The Price Is Right!

Published in: IPA, November/December 2006

Creating Perceived Value

Is price important? Of course it is. However, performance and contributions toward the economic and professional performance of the buyer and buyer's organization in today's competitive environment are more important.

I literally just received in the last 30 minutes a call from a client with whom we completed our work about a year ago. The president wanted to tell me that one of his struggling sales reps had just received an award valued well over $100,000.

His words, "The buyer told our rep that ours was the highest bid submitted, but we were the only supplier who submitted a full-blown proposal. He said our proposal was so complete they didn't have much of a choice but to make the award to us. Can you believe that? I just wanted you to know that what you taught us to do — how to do it, and why we should do it—keeps paying off for us, week after week."

Low price doesn't always win. "Creating Perceived Customer Value" is the key to getting and keeping customers.

This is not about how to put together a proposal or when to use one. It is about Creating Perceived Customer Value, what that looks like, and why low price doesn't win—except:

• With organizations who do not have effective growth plans (like Wal-Mart), or
• When none of the suppliers know how to create perceived customer value except through "cutting the price."

To begin, put yourself in the position of a young, relatively inexperienced buyer who is expected to buy a wide range of sometimes utterly complex items (including print and print services) in a seamless and timely manner. You, the buyer, count on your suppliers to keep you informed, to "make it easy to do business with them," and often to understand what you need better than you understand what you need.

The following scenarios are designed to elevate your understanding and your business development team's understanding of the opportunities for Creating Perceived Customer Value.

Real, Provocative Examples

You are the buyer, and you have three approved suppliers for your graphic communication needs.

1. One of the three suppliers always brings you at least two pieces of useful information — on every visit. The other suppliers make what might be termed "social visits" and often they overstay their welcome; but sometimes they do offer useful information however, that is the exception. Which supplier would you work to keep interested in you as a customer?

2. One supplier on a regular basis brings key personnel from his office and plant for you to meet. For example, he might be accompanied by the supporting CSR, supplier president, bookkeeper, or even the estimator and plant manager. They always arrive pre-announced, with an upfront agreed upon agenda for discussion. Discussions seem to include an exchange of information about the two organizations' performance issues, business environment, or upcoming projects. The other supplier reps seldom bring the "team" on a sales call. Which supplier would you feel most comfortable working with if you had to consolidate your purchases?

3. One supplier rep relates that his organization regularly and frequently engages in skills and technology training. Sales Call conduct is professional from that rep in all regards. The other supplier reps have never mentioned any education and training program they have been provided by their employer. If you were the buyer, which supplier would you prefer to work with and lean toward on awards?

4. One supplier provides educational sessions for its customers on a frequent basis (as in at least one every three months). Examples include but have not been limited to:

What's new in graphic communications?

• How to get the most from your graphic communications suppliers,
• New updates on InDesign,
• How to use Photoshop,
• How to select the right paper,
• Editing and proofreading 101,
• How to make money with personalization and variable imaging, and
• How to conduct a press check.

The other suppliers may offer one educational session a year. If you were the buyer, which supplier would you lean towards keeping?

5. One supplier has a New Buyer Education and Training Program. It is detailed, organized, and personal to your company's needs, and your skill level (that means it is not canned). Interestingly, it contains published articles about your employer, information going back five or more years. You note that not even your Human Resources Department provided such information. You do remember it was offered the first week you were in your new position, and you were struggling. Your supervisor encouraged you to take advantage of the offering. However, none of your other suppliers offered anything of a similar design. The most you heard from them was, "We look forward to working with you, as we did your predecessor; and by the way, do you know where your predecessor now works?" Because this supplier made it so easy to "learn their system and terms," you have inadvertently moved numerous items from other suppliers to them. If you were the buyer, with whom would you be "bonded"?

6. One supplier provides you assistance with your budgeting on an annual basis. They provide details on expected paper pricing for the coming year, as submitted by their mill sources; opportunities for savings; and suggestions for improved cash flow, which your financial officer loves. If you were the buyer, which supplier would you work to assist?

7. One supplier provides you with quarterly research on your top three competitors. The research comes in two copies (one for you and one for your assistant) in a three-ring notebook with tabs and a table of contents. Sections include published articles, and financial information organized by competitor. There is also a section of published articles about your organization and your industry from a global perspective. That supplier rep states that he also has a copy of what you are sent and that he and his CSR are required to read and know what is in the entire book. None of your other suppliers have ever thought of offering such information. If you were the buyer, which supplier would you tend to favor?

8. One supplier tends to document and confirm important discussions with both the sales rep and CSR. These confirming emails are most helpful for tracking and clarifying what was said or should have been understood. Any misunderstanding tends to be corrected almost immediately. This supplier also confirms voice mails and receipt of faxes. Neither of the other two suppliers do any of this on a disciplined, reliable basis. With which supplier would you feel most comfortable working?

