Selling Into Procurement Ohio Valley Business Travel Association

Selling Into Procurement Ohio Valley Business Travel Association

Understanding Procurement

Why CEOs Like Procurement 100% ~ 60% ~ Purchased goods and services can be more than half of a firm s total revenue Reduced pricing falls right to the bottom line 25% 10% 5% without layoffs 8% Total Revenue Purchased Goods and Services Salaries, Wages and Benefits Taxes, Depreciation and Interest Profit Before Profit After

How does Strategic Sourcing work? Buyer Buyer Fragmented Suppliers Consolidated Suppliers

Seven Basic Procurement Steps 1. 2. 3. 4. 5. 6. 7. Consolidate Spend Specify Quality Set Targets and Strategy RFP or Tender Analyze and Negotiate Decide and Contract Implement and Track Works well for most every category, including Travel

Supplier Rationalization

It s all about

Commoditization

Impersonal Relationships

Reverse Auctions

Pooled (Consortia) Buying

Buying in Bulk

Benchmarking

Negotiate against Yourself

Supplier Development

Supplier Conditioning

Travel Is a Signal Category

Travel is not a commodity right? Common Points We Could Be Talking About It s a significant expense category. The spend is very hard to control. It touches most employees. You can t just switch suppliers like you can with office supplies. It really affects sales and/or productivity but you can t quantify it. Travel or Health Benefits or Advertising or Enterprise Software or I.T. Consulting Travel isn t as different as we might think

Sourcing Travel Isn t Very Hard Sourcing Complexity Simple Moderate Complex Carpeting Laptops I.T. Coal Temp Labor Advertising Cars Airlines Hotels Agencies

The Procurementinfluenced Organization

The Procurement-based Travel Management Model Travel Category Manager Sourcing Team Buy the specified quality of travel Set guidelines for purchasing Evaluate supplier quality and cost Manage selection process Negotiate contracts Quantify potential savings Operations Team Manage travel agency Implement new programs Implement new technology Manage supplier performance Manage travel policy compliance Resolve traveler problems Each team has very different goals

Travel Sourcing Team Travel Sourcing Team Travel Manager Procurement Finance Consultant

Travel Council Travel Council Finance HR Sales Ops Procurement Travel Sourcing Team Travel Manager Procurement Finance Consultant Travel Council s roles Modify/endorse travel policy changes Provide guidance on supplier selection criteria Endorse sourcing team s recommendations to senior mgt.

Steering Committee Strategic Sourcing Steering Committee C.F.O. Chief Procurement Officer 1-2 Senior Executives Senior Consultant 1st wave Travel Council P.C./Laptop Council Lab Supply Council Printed Material Council Travel Sourcing Team Steering Committee s roles Push hard for savings Remove organizational roadblocks Ratify supplier selections

Procurement Manager 101 Typically career procurement folks Very process-based (often not category experts) Often handle multiple categories at a time, and/or have sourced many different categories Skilled at dealing with stakeholders Will make fact-based recommendations

Myths about Procurement Mgrs They treat Travel like widgets A few do. The rest want you to believe that. It s all about price It s all about value credible value. They ll gladly over-commit share They do care about good contracts Pricing tied to volume or share makes sense Accustomed to price penalty clauses

Travel Category Stereotypes Airline pricing isn t rational Travel managers are too cozy with suppliers And coziness causes high prices Travel policy compliance shouldn t be a problem Travel people sure like to hug a lot

SELLING INTO PROCUREMENT

What Procurement wants you to do Educate me about your business Understand my goals and concerns Believe it takes a low price to win Propose credible solutions Overcome my fears (a.k.a. objections) Create value for both of us

Test for your differentiated value Differentiated means you versus your nearest competitors on key features such as: Schedule and network, or hotel features and brand/chain fit Traveler comfort, productivity Traveler confidence Traveler loyalty and rewards Waivers and favors, ease of doing business Without these, you ARE a commodity

What s this?? A question mark, yes? but also an upside-down fish hook! Use questions to catch and control buyers

The Buyer s Needs Hierarchy Confidence Subjective Assessments Decision data Framework for Supplier Decision Understand the Supplier s Business

The Seller s Opportunity Hierarchy Build Educate Influence Confidence Subjective Assessments Decision data Framework for Supplier Decision Understand the Supplier s Business Calibrate Learn

Shop Your Results Travel manager Procurement manager Senior execs Great way to engage the buyers and strengthen your non-price values

By the time you get the RFP, it s too late

Ways to Differentiate Yourself Show that you understand the account Key goals, main concerns, your reputation Understand Procurement s role Delivering high-value contracts Focus on the core issues Respect the procurement process

scott.gillespie2008@gmail.com My Contact 440.248.4111 Info via LinkedIn Join me on LinkedIn Subscribe to my free blog: Gillespie s Guide to Travel+Procurement