Selling to Procurement: Think Procurement only cares about price? You’re wrong!

What matters to Procurement the most? As a B2B sales person, this scenario will, no doubt, be familiar to you: You spend a lot of time and effort on communicating your value proposition to your prospect. There is a good fit. They understand and appreciate the value you are bringing to the table. They want to move forward. Then Procurement gets involved and it all seems to come down to price. So, why does Procurement only focus on price? That’s the question I’m answering in this article.

And that’s actually a very good question, because if you’ve submitted an unsuccessful RFP bid, it does look like you lost because of price. But there’s a bit more to it than that. It’s not all about price. In general, Procurement teams pursue a combination of three different things.

Value for Money is what matters to Procurement

Firstly, they’ll be looking for suppliers that can provide value for money – that’s the optimal mix between price and quality. So, price matters here but only in relation to quality. It’s about finding that sweet spot where you get just the right quality at the right price. And it’s the users of the service or product, not Procurement, that decide what “right quality” actually is. Procurement may challenge other stakeholders on their perceptions of what quality means, but at the end of the day it’s not Procurement’s call.

Total Cost of Ownership matters too

The second thing that Procurement looks for in a supplier is whether they are able to lower total cost of ownership without compromising quality.

Briefly, Total Cost of Ownership is made up of the purchase price plus all the direct and indirect cost associated with that purchase.

So, a solution that delivers a lower Total Cost of Ownership isn’t necessarily lower priced. It could actually have a higher price tag. If that higher priced solution is able to take costs out somewhere else in the company – somewhere else in the system – then that would be favourable from a total cost of ownership perspective.

When Procurement has a way of tangibly calculating what the Total Cost of Ownership is, for a particular purchase, they may use that figure to calculate a Value For Money score.

And so does Tangible Business Value

Thirdly, Procurement is looking for suppliers that can add tangible business value, which can be expressed in monetary terms. And the keywords are “tangible” and “monetary”, because we all know that there is business value that is worth having, even essential, but which you cannot necessarily express in that way. Now that’s all very good and worth pursuing, but from Procurement’s point of view it will not be valued as much because it will not count as much towards how Procurement, as a function, is rewarded.

So, generally money is what matters to Procurement, but that does not mean suppliers are selected on the basis of price alone. It’s about value for money, total cost of ownership and tangible business value.

Invest 30 minutes of your time to become Procurement savvy

If dealing more effectively with Procurement is important to you, then you could benefit from using the proven process that I share during my free 30-minute online events called, “Sell more in less time by taking control of your relationships with Procurement”. But grab your seat quickly! After 10 January 2023, the webinar will no longer be available.

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