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View Full Version : Getting past the company preferred supplier line.



orion_joel
12-18-2008, 09:52 PM
Hi All,

Well, as many of you may know i have my business which is sales of computer and related products. One area that i want to focus on is the printer consumables market.

One issue that i have had is that some companies have started giving me the sorry we must use the company preferred supplier, for all purchasing. Which is fair enough for something's as their company may use a very specific brand of something for a purpose that if they change they may have to change a whole manufacturing line or something. However when it comes to a consumable product that is going to be the same from one supplier to another, what difference does it make.

In this particular case, i know that the price this company is paying is about $30 more per item then what i can supply for, and this is not because i am making no money on it, i would be in fact making 82% profit on the item, and still saving this company $30 per item, of which i would guess they use about 10 per month. So why would they be trying to stick to a supplier that is costing them an additional $300 per month, and this is just one item, they have a few other printers as well, that would also have saving's maybe not as good but still better then what they are paying now.

Any ideas?

vangogh
12-19-2008, 12:27 AM
There could be a variety of reasons for the why. Maybe there's a personal relationship between the supplier and the company or maybe while the supplier costs more for this item they offer deals on enough other items.

As for what you can do about it I'll share a story about my dad. My father was a salesman and often approached businesses who already had a supplier. He knew they did and knew going in he wasn't going to change his mine. What he would do is walk in and leave his business card. He'd let the person know that he was aware they had a supplier, but if for some reason their supplier couldn't deliver for whatever reason he wanted them to have his card as a backup.

Many of those businesses kept his card and sooner or later most of those suppliers would be unable to deliver for some reason. When that happened they'd call my dad and he'd have a new customer. Some stayed on as permanent customers. Some were customers just the one time. And some continued to have my dad be the backup supplier. Through it all he built up a large list of customers.

You can try to change this company's mind, but I'm guessing they aren't looking to change now. Get them to take your contact info and let them know you'll be there for them if they ever need you.

Then move on to the next company. Maybe give them a call or send an email every so often to say hi and remind them you're there. Low pressure kind of stuff. It's just the reminder you exist.

Steve B
12-19-2008, 03:56 AM
Steve is right. This is just the nature of most sales. Remember, it is very rarely just about price.

In cases like this it is just a matter of persistence and quantity of contacts that you make. Some small percentage will buy from you immediately, another small percentage will buy from you after several contacts, and many of them will never buy from you ever no matter what. But, if you keep calling on enough new clients and keep re-visiting the old ones you will get enough customers to make a nice profit - no matter how small those percentages are.

billbenson
12-19-2008, 09:38 AM
It's really old school purchasing departments. It used to be a very difficult issue, but today the wining and dining of purchasing agents is lower, at least in the US. Purchasing agents go online and buy.

What you need to do is get someone in purchasing to enter you into their computer as an approved vendor. Find something they need, sell it to them and offer net 60 terms, when the other guy wants cash or net 30. Or just plain cold call the purchasing manager if they are local to you.

This sounds like stuff large companies do. What I find is that large companies have purchasing department, but also give credit cards to field personnel and others. The people with the credit cards hate having to go through purchasing. It's quicker and easier to give you a credit card and expense the purchase. Try to find what they need that is not in the system and put in a requisition to purchasing recommending you as the supplier.

One other strategy I used once was to assign a unique part number for a product and got it approved by a government agency. A public bid goes out for a part number, but nobody knows what it is. Locks you in as the only supplier because its your number, not the manufacturer

Bottom line, get in purchasings system somehow and make it easy for them to buy.

BillR
12-19-2008, 11:14 AM
I have dealt with this a lot over the years. We work with a lot of Federal and large customers.

The "preferred supplier" is rarely about the up-front costs of a product or service. It's about the long term strategic costs. For example, a company can save a lot of overhead (on both sides) if they know they are going to get one bill a month for all of their needs of one type instead of many bills with different terms from different suppliers.

The long and the short of it is there are 4 possible outcomes that I remember ever having:

1.) You are not getting in ever - this was probably 30-40% of the cases. Such is life.

2.) You go to the preferred supplier and become a vendor to them. In your case this might be difficult BUT you will not know unless you try. They have to get their product/service somewhere to sell to the end customer. We had a lot of success with this.

3.) You apply and become a preferred vendor to the company - typically you need an internal sponsor for this and/or a unique product offering. You can't just walk in the door and get it.

4.) You get some kind of exemption from an internal sponsor - this was rare but we had it happen a few times.

If I was a betting man I'd bet on #2.

Dan Furman
12-19-2008, 04:37 PM
Price is nice, but like others have said, in cases like this, it's usually never about price.

