Added on March 26, 2013  Ray Collis  Buying Decision , Buying Process , Buying Research , Featured , Procure To Pay Cycle , Procurement Process , Sales Process

So You Think You Know The Customer’s Buying Process?

Sellers are naturally focused on the purchase order. However, in winning the sale it is important to look beyond the buying decision to see the customer’s broader business and procurement goals.  That requires looking at buying process on 3 levels.

Can’t You See Beyond The P.O?

Beware of adopting a myopic view of the buying process – one that sees the start as the initial contact with a supplier and the finish as the issuing of a purchase order. The seller must look beyond the purchase order to see the end-to-end procurement cycle. Most important of all he, or she must focus on what the business is trying to achieve with the purchase.

Buying process is fast becoming the number one obsession of salespeople – just look at the popularity of the term on sales blogs and forumns. However, now that the basics of the buyer’s process are familiar to most, it is time to go to the next level – to look at the issue of buying process in its wider context.

 

Buying Process – How Far Can You See?

There are 3 levels upon which the seller can view the buying process. It can be viewed as:

It is important not to be blind to any of these 3 levels:

1. A Buying Decision – a set of steps leading up to a buying event, or decision

2. A Procurement Process – the end to end buying process that continues after the buying decision to include the management of supplier payments and performance

3. A Business Strategy – the buying process in its broader business, specifically what the business is trying to achieve.

Seeing the buying process on all 3 levels provides the seller with maximum leverage over the buying decision. Such a seller is best placed to influence the success of not just the executive sponsor, but the buying organization overall.

Let’s examine each of the levels of buying process in turn:

 

1. Buying Decision View of Buying Process

The most common view of buying process is that it encompasses all the activities leading up to the buying decision, with the principal focus being on sourcing and procuring the product or service. 

However, this myopic view can leave the seller exposed to shocks or surprises. Here are just two of the ways in which this can happen:

• Buying decisions can get unstuck leaving the seller waiting for the purchase order, or contract signature.
• Although projects may proceed, there can be delays or complications around payment. For example, payment may be contingent on set project, quality, or performance goals being achieved by the supplier.

 

2. The Procurement View Of Buying Process

Increasingly the buying decision is being seen in its broader procurement context. That is the full procure to pay cycle, including those steps before and after the buying decision is made. The steps include:

– The order is submitted

– The goods/services are received and accounted for

– Inventory and warehousing

– The invoices are processed and payments made

– Supplier performance is managed.

The paperwork, administration and bureaucracy associated with procurement can be significant. So it is not surprising that organizations are paying increased attention to cutting these costs. That includes such strategies as:

– Use of procurement systems, such as; eSourcing, eCatalogues and eAuctions

– Electronic payments approvals and processing

– Vendor managed inventories, where inventory is held by the seller and provided as required by the buying organization

– Aggregation of purchases and framework agreements (so rather than buying 8 times a year, the purchases are grouped into a framework agreement that governs multiple purchases)

– Consolidation of suppliers and SKUs (where the number of suppliers are reduced and an approved vendor process put in place to reduce the complexity and cost of dealing with multiple vendors).

The seller can help the buyer to reduce the cost of acquisition, as well as the cost of the full procure to pay life cycle. This is important, because cutting the seller’s price is not the only way to save the buyer money. But the implications extend beyond economics.

The procurement process is ideally a closed loop process where progress is reviewed to ensure the results and outcomes envisaged are achieved. It all takes place in the context of the broader procurement strategy of the organization, and in particular for the category of goods, or services in question. These are two areas on which the seller should focus.

 

3. The Business Strategy View Of Buying Process

The purchase of your product, or solution is happening because of other things happening in the business. That may be the manufacture of a product, the implementation of a project, or some other aspect of the running of the business. So, don’t just focus on the customer’s buying process, focus on their business process too. That is the business strategy, or project in question.

What is the difference between a buying decision and a business strategy?  Well as the diagram below suggests it starts earlier and finished later.  The end is not the PO, but rather the achievement of success in respect of the strategy, or project concerned.

The revenue cycle is a view of the effectiveness of the business at converting your solution into value, into results for the business overall, or a specific department, project, function or facility within the business.

What we are talking about here is the customer’s success, although a win-win is clearly the objective.

From the procurement perspective the focus is on ensuring a loop with respect of the purchase, ensuring what is delivered is what was paid for.  It entails making any corrections to ensure all the benefits are realized and learning any lessons for the future.

From the business perspective the focus is on successful implementation of the business project, or strategy. Success is therefore measured by reference to the key performance indicators for the business, department, function or facility.

This goes further than the procure to pay cycle, to encompass implementation, post purchase support, and ultimately the customer’s success. It is how the customer extracts value from your solution, how it uses your solution to impact on its success. You could call it the ‘Revenue Cycle‘, this is the procurement cycle in its broader business context.

An Example Of The Revenue Cycle View

Let’s look at an example. Suppliers measure their supply chain performance in terms of stock turn – that is how quickly they can rotate stock through their warehousing. This is typically measured from the point of entry to the warehouse to the point of dispatch to the customer. However, for a supplier concerned with the customer’s revenue cycle, or overall business process, there are other important ways of measuring supply chain performance. That is to count stock turn not from the point of delivery, but from the point of sale by the customer.

For the supplier moving its finished goods from its own warehouse to the customers warehouse, or onto the customer’s shelves is clearly not the complete end to end supply chain view. The most effective strategy to maximize stock turn (and related revenues) is to help the customer to do the same.

After all  it is only when the customer is moving the stock that revenue is being generated. It is only when the customer moves, or consumes the stock that another order will be triggered from the supplier. So, adopting this perspective is enlightened self interest.

This is an integrated supply chain view, extending from the raw material supplier right to the buying organization and even on-wards to its end customer.

The supplier shares the objective of making the buying organization’s business as successful as possible. The supplier can help the customer to maximize the efficiency of its supply chain.

This includes helping the customer to reduce the amount of cash tied up in inventory, for example, by inputting to the customers forecasting and planning, or by supplying the customer more frequently and holding its stock (Vendor Managed inventory). However, the opportunities available to the supplier go much further, for example:

– Changes to packaging or the product to make it better to store, handle, or use

– Process innovation which will drive down costs, or improve output

– Improved order accuracy (i.e. increasing fill rates) and on time delivery.

 

Implications For The Seller

Don’t be blind to any of the 3 levels of the buyer’s process.  So, after you have mapped out the steps in your buyer’s buying process sketch out what is involved in the overall procurement process of the organization and most important of all how the purchase fits into the organization’s broader business context. Its impact on the business, department, project, function, or facility.  That will maximise your leverage over the sale.