It’s all about Price! (True or False?)


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Why gather customer feedback from purchasing people? They only care about one thing: price. We often hear this from potential clients who believe purchasing people are driven only by the need for price reductions. They are convinced that speaking with employees in purchasing roles is more or less a waste of time. Those who work in purchasing think prices are too high, yet you think your pricing is justified and, if anything, maybe too low.

Too high, too low, never the twain shall meet – why waste the time talking about things you can’t control?

Decisions are not made on price alone. In the 21-plus years we have been in business, our clients have conducted Customer Review process interviews with hundreds, if not thousands, of purchasing people. In the course of completing those interviews, our clients made a very interesting discovery: the higher up someone is in the purchasing area, the broader their field of vision and the broader their perspective. They become concerned about a wider variety of issues, including availability, risk management, quality, supply chain, global sourcing, technical support, response time, documentation, understanding regulatory issues, and of course, price. For these folks price is important, but it is not the only thing they think about. Price might not even be one of their top five concerns.

In fact, sometimes your price can be too low. One senior purchasing manager told me during an interview that when they discovered my client was selling a product below cost, it was a red flag because they immediately worried my client would stop supplying the product after customers had incorporated the ingredients into their new products.

Price can be everything and it can be nothing. I once conducted a Customer Review process interview with an experienced purchasing person my client had warned me about. My client told me before the interview this person only cared about price: “Price is everything to Joe.” But during the interview Joe said, “Price is everything – and it is nothing.” I probed for more information. Joe said if my client’s quality, personnel, safety record, attention to detail, project communications, and other key performance metrics were equal to or greater than the competition, then the customer’s decision would come down to price, which then meant everything. If on the other hand, my client fell short in any of these areas, then their price meant nothing in light of their other shortcomings. Price can be everything and it can be nothing.

Price is still important. Please don’t misunderstand. Price is still important and will remain important, especially in particularly cost-sensitive industries or when dealing with basic commodities. Price is also very important to more junior-level buyers who are often incented on the basis of cost savings and whose focus often is very narrowly focused on getting the best price possible.

Are you the low price provider? Do you successfully compete on the basis of price? If you are like most E.G. Insight clients, you are not the low price provider. To be successful, you must go beyond price to find other effective ways to compete. You need to have a clear understanding of and ability to leverage your strengths. One way to do this is by speaking with senior purchasing people to discover their concerns, what excites them, how best to solve their problems, how to give them a good night’s sleep. In short, you need to find a way to meet their needs. Talk with them, listen carefully, and you will discover it is not just about price.

Republished with author's permission from original post.


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