The perception of most Buyers is that product or service “capability” is expected and can be attained by a number of your competitors. In other words, Buyer’s “expect” products to work when they’re purchased, just like we all do in our private lives. And most Buyers believe that specific products and services are available from a number of suppliers that will both fit their need and perform without issues; that you’re NOT the only game in town. So unless you’re the only supplier in the world that can provide a specific product or service, “price” has become even more important to you during the Buyer’s decision-making process.
Think about this statement: It’s possible that EVERY supplier could convince the Buyer that their product or service will work; that their product or service will do exactly what is specified and expected by the Buyer. But only ONE supplier will be able to convince the Buyer that they have the BEST PRICE, whether it’s from being the initial/eventual low bidder, or through the educational process of Total Cost of Ownership (TCO). (We’ll discuss TCO on a future Blog.)
So how do you convince the Buyer the best price is coming from YOU? Well, convincing through TCO takes education and energy; things the Buyer may not have time for. So, convincing by being the initial/eventual low bid supplier is the fastest and most straightforward way. What most Sales Professionals don’t realize is that they may have been the initial/eventual low bid supplier without even knowing it and without having received the order! There are a number of reason why this would happen. So today’s FEEDBACK: Sales Advice from the Buyer’s Desk, the following list contains the Top Ten ways suppliers can lower their quote (in no particular order) WITHOUT removing a penny from it:
1. Read and understand the RFQ. Don’t give the client more than what they asked for. Make sure you’re not over-quoting, thereby over-pricing. Anything above and beyond what’s been asked for should be in the “options” section of your quote. Make sure you understand exactly what the client wants. For instance, if they want pricing for one set of perishable tooling, make sure your quote doesn’t provide a price for more than one set. That will increase your overall base price substantially without warrant!
2. Provide “progressive-payment-terms” pricing, even though the order will be placed as “non-progressive”. How do you do that? Convince the person who will be creating the requisition to develop it with specific line items that you can invoice for as the item descriptions are completed. For instance, design and engineering only could be in one separate line item. When that part of the job is competed, you can invoice for at least 90% of it now, instead of waiting until the entire job is completed. That will allow you to lower the initial price of your quote since you’ll be receiving percentages of the order funds ahead of time.
3. Make sure you understand what is to be priced as an option and what is not. If on-site service or training is to be quoted as options, make sure you didn’t include them in the base price.
4. Make sure you know the absolute bottom line you’re willing to lose the job! Most suppliers only lose the order by a small percentage and could have very well received it at a lower profit. A lower profit is better than no profit.
5. Increase your communication with the client during the quoting process. The more you can sit down with the Buyer and End-User to review their requirements, the better chance you’ll have in receiving the order. It also provides an opportunity to propose low cost solutions that can reduce the base price of your quote.
6. Review your last quote with the client, especially if you lost the order. How far off were you from the low bid and why? If you quoted exactly what the successful supplier quoted, why was your price higher? Did you over-quote? What’s your competitor doing that you’re not?
7. Negotiate with your suppliers for better pricing. Don’t go back to the Buyer after the fact and say, “We met with our suppliers again and were able to get their price down.” Why wasn’t that done the first time?
8. It’s not difficult for a Buyer to make a mathematical mistake! Going through every supplier’s quote and making sure they have every dollar accounted for is not an easy process, especially if the quote is unintentionally misleading or confusing to the Buyer. Ask for time to sit with the Buyer to ensure they know exactly what your pricing is. If they have no time, make sure the quote is clear and logical based on their preferred format; a benchmark quote! Show the base price first, followed by the itemized pricing. Make sure items are clearly labeled either per unit or one time charge!
9. Make the Buyer aware of bundling opportunities. Your company may be providing several quotes to the same client, but to different buyers and even to different global organizations. If that’s the case, make sure each buyer is aware of everything you’re quoting to their company and what savings could be realized if you received two or more of the orders.
10. Make sure you’re not marking up purchased items with an unreasonable percentage. Many purchased items or services are marked up by the supplier using an unwarranted or gluttonous percentage, when they should have received little or no markup. There should not be a supplier markup for items or services that do not directly change that item or service before it’s provided to the client; i.e. transportation.