Issue #66

How Companies Really Buy

This week’s story is about being on the other side of the deal, the buyer's side.

In particular when you, inevitably, have to raise prices, this is a set of scenarios you can trigger in your customer - make sure you do the right thing.

In between my sales roles, I’ve found myself on the other side of the table, working in operations and procurement.

At one point, I was even selling procurement services, which is just as confusing as it sounds.

In this case, I was the Supply Chain Director (SCD), managing procurement, manufacturing planning, and outbound fulfilment.

Three suppliers decided to try the good old January price hike. Nothing new there, right?

The First Company

I agreed to meet and discuss their request. It was a productive meeting. They explained their challenges, and we worked out alternative solutions.

We decided on ordering once a month instead of every week, which reduced their transport and order processing costs.

In return, we negotiated a price reduction for increased volume throughout the year, thanks to fewer, larger orders.

It was a win-win—they got their savings, and we protected our cost base.

The Second Company

The second company didn’t want to talk. They thought they could simply dictate the new price and that would be the end of it.

I called their bluff and went straight to tender. I got a five percent price cut from a potential new supplier and a three-month transition plan.

When I informed them of this, they quickly backed down.

They weren’t ready to lose the business, and we avoided the price hike altogether.

I also made a note that they would be out when I went to tender for real the following year. Who needs to work with chancers?

The Third Company

The third company was different. They wouldn’t budge on their price increase.

They invited me to their factory, played the “poor mouth” card, and told me stories about their 20-year relationship with the company’s founder.

The truth was, their product was vital to our offering. There was no competitive alternative that could replace them in the short term.

So, I took the hit for this year.

But by the next year, I had found a competitor’s product by adjusting our own formulation, and we cut their volume by 30%.

We also stopped promoting the product they were vital to and focused on another product group, one that was more profitable.

They lost market share and their growth projections dropped, all because they had insisted on a short-term gain at the cost of our relationship.

The Lesson

When you’re pushing for a price increase, you’ve got three options: talk value, play games, or bury your head in the sand about the consequences.

If you treat customers like they’re just sources of revenue, they’ll treat you like you’re just another supplier.

My responsibility was to my customers, my shareholders, and my career stats, and that means focusing on value, not just demands.

Ready To Sell The Way Big Companies Buy? Click Here

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Here is a video that further explores your customer's view of the world, in particular the difference between sales processes and buying processes - which is a pretty vital distinction.

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See you next week!

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