I\u2019ve written extensively about the concept of \u201cvalue\u201d in procurement.\u00a0 A couple must-read items include \u201cWhat Is Best Value Procurement?\u201d and \u201cHow Sales Pricing Drives Procurement Pressure.\u201d<\/p>\n
A simplified variation of my definition of procurement value is \u201chow much quantifiable monetary benefit your organization receives from purchasing something.\u201d<\/p>\n
In procurement, we often use the concept of value to compare supplier proposals in sourcing decisions.\u00a0 But you can also use it in negotiation.<\/p>\n
For example, let\u2019s say that a supplier proposes a higher price in a new year.\u00a0 Often proposed price increases are accompanied by some type of explanation, generally emanating from the classic excuse \u201cour costs went up.\u201d<\/p>\n
You can respond to this proposal in a number of ways.\u00a0 One way may be to challenge the supplier to quantify the additional value you\u2019ll get from the product or service in the next year compared to the previous year.<\/p>\n
The supplier may not be able to give you an acceptable answer.<\/p>\n
So what if their costs went up?\u00a0 So what if they gave their employees a pay raise?\u00a0 How will that help you, as the customer?<\/p>\n
Push for an answer.\u00a0 If there is no true answer, then (if you can) refuse to accept the higher price.<\/p>\n
\u201cI don\u2019t buy features.\u00a0 I don\u2019t buy highly compensated supplier employees.\u00a0 I pay for value.\u00a0 If you\u2019re giving me last year\u2019s value, then I will pay last year\u2019s price.\u201d<\/p>\n
You can also use this to negotiate prices for products or services that a supplier puts on a time-limited sale, even after that sale expires.<\/p>\n
\u201cYou offered this product\/service for 40% less last month.\u00a0 What\u2019s the difference between the value the customer gets this month at full price compared to last month at the discounted price?\u00a0 Oh, there is no difference?\u00a0 Well, then I\u2019ll pay the discounted price.\u00a0 What?\u00a0 That was a one-time offer?\u00a0 Sorry, I pay for value.\u00a0 If\u00a0last month\u2019s price of the product\/service was appropriate for the value delivered \u2013 and nothing with the product\/service has changed \u2013 then surely it should be an acceptable price this month.\u201d<\/p>\n
There are countless applications of the \u201cI pay for value\u201d tactic in procurement negotiations.\u00a0 I encourage you to create, apply, and test your own!<\/p>\n","protected":false},"excerpt":{"rendered":"
I\u2019ve written extensively about the concept of \u201cvalue\u201d in procurement.\u00a0 […]<\/p>\n","protected":false},"author":12,"featured_media":4026,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-3595","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-procurement"],"yoast_head":"\n