It might help to think about why anyone would have preferred (or approved) providors/vendors in the first place. Why is there a need (or want) for this kind of thing???

To me, it's consistency and trust. That's why. That's the "real" reason to have a preferred list. Now, price could be a part of those two things, but it's those two things that matter most in an overall sense (in the majority of cases. Exceptions noted where a supplier may be an old friend, too.)

The other (very related) thing you have to remember here is human nature, and the "CYA" (Cover your ###) mentality that is a part of corporate culture. The preferred supplier is "safe" for everyone. If someone makes the decision to dump the preferred supplier and use you instead, and you (for some reason) fail to deliver 6 months from now, well, the person who approved it looks bad.

All of this will work against you, so it makes sense to definitely make "reassurance" (consistency and trust) a big part of your presentation. Bigger than price - price is the icing. And remember - the decision maker needs to benefit. He or she needs to be able to say in their next review "I made the decision to use Orion Joel, which increased efficiency and saved us 30% as well"

Admittedly, it is very hard to get your foot in the door with these kinds of companies. The good part is, once in, it's generally yours until you lose it.

billbenson
01-29-2009, 07:03 AM
Jayurya, your post seems a bit spammy, particularly with the link at the bottom. How about giving us a good tutorial on MLM's. Good ones, bad ones, how they are structured, etc., so people can make decent decisions.

cbscreative
01-29-2009, 12:16 PM
Just so bill's comment about Jayurya makes more sense, I will note that the post was spam and has been deleted.

pete
01-29-2009, 08:30 PM
BillR did a good job of explaining.

Many companies can tell you what it costs to deal with a vendor. I've been told as high as $ 30 to "cut a check".

But, as a long time outside salesman I can tell you - "The sale begins when the customer says NO." Up until then you are an order-taker.

So, if you want to get this sort of business, you have to become inventive. Come up with some Columbo type lines, where you get right to the door and then turn around with "just one more thing." Do some demonstrations, show where your product is the same and you can save them money. I've found that a pair of kindergarten scissors and a dollar bill will make an impression on folks. Start snipping and showing how much is left buying from you and from the other guy.

And some you still won't get. I'll never forget being told by an older guy on the Eastern Shore of Virginia "I know you've got a better product, I know we'll sell more of them, I've been out to your companies place on the lake up there in Michigan more than you have. Everything you say is true. BUT - we've been buying from old so and so comin' down here from Baltimore for longer than I care to remember and until he retires or dies, we're going to keep on buyin' from him."

He was the #2 man in the company owned by the guy who "owned the Eastern Shore", so there was not much I could say that would have made any difference.

Anyhow, if you're not a salesperson, become one. There are books, CDs, DVDs and more to help you. Or you may be able to get some help from your supplier. They may have "missionary men" that make joint calls with their customers and help close deals. "I've got the guy from the factory with me" can get attention.

Sounds like you need to put on your sellin' shoes and get on with it.
.

orion_joel
01-29-2009, 10:10 PM
To put it all straight what it comes down to is that i know if i could get someone to sell to them and the company was to even consider it they would more then see the saving's on the bottom line. The biggest issue is i cannot be the one to do the selling, as i work for the company that uses this line. The primary reason that i cannot sell to them is that i would be profiting from knowing inside information, which is not something they like and not something i really want to play devils advocate with, as i am in line for really moving up in the company.

However, i know there is absolutly heaps of margin in a number of the products that they are buying and i could have someone literally providing the same products at 10% less, and still making close to 30%-40% margins on them. This i know from the business point of view for working for them could make great difference on their bottom line, however i could only guarantee it if i was leading the sale from the supplier point of view. Now this isnt me trying to make a profit or anything it is literally that they are a massive company that spends hundreds of thousands on this stuff each year, but in some cases paying close to retail price even on quantity buys. Because of the company mentality of buy from the company approved supplier, because ....

billbenson
01-30-2009, 05:31 AM
In large companies, a strategy that worked well for me was to make friends with a lower level engineer who had direct contact with the decision makers. They actually became your salesman and eventually gave you access to the management level people who could make a decision. This was the type of sale that took a year to close for $1M or more. Not a one call close. Still, if you are looking to get your product standardized and in the purchasing system, its a good approach.

orion_joel
01-30-2009, 10:11 PM
The hardest decision to make often has obviously the two most polar opposite answers. I know staying with the company i am going to make a wage every week, and as it stands i would have to do something pretty dumb and probably criminal to lose that. However i also know that i could probably make a lot of money if i was to take the risk get my business going and spend the time and such required to actually get in and do the things that i know i need to do for my business.

The hard part is not really knowing what i really would need to do to get myself placed properly to both save them money, make me money and the rest.