Price No Longer The Deciding Factor In Procurement

Supplier relationships are emerging as a strategic part of companies’ procurement, accounting and cash management. But not all industries are created equal. Sales technology firm Altify (formerly known as The TAS Group) published its latest findings on how professionals across verticals differ in their procurement activities and interactions with key suppliers.

Altify, along with procurement consulting company IDD Consult, did find a few common threads, however — and how suppliers can step up their game to help their corporate buyers.

“Contrary to some opinions, buyers across all industries depend on sellers to help them make a decision,” IDD Consult CEO Ingrid De Doncker said of the research results, published earlier this month. “This unique research shows how sellers in each industry are falling short. Buyers and sellers need to understand each other’s perspective to deliver maximum mutual value, and now, sellers can learn what changes they might need to make.”

But depending on which industry a supplier operates in, the approach to strategic customer management may be different.

Automotive corporate buyers, for example, are often engaging their suppliers earlier in the procurement process. According to researchers, two-thirds of buyers in this industry say they do so, with half connecting with a supplier before a project is even identified, researchers said.

Manufacturers, meanwhile, are more likely than the rest of the market to prefer an “incumbent supplier,” with 72 percent of professionals in this space responding that they prefer this — significantly greater than the average of 41 percent for all sectors.

But Altify and IDD Consult’s research explored more than simply the preferences of buyers across industries. The report also identified where suppliers fall short in meeting their clients’ needs.

Suppliers in the high-tech space, which sell software, for example, score low on their ability to provide value to corporate buyers during sales meetings. For buyers, 40 percent of suppliers either “rarely” or “never” add value to their meetings — a finding that researchers concluded could be a result of the complexity of the services or products with which this industry works. It could also signal, the report added, that suppliers in this space must be well-versed in what they’re selling in order to provide value to their corporate buyers.

For the suppliers that fail to add value to those meetings, regardless of industry, they miss out on sales — $579 billion worth of sales, according to the report. Further, nearly two-thirds of initial meetings between buyers and sellers across sectors never progress to further dialogue.

Attempts to regain a lost sale are also expensive, hitting $218,000 for a $1 million supplier, the report said.

And in the professional services space, more than half (53 percent) of buyers said that their top factor when deciding on which supplier to work with is assessing their own company’s previous experience with that supplier. That’s becoming more important than even cost or quality of that service, researchers found.

In the report’s forward, De Doncker said that the research reflects not only suppliers’ need to meet their clients’ industry-specific demands but for buyers and suppliers to collaborate.

“If either sellers or buyers take a position of ‘I win, you lose,” then we all lose,” the executive wrote. “Procurement has much to learn from sales [and] are not just ‘value extractors.’ Cost is only one criterion in a blended decision methodology, rarely accounting for more than 30 percent weighting.”

“Let’s stop using it as the excuse for a shallow engagement.”