Supplier Development 2 - Supplier Conditioning

Supplier Preparation and Conditioning

In the second of a series of articles dealing with Supplier Development, David Birch of Purcon looks at the topic of Supplier Conditioning and its importance in the negotiating process.

1957 was an important year. It was the year Vance Packard's book "The Hidden Persuaders" made the public aware, for the first time, that sales and marketing through advertising used hidden messages to sell products. Subliminal advertising is still with us today. It’s an indelible part of marketing and the sales process.

Suddenly we became aware that consumer demand wasn't wholly driven by free will. In fact, we knew it could be stimulated in very subtle ways.

Marketing in this way isn’t new. It is the result of many hundreds of years of adopting "best practice" techniques by sellers. From the humble market trader to the corporate sales force, the analysis of what sold best and why has evolved into ever more sophisticated selling and marketing techniques.

In the 21st Century, we purchasing professionals, of course, know all about these subtle ways of influencing our corporate buying decisions . . . or do we?

Sellers Conditions

Sales people have a range of methods to influence and encourage buying. Unsurprisingly they like to lead the discussion and set the tone of a meeting. Each tool in the sellers toolbox is used to promote specific reactions from a buyer. The common ones are:

a price list
a special offer
discounts linked to volume
low profit lure (we've all heard the phrase "I'm not making much on this deal" )

The seller is, in effect saying, "if I sell to you, these are the conditions." I would argue that what should be happening is that the buyer should be saying "if I buy from you these are my conditions."

Only in the last few years have buyers started to take more control. Purchasing professionals are developing their own best practice techniques for counteracting this conditioning. I know from my own recent experience that more and more sellers are now taking an interest in corporate buying techniques as they meet an increasing number of professional buyers.

Turning the Tables

One of the primary objectives of a buyer must be to ensure that the seller clearly demonstrates an understanding of your needs and how the product or commodity in question satisfies those needs. We as buyers, must not be manipulated by any pre-conditioning techniques.

In fact a buyer can exert a great deal of influence over the sales process, particularly at the initial buying phases. It is at this stage that the buyer outlines his requirements and is in a naturally strong position.

By using certain phrases, a buyer can either increase or decrease the sales person’s interest. For example supplier interest will increase if the buyer says "We are reviewing our strategy", "We are interested in long term relationships" or "We need your help”. These types of statements reveal a change in the current situation and give an indication of opportunity to the seller. The buyer, however, retains control of the process.

Conversely, statements such as: "We intend to share the business. . ." , "We are asking all our suppliers to bid. . ." and "It is time for our market review on supplier performance . . ." will have the effect of tempering the suppliers expectations.

As you can see, the buyer can lead the tone of a meeting to his advantage. This may at first seem a little hard-nosed, but it helps the buyer to get the best deal. The seller will be aware that he may have to work hard to make his sale. It will also remove any complacency the seller might have had before entering the meeting. This conditioning is very much to the advantage of the buyer.

Early Conditioning

I believe supplier conditioning cannot begin too soon in the procurement process. One effective tool, which has recently been used by some companies is the ‘Purchasing Brochure’.

This is a document that sets out in absolute terms the way your business interacts with suppliers, both potential and existing. Typically it would give a brief history of the company, its terms and conditions of business, the quality criteria of purchased goods and services and payments terms.

As you might expect, Purchasing Brochures vary. They range from very basic to glossy and expensive. But whatever form they take they must accurately reflect the business and its underlying principles. It is an ideal vehicle for the first steps in demonstrating to sellers how you and your company do business.

The style and content of the ‘Request for Quotation’ document, or your company's equivalent, is another opportunity to influence the supplier's perception of your company. The presentation and attention to detail of this document, in terms of the requirements, specification and logistic needs, will give the buyer a high degree of influence during this stage of the buying process.

Linked to this could be an invitation to potential suppliers to attend a presentation by Purchasing. This would set out the requirements and terms of business for the upcoming contract and ensure that all the suppliers receive a common message. Furthermore it demonstrates unequivocally, that the buyer is in control of the process and that potential sellers will have competition. And as we all know, increased competition is good for the buyer.

Controlling the Process

After the initial phase, potential suppliers may seek additional information from various sources within your company so they can prepare their offer. It is of paramount importance that information should only be available from the buyer. They alone should be the suppliers point of contact. Sellers will, of course, attempt to ascertain more information. Particularly the budget and product approval criteria involved in the purchasing decision. With this information they can tailor their offer and asking price. If all information and intelligence is channelled through one point of contact, preferably the buyer, then he or she continues to keep a tight control on the whole buying situation.

One more method of supplier conditioning is to keep your suppliers guessing. Being somewhat unpredictable will make it harder for sellers to use their own conditioning techniques. For example: a frequently used selling ploy is the "deadline", this is a way that the seller tries to extricate a positive decision from a buyer. It should be countered by a buyer establishing their own deadlines even though they may be quite arbitrary.

The methods used for supplier conditioning depend on particular situations, and must be applied appropriately. Of course they will vary from situation to situation and also from person to person. Used effectively they will increase a buyer's control over suppliers and will have a significant impact on your business success.

About the author; David Birch is Director of Purcon Training. Coming from a background at the highest level at Jaguar Cars and Nissan Europe, David is in demand for his extensive purchasing knowledge and strategic influence. For more information, contact Purcon on 01494 737300.