For many years, cost savings was considered to be the primary \u2013 and, in some cases, only \u2013 objective of the procurement function.<\/p>\n
Don\u2019t get me wrong, cost savings still represents a relevant procurement contribution. \u00a0But it should not be considered the one trick of the procurement pony.<\/p>\n
A myopic, profession-wide focus on cost savings makes an incorrect assumption. \u00a0That assumption is that every organization competes on low cost to the consumer and that procurement cost savings enables profit improvement in a tight market.<\/p>\n
This assumption only applies to markets in which a final product or service is considered a commodity. \u00a0And even commodity-type markets are being transformed by innovative organizations who find new ways to differentiate their products and services.<\/p>\n
Markets and the businesses that comprise them are increasingly joining the \u201cexperience economy.\u201d \u00a0The experience economy is one in which consumers value how a company, brand, product or service makes them feel as their customer.<\/p>\n
These experience-chasing consumers don\u2019t make comparisons based on price alone. \u00a0They don\u2019t select a supplier, service provider, store, or product because it is one penny cheaper than the competition.<\/p>\n
Instead, they value a unique feeling that they get. \u00a0They want an experience that they can rave about. \u00a0And social media\u2019s ever-growing portion of what is considered \u201creal life\u201d only magnifies the desire for a rave-worthy experience.<\/p>\n
Consumers want pleasant surprises. \u00a0They want to feel like they got more than they paid for. \u00a0They want to feel like they were treated like royalty.<\/p>\n
Consumers\u00a0want to feel like they chose an option that was better than any other option they could have had. \u00a0Notice that I did not say \u201ccheaper.\u201d \u00a0I said \u201cbetter.\u201d<\/p>\n
Consumers don\u2019t get those warm and fuzzy feelings\u00a0from a commodity. \u00a0So, product and service providers reinvent themselves to include experiences as part of what they sell.<\/p>\n
As such, the experience economy has been transforming procurement. \u00a0Procurement decisions and supplier selections now need to be made based on how positively a decision or selection affects the consumer. \u00a0Sure, if two options are equivalent, low cost can be the tie-breaker. \u00a0But, in many cases, the more expensive option can create a more valuable consumer experience for which the company can charge more for. \u00a0So, choosing the lower cost<\/em> alternative does not always equate to choosing the most profitable<\/em> alternative in the experience economy.<\/p>\n As such, procurement professionals need to be in tune with the preferences of their organization\u2019s customers. \u00a0And they must be aligned with the overall strategy of the organization, including its marketing and sales strategy.<\/p>\n As you try to get in touch with your organization\u2019s overall strategy, you may find that your organization is not a participant in the experience economy. \u00a0Consider the airline industry. \u00a0Anyone who has flown regularly over the past twenty years will likely agree: \u00a0the airline customer experience has gone \u2013 and continues to go \u2013 downhill. \u00a0And airline leadership simply does not seem to care.<\/p>\n I mean, airlines now have:<\/p>\n Despite the fact that the world is moving to the experience economy, the airline industry makes it seem like a positive experience is less important than it ever was. \u00a0Do you hate certain airlines? \u00a0Or, like me, virtually all airlines? \u00a0Does the total airline customer experience make you hate being an airline customer?<\/p>\n Most businesses would never in a gazillion years allow their customers to hate doing business with them. \u00a0Well, airlines can get away with it.<\/p>\n The consolidation in the airline industry has made it less competitive and more oligopolistic. \u00a0And, on many routes, there is only one non-stop option, making it more monopolistic. \u00a0Without adequate competition, a company can treat its customers like [insert the soft-serve-chocolate-ice-cream-cone-without-the-cone emoji] and stay in business.<\/p>\n But your employer may not be able to do that in its industry. \u00a0Even if it could, your employer may never want<\/em> its customers to feel as short-changed as airline customers feel.<\/p>\n Therefore, it is key to understand some things about the industry in which your organization operates:<\/p>\n As you now hopefully realize, previous years\u2019 procurement priorities like focusing 100% on cost savings may not be appropriate in the experience economy. \u00a0Hopefully, your organization is not a laggard in the experience economy.<\/p>\n And, hopefully, you realize what you need to change so that your procurement department can better support a rave-worthy experience for your organization\u2019s consumers.<\/p>\n","protected":false},"excerpt":{"rendered":" For many years, cost savings was considered to be the […]<\/p>\n","protected":false},"author":12,"featured_media":4128,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-3587","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-procurement"],"yoast_head":"\n\n
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