Tweet

Price is what you pay. Value is what you get.

Guest post by: Sue Barrett

Article Overview: I recently had the pleasure of attending and speaking at the 6th CIPS Australasia Annual Conference for the procurement profession. It was my third invitation to speak at a CIPSA event in my capacity as a professional representing the sales profession. The theme for this conference was ‘Managing Volatility’. A key message I gleaned from the conference was Value Management rather than the narrow band width of Cost Management.

Price is what you pay. Value is what you get.

I recently had the pleasure of attending and speaking at the 6th CIPS Australasia Annual Conference for the procurement profession. It was my third invitation to speak at a CIPSA event in my capacity as a professional representing the sales profession. The theme for this conference was ‘Managing Volatility’. A key message I gleaned from the conference was Value Management rather than the narrow band width of Cost Management.

Don’t get me wrong, the Procurement Profession is still interested in cost, however, there was a distinct awareness about ‘cheap being a false economy’. While it was important that it look to secure supply, and at the same time reduce total supply cost, it was not after ‘cheap’.

At the ‘Pricing Insight’ session, one of the many sessions I attended over the two days, the famous Warren Buffett quote: “Price is what you pay … Value is what you get.” defined the issue.

Many of the procurement professionals in the ‘Pricing Insight’ session commented on the stupid pricing games played by sales people and their companies. They still found that too many sales people were product fixated rather than business oriented, and defaulted to unnecessary price wars at the expense of developing real value propositions. When something was offered up as very cheap, the procurement professionals were concerned about the guarantee of supply and quality of the offering. They did not want to buy ‘cheap’.

Contrary to the popular myth that all procurement people want to negotiate down to the lowest price, the procurement profession is far more sophisticated than most sales people give them credit for. The sales profession is doing itself a disservice if it pitches the ‘Us versus Them’ scenario when it comes to dealing with procurement.

The procurement profession is learning its lessons too. We cannot deny that there has been a climate in the past of procurement focusing on cost management only, and maybe some lingering effects still exist in some industries. However, they are learning that supply and demand are inextricably linked and not managing these issues well can cause greater costs and harm to their organisations and industries.

Take for example the European auto manufacturing industry. Prof Dr Nicolas Reinecke, a world expert on Procurement, cited how recently the major European car manufacturers had to bail out the world’s largest manufacturer of bumper bars to the tune of $100M because a climate of reducing prices by 1-2% every year finally sent the business into bankruptcy. What that auto industry had to learn was that they nearly killed off the only major quality supplier by being short sighted and self centred, as their own cost management behaviours had made it near impossible for other equivalent auto suppliers to exist. Bailing out this bumper bar business cost the industry much more than if they had have worked in a sustainable partnership model that allowed all parties to continue trading in a healthy manner.

David Noble, Chief Executive of CIPS worldwide, says that the volatile environment is the new norm and being near sighted about cost management only will harm everyone. The key differentiator, he states, is the Supply Chain as it touches all corners of the organisation and is the face of the enterprise. He commented that Value Add is increasingly generated external to the enterprise and that strong supply chains need to be fast, flexible and robust with the ability to control risk and environment.

The Supply Chain efficiency is increasingly seen as the key differentiator in business with the majority of value add in an enterprise coming from outside the organisation’s boundaries.

Sixty percent of major corporations now have Procurement and Supply at the top table with the world globalisation, recessions and environment all sitting squarely in the procurement space. David states that, the spotlight is on their profession and volatility is at the heart of supply chain management. Controlling volatility and managing value gives an organisation a huge competitive edge.

We are witnessing a quickening in the development, thinking and sophistication of the Procurement Profession – they are definitely on the front foot. They realise that they do not have to make negotiation a part of every sale – it is not about being adversarial for the sake of it.

The Procurement Profession has access to more information than ever before. Most clients know what they are after even if they don’t know how to articulate it. Today, clients expect to communicate and deal with a real professional who knows their own business and how they can best serve their clients’ needs with creative solutions and fresh ideas.

They don’t expect to be coerced, bullied, tricked or intimidated into buying. They don’t expect to be treated like an idiot by sales people who just talk at them and flash brochures or product sheets. Nor do they necessarily want to make ‘friends’ with sales people.

Clients, especially the procurement profession, are now after ‘business people’ who can sell, think about possibility and take information to the imagination phase. They are looking for partners to help them map a pathway forward into the future.

As a sales profession, we need to be keeping pace with the procurement profession and rather than working against procurement we need to work with them in a spirit of cooperation where we can manage value together.

Remember everybody lives by selling something.