9. One supplier manages procurement of projects for you that they don't produce. These projects tend to be "one of a kind" and seldom reoccur more than once a year. Yet, their expertise is invaluable, particularly for complex, multiple supplier projects. Your other two suppliers tend to avoid managing anything they don't produce in-house. With this information, is there one supplier you would work diligently to keep interested in you as a customer?

10. One supplier regularly asks for referrals and keeps you informed of their follow-up success on those referrals. This contribution to your supplier seems to make it easier for you to call on them if you are in need of "rush assistance." It also seems to make you more valuable to them. Additionally, when you have been flexible regarding delivery or quality, you always receive a note of appreciation from "their team." As a buyer, it is helpful to know that you have earned the privilege to make demands that are necessary to running your business. The other two suppliers seem to miss the point of your contributing to their performance through anything other than "a higher price." Which supplier is most valuable to you?

Creating Perceived Customer Value: It's More Important than Price!

Graphic solutions providers need to elevate their understanding of the opportunities for Creating Perceived Customer Value. Doing so requires work, intelligence, and a "servant's heart." Experience is that not everyone qualifies.

11. One supplier's CFO does two things that I consider rather extraordinary. First, he calls your CFO once a year and just "chats about how business is going." This is the third year their mutual check-up has occurred. This year, your CFO gave you a copy of his internal memo on the discussion. As you reflect, there were two situations over the last year in which your CFO nudged decisions that favored this supplier. Such occurrences are not missed by you as you plan your own career development.

Second, that same supplier CFO sends out a "Letter of Appreciation For Prompt Pay" every January. Your Bookkeeping Department always sends you a copy of the letter while also thanking you for promptly turning around your paperwork for this supplier in particular so they can make sure that this supplier's bills are paid on schedule. You have also noticed that this supplier's invoices tend to arrive promptly, are in order, and seldom require additional information. In other words, this supplier takes less time to deal with than the other two, and therefore supports your accomplishing more. Which supplier not only makes you look good but makes your job easier?

12. One supplier provides regular updates on "opportunities to improve performance for your organization." They call these sessions "Periodic Business Reviews." Senior management attends along with your sales rep and his CSR. A written report of discussions, what was learned, and who is to do what and by when promptly follows the review. After sending copies to your supervisor, who sent a copy to your president, both now make it a point to attend the sessions, which are conducted semi-annually. Only one of your graphic communications suppliers provides this process. After each session, at least one person attending , from your organization is overheard to say words to the effect, "Why don't our other suppliers do this?" Clearly, your organization leans toward this supplier, who repeatedly demonstrates that they are working to understand your organization's performance needs and are working to stay ahead of what you need.

13. One supplier has invested in a web-to-print, print-on-demand ordering system. It allows you to see the status of jobs in real time, as well as review previous invoices, and year-to-date budgets. This system has eliminated paperwork and is faster to operate. Also, your marketing officer can review what different field reps are ordering from your supplier's storage. And your CFO loves this system because of significantly reduced inventory obsolescence and radically improved cash flow.

Interestingly, while it is suspected that all three suppliers have these capabilities, only one properly demonstrated the economic benefits from your company's perspective. Both your CFO and vice president of marketing asked, "When can we start?" rather than, "How much?" If you were the buyer, wouldn't you want a supplier that saves you time and money?

14. Only one supplier submits full-blown proposals on major quote awards. Additionally, this supplier submits multiple copies of the proposal so everyone on the enlarged buying committee has adequate time to read it. Only one of the other two suppliers ever submits a proposal, the proposal is far from adequate, and only one copy is submitted so it is never properly read by everyone. As a buyer, wouldn't you want a supplier who provides a proposal that leaves nothing to guesswork and with whom there are no surprises?

An organization leans toward the supplier who repeatedly demonstrates they are working to understand the organization's performance needs and are working to stay ahead of those needs.

15. Only one supplier occasionally brings in one of their key suppliers for technical discussion of a major project. These discussions tend to be helpful to your understanding of why certain materials and production techniques work and why others are not practical. Your other two suppliers avoid bringing in not only their suppliers but also their senior management. In fact, with these other two suppliers, you sometimes feel like a hostage. That feeling was particularly acute when a project didn't go well; and you were told that nothing would be corrected and reproduced until your organization agreed to pay for the first round of production, which though produced according to specs was not useable. Which supplier makes you feel good about doing business with his organization? What is your comfort level?

Whom Do You Trust?

If you were the buyer, which supplier would you lean toward awarding work? Given the stress of the "compression of time" that most buyers are working under, which organization would you trust to support you in difficult moments of performance?

Is price important? Of course it is. However, performance and contributions toward the economic and professional performance of the buyer and buyer's organization in today's competitive environment are more important.

Review this outline with your business development team, examining it from the buyer's perspective. I think you will find the discussion revealing. Creating Perceived Customer Value requires work, intelligence, and a "servant's heart. "My experience is that not everyone qualifies.

Ceteris paribus, res ipsa loqitur. All else being equal, the facts speak for themselves.