How can you make procurement an ally instead of an obstacle?
For agencies, procurement is where the money is. But many agencies shiver when procurement approaches – and they are crushed by procurement’s superior negotiation skills. It doesn’t have to be like this!
In this guide we’ll cover:
- How can you make procurement your ally instead of your enemy?
- How can you grow your relationship with procurement?
- How to ‘size up’ your procurement contact
- How can you understand their motives – so you can get a win-win commercial deal?
Mike helped us deal with procurement gatekeepers.
Some of this resource is based on a training session that Mike Lander delivered for Agency Hackers members. Mike is an ex-procurement director, and now he helps agencies engage with procurement.
If you want to watch the training session, enter your email address below.
Know Your Enemy: The Two Types of Procurement
There are two types of procurement: direct and indirect. If your procurement contact has a background in direct procurement – beware! “These are extremely well trained, very savvy negotiators” says Mike.
- Direct procurement are the kind of battle-scarred warriors who buy bananas for Walmart. They have very deep category expertise. They are specifically trained in negotiation.
- Indirect procurement folk buy the stuff that sits between gross profit and net profit. So, marketing, infrastructure, marketing services, HR. “Normally a procurement person that sits in the indirects are spread pretty thin. They work across multiple categories. And they may lack in-depth category expertise.” “If you’ve been frustrated with procurement people that don’t understand marketing, this is why” says Mike.
“If you meet someone in procurement, look at their LinkedIn profile. If they’ve been in direct procurement – buying goods and services for a big retailer or manufacturer – they’ll be a really savvy negotiator. You need to prepare really well when you meet those kinds of people.”
What Does Procurement Want?
To catch the squirrel, you must become the squirrel.
Who are you dealing with? Who works in procurement – and what do they want?
There are lots of stereotypes about procurement:
- Rational and analytical
- Trained negotiators
- Tough minded
- Emotionally detached
Many of these are true. But there are also plenty of myths.
Myth: “Procurement Only Cares About Saving Money”
(Reality: They Care About LOADS of Stuff!)
Procurement is not just measured on its ability to lower price anymore.
Certainly, procurement’s priority has always been about savings – ,and probably always will be. But that isn’t the ONLY thing they are measured on now. Today, procurement now wants to hear about all kinds of other things too from agencies:
- Diversity & inclusion
- Quality and reliability
- Risk and governance
They are actually measured on all these things. So if you’re an agency and you’re meeting procurement, mention it. If you have sustainability initiatives that you’re proud of (like, if you’re part of the Agency Hackers Sustainability Council) then make sure you talk about this. If you can help bring innovative solutions to the organisation, let them know.
Myth: “You Can’t ‘Schmooze’ Procurement“
(Reality: You Can Actually Build a Relationship)
Agencies think procurement are these untouchable autocrats they aren’t allowed to speak to.
Wrong! The truth is, you CAN build a relationship with them.
“A great opportunity to engage procurement is when you’ve written thought leadership papers” says Mike. “If you’ve written a great thought leadership paper, which has got true insights and trends about what’s going on in your area of the market – which isn’t just a sales document – send it to them! Or send them a precis and invite them to a 30 minutes call.”
Why would a procurement leader be interested in your thought leadership document? Two words: category planning.
“We often do something called category planning. How’s the market moved? What technology has been adopted? Who are the upcoming players? Who are the incumbents? What’s the pricing like in the marketplace? We produce a category plan every few years, so if you can educate me when I’m getting near to a category planning cycle, then I’ll be all ears!”
Tip: Engage outside the RFP process
* People often say you can’t engage with procurement.
* You can! But just NOT inside an RFP process.
* So start BEFORE you get to that stage!
It’s a good idea to target procurement leaders in your marketing campaigns
“Build a top 50 marketing procurement category lead list” says Mike Lander. “Use it to target people who lead procurement inside organisations you want to work with over the next three years, and start to run campaigns for them as you would with any of your stakeholder groups. Invite them onto webinars and educate them.”
Mike – a former procurement director himself – says that procurement folk are often up for attending webinars. “I’d always go to a half hour webinar. I might turn off my camera and work in the background but I will be listening to what’s going on and looking at your content.”
Tips for Engaging Procurement
* Build relationships them on LinkedIn. Comment on their posts with your insights.
* If you’ve got something relevant to share – send it to them!
* Become front of mind and ask them about their category planning cycle – so that you will become part of it. (They will be impressed you know)
Myth: “You Can Never ‘Push Back’ At Procurement“
(Reality – Sometimes, You Have To)
Truth: There ARE times you SHOULD stand your ground
When should you push back at procurement? In Mike’s Agency Hackers session, somebody brought up the dreaded spectre of the “pricing spreadsheet”.
Agencies hate it when procurement sends over a spreadsheet where you have to supply grades, roles, and hourly rates.
