Jens Hentschel‘s passion is B2B relationship management and is especially interested in the interaction between the two sides at the negotiation table: buyers and sellers, suppliers and customers, sales and procurement professionals.
In this episode, Jens delves into the role of procurement in guiding the internal stakeholder’s buying journey on the supply side, while the sales professional assists in facilitating a value-based negotiation.
Why you have to check out today’s podcast:
- Gain a comprehensive understanding of procurement’s involvement in the sales process using the direct and indirect spend terminologies
- Recognize the significance of involving procurement at the outset of the negotiation process
- Learn how procurement and sales can create a mutually beneficial scenario in pricing value
“When you get into that situation where you have been put on the spot in that negotiation, don’t budge on price.”
– Jens Hentschel
01:16 – How he got into pricing
03:04 – Jens important thoughts about Mark’s bad impression of procurement
07:27 – A case where it’s all about price [on the procurement side] and not a win-win situation
11:12 – Understanding procurement’s role in the sales process using the direct and indirect spent terms
15:00 – Why the need to involve procurement early on in the sales process
17:57 – Identifying the right procurement person and establishing the initial conversation
20:49 – A procurement’s participation in the customer’s buying journey
22:22 – Discussing the concept of supplies vendors list
25:00 – The role that price play in making it to the vendor’s list
27:12 – Jens impactful pricing advice
“What we are trying to preach is, involve them [procurement] right away because 90% of what your customers spend is managed through a procurement process.” – Jens Hentschel
“Something that I can only recommend to anybody to do is, interact with them [procurement] early, provide them with value insights that they’re not able to gather themselves. That’s how you start building that relationship.” – Jens Hentschel
“My thinking is, the procurement professional is the enabler of the buying journey of the internal stakeholder. And they can do it best by having a salesperson on the supplies helping them to be that facilitator.” – Jens Hentschel
“Where really value is created is where the sales professional on the supply side and the procurement professional on the customer side really work hand in hand to promote a solution.” – Jens Hentschel
People / Resources Mentioned:
- Procter and Gamble: https://en.wikipedia.org/wiki/Procter_%26_Gamble
Connect with Jens Hentschel:
Connect with Mark Stiving:
Full Interview Transcript
(Note: This transcript was created with an AI transcription service. Please forgive any transcription or grammatical errors. We probably sounded better in real life.)
When you get into that situation where you have been put on the spot in that negotiation, don’t budge on price.
Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the important relationship between them. I’m Mark Stiving, and our guest today is Jens Hentschel. And here are three things you want to know about Jens before we start. He is the founder, trainer, and consultant at FIVIS, and I didn’t ask him how to pronounce that. I hope that was right, a company that builds bridges between procurement and sales, which is why I have him on here today. He had over seven years of experience in procurement at Procter and Gamble, and believe it or not, he hiked Montblanc, which is the biggest mountain in France. Welcome, Jens.
Thanks, Mark. Thanks for having me on the show. And yes, it’s FIVIS.
Okay, good. FIVIS. I always start with this question, and even though it doesn’t perfectly apply to you, how did you get into pricing?
I founded this business five years ago, and obviously when you are founding a business or running a business as you know yourself, you quickly find out on how to price something as well. But where it all started was, what you already alluded to with my career at P&G where I was working as a buyer. I spent, before I started this business, 15 years on the buyer side, debating with suppliers and sales professionals on what the right price should be. So this is my connection to pricing. I would say I know it from both ends, from the buying side, and now being a business owner also from the sales side.
Okay, so let’s just get the dirty laundry on the table. I don’t like procurement people, no offense. Okay? And I’m going to give you a chance to defend them and to help me change my mind and figure this out. But here’s why. I think procurement people lie for a living. Let me start it with a story and then from here on we’re going to go your path and see how we can make this make sense. I was running a committee of people to buy a very expensive piece of software, and we had made a decision that said, we’re going to buy this piece of software. I took it into procurement and he said, tell me two competitors. And I said, we’re buying this one, it doesn’t matter. He said, no, tell me two competitors. I did, and then I happened to be in the room in the very first meeting, and he looked at the people who I said, we’re going to buy this software. He looked at them and he said, we’re looking at two other companies. Yours is most expensive. You have to lower your price if you expect to win this deal. And I knew for a fact he was lying. Okay? That’s the end of the story. Tell me that I have a bad impression for some reason.
No, look, I mean, we hear this all the time, right? I mean, obviously we are in the business of training and consulting sales professionals on how to better interact with procurement, right? That’s what we mean by building bridges between procurement and sales, because we’ve been on that side. So we know what’s going on. And a lot of sales professionals have exactly that same experience that you had, right? That they’ve been in meetings where procurement is tactical, opportunistic, abrasive. I mean, we’ve heard it all. And I’m not dismissing your experiences. This is your reality and it happened, but I think what we always find out when we then talk to people and unravel your experiences most is probably linked to that you probably haven’t understood really what the buyer is all about what their function is.
