Bottleneck focused marketing

Bottleneck focused marketing

The "bottleneck focused marketing" method identifies the customer's "burning problem" and solves it better than anyone else. In practice, it works like this: "I looked at all their online advertising and did a basic analysis using commonly available tools. I worked it into a concise presentation where I said - here you are, these are the mistakes, these are the opportunities and this is how I would optimise it. I sent the file directly to the owner of the company with the understanding that we should meet promptly. He responded promptly. An hour later we were sitting in a coffee shop, and in another two hours I had all the approaches in place and started on the marketing manager position."

The electronification of purchasing is rarely bottleneck

The problem is that when you're selling purchasing software, you rarely find an executive who sees purchasing and its digital transformation as a pressing problem that they need to solve as quickly as possible. Conversely, when approaching customers, you'll typically encounter some skepticism as to why they should even address such a topic. And then the biggest challenge is managers who want to demand at the very first meeting:

"Don't give me a presentation of your product, but tell me how your solution is unique and explain how you solve our problems."

"Today we have no software. We have everything perfectly fine-tuned. And we are special (how else). So why your solution?"

"I expect you to offer me to streamline our purchasing processes so that we can save at least 10% of costs while maintaining long-term fair and mutually beneficial relationships with our suppliers."

"Just show me references of companies with a similar type of business to ours."

Sourcing module and cost savings

It is still true that any discussion around purchasing sooner or later turns to money, and when you even offer purchasing software, senior managers consider it a wasteful use of hard-earned money that could be far better spent on other activities, especially marketing. Therefore, no later than the second sentence, they will ask, "how much will it cost and how quickly will I get a return on my investment?"

We at Promitea have always found it annoying to fiddle with general numbers in a meeting and promise specific savings without detailed knowledge of the customer. We therefore answered fairly: "Your claim of a 10% saving may be realistic or completely unrealistic depending on the maturity of your purchase, the nature of the categories you are buying, the current price level and the degree of computerisation. This is an area that needs to be expertly researched."

But that's not what the customer wants to hear. That's why we decided to present the potential customer with numbers that we consider realistic and representative of a customer who is just starting to computerize their purchasing processes.

Note that we only list price reductions in third place, even though companies are usually most interested in this "visible part of the iceberg" and are disappointed when the computerization of purchasing does not immediately contribute to this type of savings. However, a typical purchase to pay process (administrative costs from request to payment) costs €50 per business case whereas even a poorly automated e-catalogue costs €20, i.e. a saving of €30 per order. Conversely, a 9% reduction in purchase price on a €150 order is equivalent to €13. In other words, it is more efficient to reduce administrative costs by €30 at the beginning and only afterwards focus on reducing the selling price by €13. This information is so counter-intuitive that it literally takes many managers' breath away.

The purpose of tools such as sourcing and catalogue purchasing is not primarily to reduce the purchase price for small orders for standardized fulfillment, but to reduce the total cost of ownership. This means that computerizing these processes saves the buyer the cost of the tendering process (sending out the request for quotation, comparing quotations, submitting recommendations for approval). For example, by implementing an appropriate level of catalog spend, both partners typically save 70% of administrative costs by automating requisition creation, ordering, invoicing and payment through three-way matching.

When it comes to E-auctions, we take a pragmatic approach. E-auctions lead to price reductions and are justified for transactions where the market is competitive and where we need to find a "fair" market price quickly. However, their use must be carefully considered as part of the purchasing strategy. In the long term, e-auctions can have a negative impact because they limit the relationship with the supplier to price alone and neglect other factors.

Benefits of Supplier Relationship Management

In order to offer a responsible supplier relationship management system to the customer, we need to understand the company culture, business model and preferred form of cooperation with suppliers. For example, in a project-managed organisation, we see a number of advantages, which we will only list telegraphically, as the specific value for money must always be determined only on the basis of expert analysis:

(a) Lower overall costs associated with managing a panel of suppliers,

(b) meaningful consolidation of the purchasing base,

(c) good working relationships and communication with suppliers at all levels of management,

(d) better communication and collaboration because the supplier understands our needs and can better meet our performance criteria,

(e) timely resolution of issues and avoidance of conflict,

(f) systematic and efficient allocation of pricing risk so that it is borne by those who can best manage it,

(g) working with open costing and mutually beneficial solutions,

(h) understanding internal processes and adapting them to the needs of the counterparty,

(i) informing decisions about what to do internally and which activities are for oustourcing,

(j) identifying suppliers who are best suited for continuous improvement,

(k) systematically measuring supplier performance at all stages of the purchasing case,

(l) developing the knowledge and skills of procuring entities in modern purchasing.

Added value of electronic purchasing

We then conclude the meeting with the general benefits of electronic purchasing. The list is like candy and we highlight only those that have real value for a particular customer.

• Promitea is unique in its ability to combine technical knowledge of purchasing process management with the ability to identify the customer's real purchasing needs, design a solution and help the customer implement it in practice
• Digitalization of purchasing is just one of the steps of professionalization of purchasing and gradual improvement. Improvement will therefore not only be in purchasing, but will spill over into other parts of the business.
• Despite all the advantages, purchasing software is only a tool that will allow purchasing to do things more efficiently, in the sense of better quality, faster, cheaper. But software alone will not guarantee anything unless people actively use it to the benefit of the company,
• Priority can be given to computerizing those processes where the greatest benefit to the company can be expected given the existing purchasing system, processes, and expectations of management and users.
• There are no one-size-fits-all solutions. Individual modules can always be adapted to the specific needs of the client,
• Return on investment must be assessed on specific cases and take into account the current situation (for some companies it will be the main benefit and savings of computerization of the purchasing process, for others better risk management, for further development of suppliers).

Conclusion

Selling purchasing software is rarely a burning bottleneck, which in practice means that the company must convince the customer with tangible benefits in the form of price and process savings, and must show that the software has an attractive return on investment. Despite the clear numbers, compelling reasoning, and intuitive soundness of computerized purchasing, it is a difficult discipline, especially in situations where a potential customer will "give you twenty minutes" to convince them that "your solution is needed, unique, most competitive, and adds a tangible competitive advantage."