Beware of selling out

31 August 2010
Salespeople and purchasers – a combination with the potential for conflict, if ever there was one. We could sit and talk about how we, as the vendor community, respect and support the efforts and dedication of purchasing. But let’s skip this and deal with the elephant in the room that exists when a salesperson is face-to-face with a professional buyer. The salesperson must cater to the needs of the buyer – a key part of the sales process. This is to the benefit of the buyer, but he is actually the one who loses, more often than not, in the long-run. The elephant in the room is price. In too many situations, it may appear the buyer is getting the lower price they were looking for, when in reality, they sold out to the vendor. The vendor, as much as they might be constrained by the parameters of the RFP or the contract, still has large amounts of room to manoeuvre. The vendor has the ability to make numerous changes to their cost structure that are completely invisible to the buyer. Some of these changes will affect the quality of what the purchaser is buying. It is far too easy to assume the vendor is taking the entire reduction in price as a reduction in their profit. But no sales manager is going to allow a salesperson to roll over that easily. If a salesperson does concede to lower profits that simply, it can only mean they are desperate for business or overpriced to begin with. A vendor of that type is not one you want to do business with. If they’re desperate for business, will they stay in business? If they’re overpriced, then what are the ethics of the company and where else are they attempting to exploit customers? Buyers need to be mindful of how the rules can change. One vendor may agree to reduce their price, only to make up for the lost profit by eliminating the customer support assistance you’re used to having. Another vendor may substitute an internal component of the assembly unit with a lower grade item that will still deliver the same initial performance, but over time may incur a higher incidence of wear and damage. The vendor knows more specifically about what they sell, and when pushed, will use this knowledge to their advantage. Purchasers have to accept the idea that vendors will make changes to their products or services when they’re challenged with offering a lower price. Buyers need to hold suppliers accountable to document the steps they’re going through to support a lower price. This documentation must then be reviewed on a regular basis with the vendor over the duration of the contract. This will ensure the vendor does not go further in making cost reduction changes that may help their bottom-line, but ultimately will put the buyer’s operations at risk. Let’s acknowledge the elephant’s presence and do something about it. Let’s engage in open dialogue so that the buyer can better understand what is at stake. Mark Hunter is a sales trainer and author of blog
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