One of the most difficult Purchase Orders to be awarded is the one you take away from the “Incumbent” Supplier. Difficult, but not impossible . . . and incredibly gratifying! An Incumbent Supplier is a company who is currently and continuously providing specific products and services to the Buyer. And in most cases, it’s harder for the Incumbent to lose the order than for you to win it. In any industry, the Incumbent Supplier has obvious advantages over their competitors, especially if the Buyer is satisfied with them. From the Buyer’s perspective, these advantages include:
• A reasonable price based on the quantity of product, and a reduction or removal of non-recurring expenses.
• The Buyer’s familiarity of the Supplier’s products.
• An existing relationship between the Buyer’s company and the Incumbent Sales Rep.
• Buyer feels that issues exist with the Incumbent’s, the Buyer is aware of the issues and feels he can live with them.
• The Incumbent’s inside knowledge, a proven track record of reasonable success, and first-hand understanding of the Buyer’s needs.
Some Incumbent Suppliers remain on top because they continue to provide what the Buyer needs at a reasonable rate. Some take advantage of the situation by nickel and diming the Buyer within a tolerated level. Others are making dangerous decisions that could ruin their future opportunities. The question is, why do Buyer’s continue to source Incumbent Suppliers if their products are creating issues? As stated in an earlier Blog called “Six Things Buyer’s Don’t Want You to Know”, some Buyers won’t switch to another supplier for a number of reasons, number one being if it only means a minimal amount of savings. This is based on the amount of time, energy and associated costs in developing a new supplier. Staying with the Incumbent Supplier, even a poor performing one, can keep investment and qualification costs at a minimum instead of taking on a new supplier who may require expensive one-time start-up costs and other non-recurring expenses (NREs). Staying with the Incumbent also greatly reduces the risk of sourcing to an unknown supplier whose products are not yet tested and validated in the client’s own facility environment.
From the Buyer’s Desk, in order to prevail over the incumbent supplier, you will have to complete some deep-dive investigative homework on the Incumbent’s products. Every supplier has at least one weakness to exploit. It’s up to you to find it. For instance, the Incumbent may feel so confident they’ll receive the order that they start charging more for the product beyond the Buyer’s comfort zone. At that point, their weakness becomes PRICE. Another weak point could be the fact that the Buyer had numerous problems with the Incumbent Supplier including late deliveries, product breakdown, incomplete documentation, unresponsive sales representation and inadequate service. It’s up to you to find out what, if any, problems are occurring and ensure the Buyer that YOUR product will not incur those same issues. But be careful not to put the Incumbent Supplier down in such a way that it turn’s off the Buyer. No Buyer appreciates one supplier bad-mouthing another!
Now let’s look at overcoming the Incumbent Supplier from another perspective . . . YOURS! Let’s say you have a friend who owns a lawn service that cuts your grass a couple times a week. You think the price is okay and you’re not having any major issues with the lawns appearance. Then another lawn service company knocks on your door and wants your business. What would it take for a new lawn service to make you want to tell your friend you no longer require his? The number one reason would be PRICE! Not only would the other service charge you less, but they would throw in a complimentary lawn cut every so often as appreciation for your business. Maybe the other service has newer and better equipment that can leave a better looking yard. Maybe the other service can cut your lawn faster than your friend, thereby providing less disruption time. Maybe the other lawn service will show up when you WANT them to cut your grass and NOT when your buddy has time for you. Maybe the other company offers free services that your friend doesn’t; i.e. landscape trimming, weed removal, clippings removal, etc. Again, think about the weak points the Incumbent Supplier has and what it might take for your company to be awarded the business.
Whatever weak points you find, it will be up to you to do your homework, generate applicable documentation, and convince the Buyer to forgo what advantages remain of giving the order to the Incumbent. It’s up to you to make the client want to forgo the Incumbent and feel comfortable in giving the order to you. You’re never going to be able to force the Buyer to give you the order. You’re going to have to give the Buyer some compelling reasons to want to place the order to you instead of the Incumbent and provide him with enough ammunition to convince his own Senior Management.