, all right, what's going on over there? And they said, you know what, when you get turned over to us, they're, the business is turning it over to us to put the deal together.
00:13:34
Brian
Right.
00:13:34
Brian
And so they're, they're saying really, they, they hate that too. Again, that thing we're so aligned. When we get brought in at the end and it gets turned over to us, our hands are tied. We can't stand that. There's no room left for anything.
00:13:34
Carrie Welles
No.
00:13:46
Brian
And and and so in fact, their argument was you as sellers have a lot of power when you get turned over to us toward the end of a deal because my job then would be to go back to the business and say, you know, you told me to go strike that deal with whoever.
00:14:01
Brian
I didn't, but I did go to your second choice and got it cheaper. And that was just like exploded my brain to say, okay,
00:14:08
Carrie Welles
Yeah,
00:14:08
Brian
And now, I
Preparing for Procurement Meetings
00:14:09
Brian
feel that way. I don't know how you feel, but I feel that way when we're in a deal and somebody says, hey, we're we're turning you over to procurement. I was like, holy smokes, we're getting well down the line here.
00:14:18
Carrie Welles
yeah, yeah, yeah, yeah that's that's a great point. So all the more reason why as sellers and account managers, we need to be working our sales process, make sure that we are discovering with various stakeholders, these decision makers, so that we've got, we've got more evidence and more data that we can
00:14:35
Brian
Yep.
00:14:35
Carrie Welles
talked to bri herman about when we finally do, quote, get turned over to them. Yeah, excellent. OK, that is it for today. Anything else you want to add?
Conclusion and Key Takeaways
00:14:45
Brian
Just that we will put a link here. um wrote an article called Speaking the Language of Procurement, and we're going to give you a link to that. And it's got even more in-depth stuff than we talked about today. But yeah, thanks Carrie, and thanks everyone for listening.
00:14:58
Carrie Welles
Yeah, that's great. OK, we'll see you next time.