“I’ve seen some horrific versions of this” says Mike. He has this advice: “Consider pre-qualifying out RFPs where the spreadsheet they send you is outrageous.”
What’s an example of outrageous?
“If it’s asking for all of your overhead costs to get to your net profit. They’ve no right to do that. So just say to them: we’re not gonna bid. Or fill in the bare minimum on their spreadsheet and then say look, we don’t do day rate work. We do fixed price work. So we can’t give you what you’re asking for.”
Mike says that a reasonable procurement processional should accept this because – broadly speaking – procurement buy activities, outputs or outcomes.
“My advice is fill in what you have to but make it very clear. We will work out the deliverables and outcomes and we’ll build a commercial model that meets your criteria, but we are not negotiating on individual hourly rates to get to a number.”
“Help! Procurement Keeps Appearing at the LAST MINUTE!”
One Agency Hackers member asked Mike: “Sometimes I’m dealing with a stakeholder who then finds out that they have to go through procurement. And a couple of months later I get the RFP… and it bears absolutely no relation to the discussions we’ve had with the stakeholder that I’ve spent three years building a relationship with!”
Mike has this advice:
- “When you get to the point of scoping a project, and you’ve confirmed they have a problem, a budget, and they’re looking to solve it in the next three to six months, help them shape the scope. Don’t go too far, but shape the output: What do the deliverables look like? What’s the scope?”
- “Then I’d say to them: ‘Now, just before we get any further, if we won this piece of work how would we get a purchase order?’ And normally they’ll say: ‘Well, that’s held by procurement’.
- And then ask: ‘Well, what size of spend do procurement get involved with?’ And they might say: ‘Look, this is going to be a £100,000 pound deal – they’re bound to get involved.’
- And I’d say to that: ‘Could you introduce me to the procurement person please? Can we have a discussion right now? Before we get into a lot of detail, let’s talk about it now with procurement.”
Here you’ll find one or two things:
|✅ Procurement are genuinely interested. They’re like, great – this is something we haven’t done before. If they haven’t done it before as an organisation they probably don’t have a preferred supplier list.||❌Or, it’s something they have done time and time again. They bought it hundreds of times, they’ve got three preferred suppliers. They’ve negotiated rates, they have a roster which they rotate. And then they say: you’re not on the list. We’re going to RFP it, and it’s going out to three agencies – one of which is not you. So at least then you know!|
“When Should We Respond to a Procurement-led Opportunity?”
The email lands in your inbox: “You have been invited to submit a bid.”
Mike says if you’ve no prior relationship with the organisation…
…if it’s the first time you’re bidding for a piece of work and you’ve randomly got onto the list for the RFP…
… then your chances of winning are exceptionally low.
“It’s less than 10%” says Mike. “They’ve already got their preferred suppliers lined up but they still need other bids. So I’d say be very wary about if it’s the first time you’ve worked with them.”
Mike suggests creating a qualification criteria:
- Are we on the preferred suppliers list?
- Can we meet the economic buyer and or procurement for meaningful discussion before submission? (If the answer’s no, that’s a very, very bad sign.)
- Do you know who the competition might be? (There’s obviously external and internal competition. Have you got both? Because on some projects, the internal team might say, well, we want to do that.)
- Do we have unique, deep expert knowledge that we can genuinely demonstrate?
- And have you solved that problem before?
- Have you worked with a company the last three years?
- Do you have an internal sales coach? (Your sales coach might not be your economic buyer – it could be someone that you know that’s well connected who you can have a few friendly conversations with.)
(Be a bit careful, warns Mike. “If you start to engage directly outside of my RFP process, and you start talking to senior stakeholders, and you start trying to shape the way the deal is going to work and how I’m going to select, I may kick you out of the process.”)
“What’s the Budget?” Can You Get Procurement to Tell You How Much They’ve Got?
Can you ask procurement the budget?
In our training session, an Agency Hackers member asked Mike: “We always ask what the budget is, but it’s quite rare that we get an answer. Or we get a really vague answer. It makes it hard to know what to go in at. On a digital project you can flex the scope to meet most budgets. But often the briefs are so vague it could be anything from £10k to £100k. Any tips?”
Mike answered: “As a procurement leader, you aren’t going to get the budget out of me. I’m not going to tell you. I don’t know of any particular way of getting this out of procurement. In the public sector they might declare it, but in the private sector their whole skill is to try and buy at the best market price.”
If they’ll give you a conversation, what you could say is: “Look, given the scope that you’ve outlined, and given the deliverables and the timescales, typically, what we find for these types of programmes is that the price range typically ranges from about £50k, up to about £120K. So when we submit, our bid will be in that kind of range. Is that appropriate?”
“And you’ve got to look at them and gauge their reaction. Sometimes they will say: “Yeah, that’s broadly okay. What you’ll find out is, if you’re way out on that budget, they may say no, that’s never gonna work. It could be a tactic, it could be a game, but usually you’ll get a reasonable answer.”