Capabilities Marketing & Sales

Procurement, the Next Evolutionary Step in Modern Sales Theory?

  • Jens Hentschel
  • October 7, 2020

The question on how to sell best to B2B customers has filled many sales books over the years. Most sales theories are predominantly seller centric and approach this question often from the salesperson’s perspective only. 

The flipside, namely how the B2B customer buys, has rarely been part of the conversation.

But that very B2B customer has not been sitting idle. Quite the opposite. They have, over the past 40 years, invested heavily in optimizing their own buying approach, and professionalizing their buying journey through the introduction of a dedicated business discipline. This article outlines the developments of this procurement function and discusses the implications it has for B2B sales. It raises the question whether procurement, with its processes and tools, is in fact the next evolutionary step in modern sales theory and hence the enabler for a better B2B customer relationship management.

40 years in the making, today, the most advanced customer centric procurement organizations control 100% of the expenditures of their businesses. That is 100% of another company’s sales revenues!

Procurement now manages the customer’s buying journey. End to end!

The seller’s counterpart in the sales process is less and less the actual end user of the product or service. It is the professional buyer rather that takes over the customer’s buying journey, independently and at times fully autonomously.

Why is that?

A ballooning number of suppliers to manage, combined with an unsustainable cost structure, had many businesses realize the ineffectiveness of allowing their organization to freely buy and select suppliers without a methodic approach. Procurement emerged effectively as a professional skill and started to reach far beyond the mere task of controlling expenditures and cutting costs. Many business leaders realized that those organizations that invested in procurement early and consistently gained a competitive advantage and ultimately could grow market share faster compared to those that did not [1-7].

How does procurement operate?

The leading procurement teams have formalized and methodized the customer‘s buying journey, which was mainly perceived, on both sides of the negotiation table (customer and supplier), as a chain of unproductive, reiterative steps with loose ownership and accountability structures (see figure below, process in blue).

Procurement effectively assumes responsibility for this buying journey through the application of its own strategic sourcing process. The buyer’s involvement spans hence from business need identification to solution implementation, end to end (figure below, process in pink). Buyers are tasked to identify and challenge internal business needs (1). They consult the internal stakeholders on external capabilities (2). They deliver the required solutions in the most efficient way possible by linking and leveraging the best external suppliers with the company needs (3-6). Procurement provides a service and plays the role of a commercial consultant.

Furthermore, the buyer has become in many companies the ultimate decision maker, determining where and with whom company monies are spent, advocating for or against certain supplier capability.

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What does this mean for the sales function?

The seller needs to change its focus – fast!

Despite these developments within the procurement discipline, there is still a certain myopia amongst most modern sales methodologies, suggesting to avoid procurement as much as possible, recommending to keep it at arm’s length at best.

The opposite should be the case. Instead of shunning procurement, sales teams should reach out to the B2B buyer, supporting them pro-actively in their sourcing process, and benefit from this new business relationship.Procurement can be the ultimate sales enabler in its role as influencer of business needs, of demand and product specifications.

It drives decision making processes and initiates projects with internal stakeholders.Its role as commercial single point of contact offers new suppliers, that potentially were previously disregarded, an opportunity to win business for the first time without needing to spend resources on assessing where the decision-making power resides.

It equally allows incumbent suppliers to reach a much broader audience within the customer’s organization than ever before. It is in procurement’s interest to deploy great supplier capabilities across all business units in their organization. The buyer can serve as the internal advocate for the supplier, helping to sell their solutions to the various outlets in the business.

Not all buying organizations are yet at that stage of managing all steps of the customer’s buying journey. Procurement is still transforming itself. Some teams have reached their desired end destination and others are determined to get there fast. Both factions know though what the future will look like and seek out those external business partners and sales teams that support them in their evolution to become that strategic, customer-centric buying team that their CFOs and CEOs demand.

What is most important for sales teams to benefit from this evolution, is to create a thorough understanding of this new counterpart in their sales process. What are the buyer’s approaches to manage the buying journey? How do they conduct their strategic sourcing process, build and maintain the relationship with suppliers? These and many other factors are crucial questions that need to be considered to build winning relationships with procurement.  

Procurement is here to stay and their influence will only further expand. Business leaders continue to put their company expenditures into the hands of procurement. The return on investment is just too great to be ignored with a ROI value of 10:1 according to a recent study by the Hackett Group [8]. Changes in procurement will only accelerate, enabled through the introduction of new technologies. The result is a fundamental revision in B2B relationship management, which requires the seller to rethink their sales approach.

This might be for many sales organizations a fundamental shift in their modus operandi.

But the main implication for sales is yet another one.

Could procurement even be the next evolution in modern sales theory?

Procurement’s process driven approach to manage the B2B customer’s buying journey has ultimately led to the de-codification and methodization of how to best sell to a B2B customer.

With its strategic sourcing process, procurement has defined and created methodic tools on how to optimally identify needs, how to best explore external business solutions, how to find the perfect supplier, and how to continuously extract value from the external business relationships. Ultimately, procurement has developed a formula on how to best sell to a B2B customer. A methodic approach that can be learned and reapplied, and more importantly, that is appreciated and valued by the company stakeholder, the user of the product or service.

This might be an affront to many sales theorists out there, but sales excellence clearly goes above and beyond just mastering questioning technics. It is more than perfecting influencing and negotiation skills. It requires more than being an expert in countering tactics or how to handle objections and rejection. Sales excellence is that very art of building winning business relationships with the customer holistically. Relationships that last and that are characterized by mutual trust.

The procurement function can be that place to turn to, to learn how to build these close B2B relationships with the customer methodically and successfully. The customer centric procurement professional can become the guiding point to true sales excellence. As counterintuitive as it might sound, it could be the natural evolution in sales. And most likely, a revolution for some.

References:

  1. “A next-generation operating model for source-to-pay”, McKinsey & Company, Samir Khushalani, Edward Woodcock, 2018
  2. “Pursuing purchasing excellence in chemicals”, McKinsey & Company, Raffaele Carpi, Marco Moder, Frank Plasschaert, and Marco Ziegler, June 2016
  3. “Shifting the dial in procurement”, McKinsey & Company, Tarandeep Singh Ahuja, Yen Ngai, May 13, 2019
  4. “Why Investing in Procurement Makes Organizations More Resilient”, Rafael Ramirez, Ciaran McGinley, Steve Churhchouse, HBR, June 17, 2020
  5. “The future of procurement. One survey, two perspectives”, Oxford Economics, 2015
  6. “Leading Procurement Strategy: Driving Value Through the Supply Chain.”, Dr. Carlos Mena, Martin Christopher, Remko van Hoek, KoganPage, 2015
  7. “Realizing the power of procurement”, Kearney, Mike Hales, Yves Thill, John Fiorentino, Sonali Agarwal, 2020.
  8. “Raising the World-Class Bar in Procurement Through Digital Transformation”, The Hackett Group, Laura Gibbons, Christopher S. Sawchuk, Srinivasa Rao Dabbera, June 2018