They may take our goods, but they will never take our profit margin!

21 March 2011
You may not have heard of Dr Reed Holden, but he reckons he knows all about you. In fact, he says he understands the way you work so well that he promises to “tip the power in negotiations away from procurement and back to sales people and senior executives”. In his role as a “pricing thought leader”, he believes vendors “in all industries” are threatened by “the pricing buzz saw of procurement”. “Our basic premise is that when sales and procurement interact it’s a negotiation, not a surrender,” he says, perhaps positioning himself as the sales profession’s William Wallace. “Procurement’s top objective is to get a lower price. It’s the job of sales, pricing and marketing to build confidence in price and defend it from further erosion.” Of course, Holden has a vested interest in whipping sales people into a frenzy with his rhetoric – given he has a book out on this topic and is promoting a series of podcasts purporting to minimise the effects of purchasing on prices. He admits his tactics to deal with this nefarious procurement involvement are “simple and easy to learn”. They include making sure you are suitably prepared in advance, consider what tactics purchasers may use and be patient, rather than rushing into a deal. “Don't get frustrated with delay - it's a tool procurement uses to cause desperation pricing. If they delay, you delay more,” he writes. At first glance the tone seems contrary to the findings of our survey where 82 per cent of buyers said they now have a closer relationship with their key suppliers than five years ago. But if Holden is an accurate representation of the marketplace feeling, asking the same question of sales people might reveal a different perception – especially if they were among the 64 per cent who were asked to cut the price of a negotiated contract in the past 12 months. Purchasers may have convinced themselves and their peers that relationships are the critical factor in modern procurement, but it seems they are yet to convince their suppliers.
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