Following on from our research and article last week regarding what customers consider to be the most important qualities of their material suppliers, we have asked the question:-
"What would a prospective supplier (in effect an unknown quantity) have to do or demonstrate to convince you to place business with them in preference over an existing supplier?"
In the past I have visited prospects, talked them through a brochure, our stock and capabilities, left the meeting room and thought “Job done, that went well”. I couldn’t have been more wrong. I was happy if I could convert 1 in 5 prospects into actual clients, but the feedback I have received on the above question has made me realise that with the right application and approach that conversion ratio could be much higher.
The word which occurred most often, in fact in nearly every response, was VALUE. I decided it prudent before discussing “value” to try and obtain a definition of the word, the most apt I came across being:-
The interesting part of this is the last sentence, which highlights that the customer’s perceived value often isn’t the same as the actual value a supplier may place on a service or physical product. In many cases this will exceed the “intrinsic value”.
One respondent wrote:-
“Demonstrate a superior value than the incumbent supplier. Quality, reliability, delivery, and attention to details both before and after any transactions. In today’s market with the abundance of electronic messaging the personnel touch is lost. I still believe there is no substitute for face to face interactions with the customer. Last is pricing, because overall value cannot be measured by price alone”
This response told me I was doing at least something right previously, taking the time to physically visit prospects demonstrates I put much more value on them than those that didn’t venture beyond the office door and hoped that a standard marketing e-mail would win them the business.
This response also demonstrated that the “value” buyers are looking for isn’t as straight forward as “price”. Price can be measured, but it certainly cannot give measure of value when considered alone. I’m sure some time in the future some genius will produce a mathematical formula (excuse me if they already have) to calculate value quantitatively, but for now I guess it is an objective appraisal of an overall package.
Another respondent wrote;-
“It would depend on the value that the new supplier could bring into my operations. Apart from cost, I am always on the lookout for a supplier who possesses the superior technical knowledge of their product and its application to bring competitive edge to my organization”.
In this instance, the respondent places value on technical knowledge, feeling that this could bring his company a competitive edge, whilst giving also consideration to cost. The previous respondent was looking to a supplier willing to offer the personal touch and face to face interaction where required.
The following response demonstrates other ways to add value in proposal to prospects. In my opinion “credit terms” is one way of adding value without any great cost (unless we are talking huge sums and cash flow is a concern).
The response also touches on the importance of how the prospective supplier responds to the RFQ and “getting to know you” requests. These requests may be quality procedures, testimonials and other documents. These are very often a prerequisite of larger organizations prior to even considering using a supplier. From experience, it is absolutely critical that these are dealt with in a timely and organized manner, it can be hugely detrimental if this isn’t the case- creating a poor impression dealing with these matters would more than likely halt your progress there and then.
“The new supplier must be perceived to be bringing some improvement or "value" to you. That can be price, delivery, quality, credit terms, proximity to your organization, etc. Those tangible items in addition to how the prospective supplier responds to your RFQ,and other "getting to know you" requests may add up to a level of comfort that will allow you to make the decision to change suppliers”
Bear in mind that there is an element of risk involved in changing supplier or using a new supplier full stop. We must do all we can to eliminate that feeling of risk, creating a confidence in the prospect that we can fulfill requirements and fulfill them well. The importance of doing this is highlighted in the below response.
“It always boils down to risk (of leaving your incumbent supplier) to the reward offered by that new supplier.
The incumbent supplier will be a known quantity that has demonstrated their performance in the past and allowed you to profit (or not which is why you might be considering a new supplier). You know the personnel involved, you know the delivery patterns and the quality provided to you by the incumbent”
Whatever “value” we can bring to an organization as a new supplier, it is invaluable to be able to demonstrate that in hard figures. It isn’t always possible to do so, but where we can find a means of doing this, you will certainly grab the attention of the prospect. This respondent, due to the nature of his business, is able to do that:-
“Being one of those prospective suppliers I have to demonstrate my worthiness. This is usually not hard at the manufacturing end of it. I can show the shop foreman, programming engineer or lead machinist why and how my product is better. This can be documented by tool life increase, production increase, less machine down time. Even if the cost of the tool is more than what they presently use, the shop person sees the benefit. The persons who are the hard sell are purchasing. They have a budget that they are always trying to lower. Most of the time they do not see the whole picture. Yes the tool costs a 20% more, but your manufacturing costs went down 40% due to throughput. This is where it is my job to show them the whole picture and show them the documented savings”
To summarise, when approached by a potential supplier, the key thing that buyers look for is “value”.
o This value can come in many guises, but ultimately they are looking for something that is going to add to their organisation. That may be technical expertise, it may be extended credit terms, it may be an operation which will increase output. Whichever mask it wears; the added/superior value will affect the bottom line and the operational efficiency of their company.
o When approaching prospects, we must remember to look beyond price and delivery and identify areas where our services/products/knowledge can be utilised to give the prospect a competitive edge.
o If we have something to offer, it is important to demonstrate willingness and an appreciation of a potential client by making the effort to meet them face to face if possible. After all, face to face communication is always more productive than a phone call, or an extremely impersonal standard marketing e-mail.
o Beyond the initial meeting/presentation, and having proven that we can add value to an organisation as a supplier, be sure to deal with early (and preferably future) RFQ’s and documentation requests with as high a level of efficiency as possible. All the hard work could have been done, and then undone, in a belated response or sloppy piece of administration. It is at this stage that we look to eliminate that feel of unease which a customer is certain to have at the prospect of switching/ trialling a new supplier. Whilst that sense of unease and risk is around, the prospect is never going to fully commit.
I will be changing my approach for the future, ensuring I incorporate the following wherever possible
Personal, face-2-face interaction
Communicate, demonstrate and (hopefully) provide superior “value” than competitor
Eliminate buyers feeling of unease/risk by providing positive/comprehensive/timely responses to RFQ’s and “getting to know you” processes.
Author; Adam Dudley, 20th November 2009