You might have not engaged with them early enough, and you might have not managed that relationship in the same way as you might have managed the stakeholder, the use of your product service, right? I’m not saying maybe this particular experience that you had maybe was just a bad buyer, right? These people do exist as well. But generally what we see is that the level of understanding is fairly low on what procurement actually does. And mostly, the other issue is, your bad experience will pre-condition you now for the next meeting that you’re going to have with the buyer, right? You always go with that mindset into that meeting, oh my god, they will screw me over and they will just talk price. And whatever information I relate to them, they will use against me.
The example that you gave Mark is something that we hear very, very often. So you’re not alone in this. So how can you get out of this? I think what we always try to do is to explain, this is what procurement does, and buyers are full of anxieties. And this might be a surprise to you, but we are. When I was a buyer, I was always very anxious when I was talking to a supplier because I didn’t trust you in the first, second or third meeting. So everything that I do, and the tricks maybe that I play, is to test the water. Can I really trust you as Mark? Is Mark telling me the truth that your software costs X, right? Because I will be held personally accountable, probably my job is reliant on what you’re telling me, right?
Because everybody within my own organization will point a finger at me. Why did you buy that software from Mark at a hundred? While we see it in the market for 50. We’ve effectively lost 50% as opportunity cost which we could have invested into a new product, into a new service, into innovation. So you have a bad buy. So that’s number one. First, anxiety. The second anxiety is, is what you’re selling me actually a need or just a want, right? I mean, my internal stakeholders probably told me, yes, go out buy that software, so I go out to you and you sell me that software. But at the end of the day, it might be totally over expecting, right? And again, I get bad feedback for buying something that is not really appropriate, right? Totally useless. At the end of the day, 50% of the functionality is not being used, et cetera, et cetera.
Let me push back for just a second, Jens. I think on your second point, at least in my mind, I would never hold procurement responsible for choosing the wrong product in a situation like that. And, in fact, I love that in your titles you have a supply chain, right? If I go through LinkedIn and I look at your titles, you have supply chain issues. And so I think procurement people actually have a lot of value in the sense that they’re managing the supply chain. And so, if you could take price and separate it from everything else, I think that the everything else part, procurement probably does really, really well, right? So I’ve got to make sure we have the right inventory, we have the components that we can manufacture. I have to know that they’ve been approved to go into the components. So I think all of that stuff is phenomenal. And then price is the one thing that’s a zero sum game between the two companies. And so it truly is, you want to pay a lower price, I want you to pay a higher price. And there is no compromise that says, oh, here’s the right answer, there’s no win-win. It’s always, every dollar you get comes out of my pocket. And so I actually think that price is the problem in this whole story.
I would see it differently. I mean, it has to be the right price. I think customers are willing to pay a higher price if you can articulate why they should be paying the right price, why you give them a competitive advantage, but paying that higher price, right? So procurement’s role, I mean, nobody in procurement these days any longer will get a promotion if they negotiate a 3% discount with you, Mark, right? These times have gone, probably 20 years ago. It already has started that this is no longer the main KPI for procurement. It’s about identifying the best supply capability, yes, at the right price. It has to be the right price that will cater to the business needs that the internal stakeholders have identified. That’s the name of the game. And yes, there will be a point in time where we’ll be sitting down as adults and discussing, should it be 50, should it be 51 or should it be 25, right?
This discussion will take place. The trick is that what we see a lot of salespeople do, they leave this discussion and leave it with procurement hands to the very last minute where value has been identified or specs have been already generated. The internal stakeholders are all aligned, or the use of your product are all aligned. And then they bring procurement in, or then they start establishing that relationship with procurement. And what is then left for the buyer to do is well pressure you on price? Because they’re pressured internally to make the deal happen. Everybody’s ganging against procurement pretty much because you have a relationship with the internal stakeholder. They just bring them in, ‘Hey, procurement, just quickly rubber stamp the contract because we have such a great relationship with Mark already. You are the blocker.’ So they’re getting it from this side and on the other side.
And this is what you should be avoiding because this is the situation I had that personally in my career as well, where you, as a buyer, become very defensive and not very collaborative any longer. And I think you can avoid that situation from happening in the first place as a supplier and a sales professional by engaging with the buyer very, very early. And even maybe against the advice of an internal stakeholder, because that would have seen on numerous occasions as well where the internal stakeholder might be even telling you, when you approach them as a supplier and a sales manager, well, we don’t know who procurement is, this black box somewhere sitting in the basement, don’t reach out to them because we are going to make a deal. And then they go, just going to understand it. And this is where I see this situation that you described initially where it can all fall apart and then it’s only about price and it is not a win-win.
