"Grow profitability by only selecting clients that recognise value" - Interview by John Smibert
Have your buyers been cutting your margins to the bone? They are much more informed and organised than ever before and they love screwing you down on price. Right? Where is it going to end?
In this discussion Sue Barrett tells us that the buyer pendulum is actually starting to swing back to value.
Sue Barrett claims that "some customer organisations had gone so far that they are now being accused of actually stealing IP, because they've been asking for these transparent, so called, purchasing chains".
"Good suppliers, that are smart, are realising that they can't operate this way, so there's a couple of things happening. Firstly suppliers are changing how they behave (more on that in the discussion), and secondly, some of the smarter procurement people are realising that they're actually cutting out all of that innovation and value and ideas and collaboration that comes with good, healthy relationships". They are swinging the pendulum back to value.
How should you respond to these changes? In this discussion Sue uses case studies to suggest some strategies that will enable you to take advantage and grow your sales and margins.See the full discussion below for the details.
Sue is an authoritative thought leader and an accomplished author on the selling profession. She's also founder and CEO of Barrett and SalesEssentials.com.
John: Hello, I've got Sue Barrett with me again - welcome back, Sue!
Sue: Thank you, John!
John: Hey Sue, I've seen you talk about buyers in transition. I know a lot's been happening in the world of buying, and organisations procure much more differently now than how they used to, but what are some of the transitions that you see happening in the buying world?
Sue: Well, the fad at the moment, it's been around for a while, is the price per unit approach that a lot of procurement departments have been applying to suppliers, and it's forcing this race to the bottom mentality where people are having to strip out all sorts of costs. You see some of the larger organisations asking businesses to show them all of their costs, and then they're going, doing-like Homebrand or something. I mean, it's really difficult...
John: They're cutting out a lot of the value that they're ultimately going to get.
Sue: Exactly. And some of these customer organisations are now being accused of actually stealing IP, because they've been asking for these transparent, so called, purchasing chains if you like. Good suppliers, that are smart, are realising that they can't operate this way, so there's a couple of things happening. Suppliers are changing how they behave, and some of the smarter procurement people are realising that they're actually cutting out all of that innovation and value and ideas and collaboration that comes with good, healthy relationships.
Sue: So, they're actually finding now that they actually want to bring in suppliers who can add value, not just do a price per unit comparison or offering.
John: You're saying customers are really starting to look at the value they're going to get through the procurement they're going through?
Sue: Some customers, not all.
John: Some. But you're saying more are doing that.
Sue: There are more doing it because they realise that they're losing a lot of the ideas that actually deliver value The whole thing is, we're communities, we're societies, we actually work together and collaborate, and the pendulum had swung too far the other way to cut out all of that lovely stuff that's hard to track and map, but nonetheless there's actually lots of value in those discussions and ideas in creation and innovation. So, the smart procurement professionals and smart businesses are realising that they've gone too far, and that they're wanting to come back to having... But then you've got to have a good supplier organisation that's not just going to deliver a product and price; they've got to bring innovation and ideas too.
John: It's true. But there's a big difference, isn't there, between a base commodity product and something that needs to be configured to address a customer need.
Sue: Sure, yes.
John: When you're configuring it to a customer need, there is a lot of value we can bring to the table.
Sue: That's right. But unfortunately, a lot of procurement practices, tender practices have actually not valued that piece, and so what you end up with is that kind of commodity price approach. I recommend to our clients as well, that if you can't actually have a healthy, viable relationship with your clients, then go somewhere else if you can, and many times you can when you actually look elsewhere.
There was a particularly interesting scenario I think in France, where a lot of suppliers to one of the major supermarket chains there just went, "That's it," and they put all their stuff online. There's a great saying, "You can't change anyone else, but if you change yourself then others have to change how they deal with you."
John: Very true.
Sue: And so, by these suppliers actually changing how they dealt with this customer in France, the customer had to change because they weren't going to get supplied.
John: And through that the customer probably realised, "We've gone too far here. We were getting value, and now we need to recognise that we've cut that value out, we cut to the bone. Let's go back and start buying value again."
Sue: Yes. Well, ideally it should never have happened in the first place, but nonetheless it does happen and people learn usually the hard way; you would hope they would learn from wisdom. But nonetheless, just keep an eye open for it and look for the good clients if you want to sell value.
John: I think that's the bottom line message I got out of this is be selective about your clients. If the clients are willing to work with you, to help you create value for them, they're a good client; if all they want to do is cut you down to the bone and put you amongst everybody else as a commodity, you'd probably best to walk away.
Sue: That's right, and not waste your time on it and go and find people who want to work with you.
John: Great message - thank you very much, Sue!
Sue: My pleasure!
Past interviews with Sue Barrett:
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