ARE YOUR CONCESSION LIKE GOLD IN THE EYES OF YOUR BUYER?

The next time you are meeting with IT Procurement ask them about their savings targets.

It is often said that, all that IT Buyers care about is savings, but let me lift the lid on what type of savings they are really after – because not all savings are weighted equally.

Ideally IT buyers are looking for Gold – metaphorically – but more often than not they are finding themselves down a Coal Mine. Let me explain:

A savings type called COST REDUCTION is the gold,
whilst another savings type called COST AVOIDANCE is the coal.

The Gold (Cost Reduction) can be claimed only – and only if – the company has existing spend (or budget) for the product that you or your competitor is selling. Gold Savings happen when this year’s spend is less than last year’s spend.

This could be as a result of

- A switch that is made from an existing non-preferred supplier to a preferred supplier (you) with better terms and lower prices.

- A negotiation leading to a unit price reduction against existing volume.

- Demand management leading to a volume reduction.

It is possible that Cost Reduction is a large or only contributor to your IT buyer’s savings target that year.

Any other savings, in the eyes of an IT Buyer, is the lesser valued COST AVOIDANCE type – The Coal.

In other words, if you are not working on knocking out a competitor with existing spend and just want to sell more volume at a slightly reduced price, expand product ranges or introduce new services, you are “Down the coal mine” and you will only be seen as offering coal when you make any concessions in your negotiations.