Suppliers Must Prove Value

Here’s my take on what suppliers need to do differently when competing for your business.  (This first appeared as an Op-Ed piece in Business Travel News on Nov. 16th)

In these tough times, buyers are extracting favorable pricing across the travel industry. Not surprisingly, this frustrates most suppliers—namely those who don’t have the lowest prices. How many times do we hear suppliers wishing for buyers to “see the bigger picture,” “don’t treat us as a commodity” and “put more value on partnership”?

Translation: “Pick me, even if I don’t have the lowest price.”

What’s troubling is when higher-priced suppliers lose a bid, then complain that buyers are focused on price—and only on price. This is small-minded thinking. Good buyers make good decisions, or they don’t stay buyers for long.  Do buyers pay a lot of attention to price? Yes, for three big reasons:

• Price is the key driver in most savings calculations, and buyers get measured on savings.

• Price is an essential part of the value equation, and buyers are expected to find the best value in the market.

• Price is easier to quantify than benefits, and buyers have only so much time to frame their business cases for or against each supplier.

That last point is where suppliers need to face head-on the dreaded “we’re treated like a commodity” attitude. Start by looking hard at what are your real differentiated benefits. If you don’t have (m)any, then guess what? Price is the only way you can compete, so here’s hoping you’ve got the cost structure for that game.

For those suppliers that really believe they have non-price sources of value, it’s up to them to help buyers see this. Salespeople need to get past whatever brand images that buyers have and focus on getting them to understand your sources of differentiated value. The trick is to do this in ways that are credible and succinct.

By credible, I mean framing a value proposition in ways that buyers can kick the tires. Making fuzzy, feel-good claims about things like comfort, convenience and incredible savings don’t pass this test. Back up your benefits with some solid data or third-party endorsements. Help the buyer put your benefits into a business case. You may have to educate some buyers about how to evaluate the features and benefits in your industry. That’s fine, as long as you don’t wait until the RFP cycle to do the educating.

By succinct, I mean finding ways to clearly and concisely communicate your price/benefit position, aka the value proposition. That is, unless you have a whole lot of faith in your brand’s image or the strength of your relationship with the buyer. Yes, these are two important factors in the selection process, but why take a chance, especially in these tough economic times? Take some of the workload off your buyers by giving them a quick and easy way to explain to their stakeholders why you should win the business.

Finally, suppliers need to put more focus on sales fundamentals. Talk less, listen more—especially about the features that buyers really value and their concerns about your offering. Suppliers that work harder in these areas will do a better job of selling value, and buyers will make their decisions with more confidence.

3 thoughts on “Suppliers Must Prove Value

  1. Well, when supplier try to clearly and concisely communicate their price/benefit position, aka the value proposition, then they are, in fact, trying to positioning them selves as a Prefferred Business Partner to the company they are working with.

    Most of the time this kind of initiative coming from the Company instead of from the Supplier, because both will have a long lasting relationship based on win-win basis. Even though, later on ‘cost saving benefits comes in form of lower price due to higher volume given, and/or loyalty incentive awarded by the time they are treating each other as their important partner to contribute a mutually beneficial successes.

  2. lets assume that price and product are a given. Yet as the competition is almost a level playing field as far as the products are concerned key aspects and virtues come into play that have proven to be the elementary basis for any longterm and successful business relationship: Trust, Reliability, Proven Fullfillment and availability for issues when space has been sold. When a trustful and reliable relationship and the subsequent respect have been established that is a value appreciated that makes even a reasonably higher price possible.

    • Hagen makes an excellent point here. These are important but intangible qualities, which makes them difficult to evaluate. How about it, buyers – how do you take these factors into account?

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