Spend Matters: Using Procurement’s Big Data for Better Sales Effectiveness

September 10, 2013- 

By Sebastian Mamro

Exploit the Information You Already Collect

While most supply chain companies have done an excellent job of managing costs and negotiating deals from the procurement perspective, far too many organisations today come up short when trying to link procurement information to their own sales performance and product pricing activities.  That’s because they fail to make the connection between their approach to procurement and the valuable customer data they now collect in their existing CRM and ERP systems.

This information, commonly referred to as “big data”, can be collected and analysed to improve sales performance and effectiveness, especially when setting prices and negotiating deals. With paper-thin margins, unleashing the potential of your big data can help your organisation manage the volatility of raw material costs and currency fluctuations, and enable your sales force to conduct negotiations from a position of strength based on timely information. The result for both procurement and sales teams is a significant contribution to outperforming your competition and enhancing your bottom line.

Get Information to Your Sales Force When/Where They Need it Most

Far too many global supply chain companies still rely on outdated manual spreadsheet methods when pricing and negotiating contracts for their products.  The sales force puts together contract proposals based on last year’s contract or purchase history, and then applies any current discounts.  The problem with this approach is obvious when one considers the many variables that impact the total value delivered to a customer – and the profitability of any negotiated deal.

Fluctuations in the cost of materials and labour that make up a product item are only the beginning.  Payment terms, packaging and bundling, freight charges, and currency exchange rates all play a part in the benefit provided to a customer and should be reflected in the price. Most organisations don’t know how to incorporate all these factors into pricing so that sales people can actually use this information in the field when negotiating contracts with their customers and prospects.

This is changing. Using big data from procurement and customer systems provides sales people with the timely information they need to properly price a set of products and services for each individual customer.  Using software and mobile devices, your sales team can literally construct the highest value deal within a framework that gives them the ability to combine or unbundle products, make substitutions, change payment terms, adjust currency exchange rates, and upsell and cross-sell more products – all based on the individual customer’s situation.  Imagine how empowering it would be if each of your sales people could demonstrate in the field, at the time of negotiation, why a certain price is justified, based on the specific value it delivers to the individual customer.

This approach relies on having a data model in place that is able to process hundreds of thousands or even millions of pricing decisions made every year. This data can then be analysed to provide insights and benchmarks such as which prices peer salespeople are generating for comparable products and customers, while the scientific analysis running in the background can “prescribe” the right price during negotiations.  Thus the data science model can harness the vast experience of the whole sales force, and bring the collective wisdom and memory of the entire organisation to each and every deal.

By adopting new pricing and sales performance technologies, organisations can unlock the potential of big data they already collect through procurement and customer management systems to help maximise the value and profitability of every contract.  This critical information can be generated automatically then applied and manipulated at the point of negotiation so that your sales force can be much more knowledgeable – and therefore much more effective – in securing better prices and margins.

In a supply chain world of increasing competition and price reduction pressures, pricing technologies offer an unprecedented opportunity to improve sales performance and profitability dramatically. However, this approach requires a re-think on how procurement and sales teams collaborate and share data to support how the overall business objective is achieved.