by Ron D’Andrea
We’re 7 months into one of the most disruptive events in global history. Every company is still looking to keep costs low. They’re churning out lists of the essential and non-essential purchases, and putting off all non-essential decisions.
It’s not black and white though. In this crisis, companies want to cut costs and often that translates into asking suppliers for reduced prices.
How do you respond to price reduction requests from your buyers?
Here are 5 simple steps to help ease the pain and to help you avoid getting cut by the proverbial procurement axe.
1. Turn your sympathy into obsessive customer research
Every good company cares about its customers and their success. To keep your company off of the chopping block, you have to take it a step further. Be proactive in these high pressure situations. Build a thorough understanding of your customer’s value chain. As the supplier, you are more likely to possess insights as to how your buyers can tighten up their supply chains and optimize efficiencies. Organize your findings and deliver them to your customer with a neatly wrapped bow. They’ll love you for it.
2. Ask yourself the tough questions: Are we expendable?
There’s nothing worse than overestimating your value to the customer. As a supplier it’s critical that you identify where you lie on their strategic map, and you know your position compared to similarly priced competitors. Before you conduct the pricing conversation with your customer, structure your thoughts by putting yourself into their shoes. How would they evaluate your worth as a strategic supplier? Show them that you understand their needs and value their business more than other potential suppliers.
3. Keep the projects and ideas flowing
Don’t wait until your buyer requests a price cut to kick your productivity into overdrive. Anticipate and address their challenges. Provide them with ideas and innovative solutions that will showcase your value as a strategic partner. If the dreaded cost cutting discussion rears its ugly head anyway, give them a path that will assure their success moving forward and still maintain your pricing integrity. Reiterate your commitment to continuous improvement and expand on the opportunities for supply chain optimization that you identified in Step 1.
4. Gift stakeholders with nuggets of information
When cost cutting operations are in full effect, stakeholders like the CFO and CEO are likely to be frequently engaged with your procurement counterpart. Structure your communication approach in a way to support them by delivering valuable market information that can make you both you and procurement look like shining gems in the eyes of the top stakeholders. Packaging this information in an easily digestible format will help your buyer to better position opportunities and minimize risks instead of opting for cost-cutting solutions. Be sure to collaborate with your counterpart to develop an action plan that showcases your company’s commitment to help them overcome this crisis.
5. Stay jointly future minded in your communications
Don’t let your customer think that you are one-track minded. If it seems to them that you’re only in it to maintain or increase your margins then you’re in a position to get the procurement axe. Be clear on your vision for the future for both organizations while also reinforcing your company’s competitive advantage. Provide them with details that will excite them about the value that will continue to be created in the years to come. Creating this sense of joint benefit shifts the discussion from being competitive to collaborative, so that the focus becomes building a future together.