In our work with major buying organizations we find that very few purchasing decisions are made based on price alone. Virtually every purchasing organization we have experience with evaluates suppliers with a matrix and price is simply one of the many criteria. In most instances, the lowest priced supplier does not get the business. Buyers are charged with supplying their organizations with the lowest total cost of ownership solution.
Selling value simply means we justify why our solution is more expensive than elsewhere. If we think about our value proposition vs. the competition, we need to weigh ALL the variables when comparing the two, not just price. This may include:
- Switching costs
- Human fit and relationships
- Impact of our product and services on the customer organization
- Outputs or production
- Financial risk
- Political risk
- Long-term strategic fit and ability to move forward together
- Global reach
- Price
As sellers, we would be far more effective if we avoided reacting to a price request and began assisting the buyer achieve as many of their internal customer objectives as possible, while at the same time trading for items of importance to us.
It is mathmatically possible to have both sides in a negotiation achieve more than both expected, move well beyond "win-win" and create true business value. This may sound simplistic. It isn't easy. It requires analytics completed before the face-to-face business negotiation. It requires knowing how to use that data.
The supply management environment is rapidly changing in an effort to source the highest value business relationships. It's time for sellers to accelerate their negotiation analytics.
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