Related Articles
  Salesperson Wimp-Out: Cutting the Price
  All Customers Care About Is Price?
  How to Handle the Price Objection
  The Price Objection
  Stress-Free Selling® - Easy Ways to Avoid Price Objections
  Selling on Price
  Direct Sales Strategies: Overcoming Initial Resistance- We Just Want the Price
  Prepare to NOT Lower Your Price - Sales and Marketing Training
  The Difference Between Selling to Negotiators and Selling to Price Shoppers
  Stress-Free Selling® - The Power of Belief
  Handling Price Objections Should Not Mean Price Reduction
  Objections are Requests for more Information
  Do you mind being beaten on price?
  Over Coming Price Discounting!
  What is So Wrong with Selling on Price?
  Teleseminars - A Winning Price Point For Backend Products
  Sales Management - 7 Selling Tips on Handling Price, Price, Price
  Dell, The Economy, Their Sales Force, and You
  Don\'t aspire to be the cheapest.
  How Much?!

Article Tags: cips, price, procurement, sales, sales skills, skills, value, value management



Related Forum Posts
Re: How Not To Start A New Business - Well, these guys these guys will not succeed at all. they need to have a way of doing things. First thing first, which market segment are they targeting? Or are they in the same segment the previous magazine was. They also need to understand the trends, currently people read online magazines so they need a website. After that they need to develop the marketing mix, which will guide them in their marketing activities. This marketing mix will be made of 4 Ps, which are Product, Place,Price and Promotion. I will assume the magazine is the product, the first P, The Price is what is the role the price will play in the market, do they want premium price, or do they want to skim the market. The other P, they need to have, is the Place, this will help in having a strategy on where to place their magazines, this includes the websites, malls, newspaper stands etc. The final P they need to develop is the Promotion, this is the advertising , channels, websites, forums, blogs, name it. Once they have done that, they can sit down and wait for money to come but not without superior customer service, otherwise without all this, they are wasting their time and money.
LastMinute New Web Site (Draft) - Louis, I like it much better than the previous one. I like Topic, Location, Date, Discounted Price. That is what I need to know to get interested. I believe that you are moving in the right direction. Andreas
Re: Is Gas Price Affecting Your Business? - I work at home so I don't have the need for car. My office is a few seconds walk from my bedroom. Gas Price is not affecting my business in any way. All my work is done online
Re: Hi from Greenville, SC - [quote="Evan":39hn23oh]Welcome Philip - from my experience in working with different merchant service providers I've found the following criteria to be important: 1) Price - at the end of the day it's very competitive industry and you don't need to be the cheapest option but you can't be too far ahead of the other guys. Automatic volume discounts are also much appreciated. Ones I've been involved with in the past give you volume discounts only if you apply. 2) Service - are you available when I need you? If I call will you be available and help me right away? If I email will you get back to me quickly? People often don't need service from their merchant service provider. It's one of those things where as long as it's working we tend to forget about you running in the background. But when there's a problem it's usually a big problem because we can't get money so we need fast and good quality service. 3) Integration support. Help people get set up. Even offer to do it for them - now that's a great way you can stand out. The integration support from most merchant service providers is terrible. You're pretty much on your own to figure out how their APIs work. I hope that helps - good luck![/quote:39hn23oh] I find all of these to be true on a daily basis. I have a strong hold in my particular area. Fast service is imperative. If I can get a restaurant a new terminal in a couple of hours as compared to the fastest national company(at least overnight) then I win. Being local is huge in my industry. I have successfully managed accounts is other areas. Usually I give them a back-up terminal so if the other one breaks down they can switch out the two ship the broken one to me and have a new back-up the next day. I have done a few online accounts. It is not my specialty though. I have found it to not be too hard if you are using a CMS and your host is at least fair. We can integrate with almost every website. It is usually as easy as dropping a pem file in the correct folder in cpanel. For more difficult ones I have a webmaster that I consult with. Price is the last one. Price is always the biggest. You cant give it away or you have no way to give good service. How apt am I to give back-up terminals or make sure I have 24 hour customer service if the margins don't support it? At the same time I have to be very competitive especially when landing large accounts. I made things too easy on one of my large accounts one time I guess. They thought all providers were like me so when they got a quote for less they switched. 11 days later they called me to help them get their machines downloaded back to my companies settings and their website was completely messed-up. I had to delete everything in the file and reload a back-up I had.
Points which are considered in a bank? - I have tried to value banks several times and found it very hard to proceed with it. I know a bit. But it seems to be too less to proceed. Can we take this up?? Here is what I know 1. Price to book is a more imp. 2. Net interest income and non-interest income need to thought of. 3. Loan loss provisioning. 4. Coverage ratio. 5. Cost of funds. 6. ROA, ROE 7. NPA 8. Deposits and advances. 9. Capital adequacy ratio 10. Tier 1, Tier 2 capital consideration. 11. Leverage, loan book value 12. LIBOR, SLR, CRR There are many more. And even in the ones above, it’s pretty hard to value a bank.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Life is a Balancing Act!

Ten Things You Can Do To Be a Better Leader

How to Conduct a B2B Marketing Content Audit

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.