Let’s break this up into two types of products for a second, if that’s okay. One type of product we will consider to be a component. So something that goes into your manufacturing and I think procurement probably plays a huge role in that. And so if you’re trying to sell a new component to Procter and Gamble or to any company, you need to be involved with procurement early, often, continually long after any decision maker’s been involved with that. Because procurement has a lot of power and makes a lot of decisions going forward. And they need to. So now let’s talk about capital equipment or large software sales, something like that where there’s a committee of people inside the company and this committee’s trying to decide what’s the best decision, right? So if I were pretending I knew Procter and Gamble’s business, I would say, a new piece of factory equipment.
Right? So that we can do something we’ve never done before. So now there’s a bunch of people, there’s an operations person, there’s engineering, there’s a bunch of people saying, what’s the right thing for us to get? When should procurement come into that? And does procurement even care early on in that process?
Yeah, that’s an interesting bit. I mean, what you described and what we call that in procurement lingo is direct spend, indirect spend. So direct spend are category such as any kind of ingredient that goes into shampoo, let’s say the bottle, the chemicals, the labels, et cetera, et cetera. That is direct spend, right? So stuff that’s being supplied by suppliers that directly affects the end product that my company is selling. Indirect spend is everything that you just described, the plant equipment, software, the office furniture, the phones, the computers, et cetera, et cetera, right? So it’s not directly sold onto an end consumer. It’s something that is required though, or very important. For instance, it’s probably a long winded answer to your question, but it’s important to understand procurement originates from the direct spend area.
It comes out of the automotive industry. That’s where procurement really as a function was born. And that’s where they started to develop the function in its strategic ways as well. What we’ve seen over the last 10, 15, 20 years is that people migrate from the direct area into the indirect area. So we will have a lot of procurement professionals that are very good at buying chemicals that move now into buying software or buying consultancy service or buying equipment or capital expenditure, right? So they become very proficient in these industries and then become part of these buying groups that you just described. Because the problem with indirect spend for us as buyers is, is very intangible. Let’s say equipment for the manufacturing side probably is not so intangible, let’s say a consultancy service, a software, you obviously need to be having a conversation with the user of that product service to understand what their requirements really are.
And sometimes it’s very let’s say, down to that person to really describe what they really want, right? What consultant they really want. So what I’m trying to say here is that it’s more difficult to buy, there’s more interaction required from procurement with their stakeholders. But what happens is that procurement becomes an integral part of these buying groups that you described. They’re not the ultimate decision maker, of course not, but they’re a contributor and a consultant to say, hey, we’ve identified this amazing supplier out here, or we are industry experts in certain software and we think you, internal stakeholders or buying group, you should be looking into this solution and we might be using the supplier or in a different business unit, why don’t we bring them in into that other business unit and for that challenge that we have in front of us. So the answer to your question really is also in this indirect spend area, procurement plays a very prominent role. They’re not the ultimate decision makers and neither are they in the direct spend area, but they can be a very important facilitator for your sales professional if you’ve built a relationship with them, again, early, and I’m repeating myself here. You can use them to upsell, cross-sell, and land the case that you should be the supplier to Procter Gamble, for instance.
Yeah. So first thing I want to say, I love direct versus indirect spend. I had never thought of it that way. So direct spend from a procurement perspective makes all the sense in the world. Because you’re going to manage the supply chain, right? You got to make sure the factories are still moving. So that just absolutely makes sense. And then the indirect spend, so let’s pretend that I’m a salesperson and I’m selling to Procter and Gamble and you are the procurement person at Procter and Gamble. And so I go out and I find out that they have a need for this new piece of factory equipment and so we start having meetings. Should I call you at the first meeting or should I wait until they call you? What do you think a salesperson should do to help procurement in that situation or help themselves in that situation?
Yeah, and I think this is probably what’s the reason for us founding this company. I think what normal sales methodology tells you, don’t call them, right? Make sure that you keep them at arm’s length, the procurement guys, because they will only talk about price. So what we are trying to preach is to involve them right away because 90% of what your customers spend, right? What the expenditures are is managed through a procurement process. So procurement will come in at some point anyways, right? And I’m not saying that all procurement organizations are there, but most procurement organizations are very much interested in establishing suppliers that create value, right? So I’ll just give you an example. So Procter and Gamble, for instance, they have 150 different production sites. The US market, there might be a sales manager in the US. You rock up at a production site and convince the plant manager that your piece of equipment is amazing and that they should install it in that very production site.
So the plant manager might be saying, yeah, we’ll do it, it sounds great. And then the whole process stalls because especially with larger organizations, they obviously want to make sure that the equipment that they buy can be reapplied in every production site that they have around the world. And this is normally centrally managed, right? So there’s a central person, mostly procurement, that has an oversight on, okay, what supplies do we actually have that can cater to the needs for the plants in the US but also for the plants in Thailand, right? Because we don’t want to reinvent the wheel wherever we go. And that plant manager might not be even aware of what’s happening in Thailand because they don’t care, right? They just want to optimize their planned location because that’s what their KPIs are. So you as a sales professional might be thinking, oh wow, I’m close to winning the deal because I have a great relationship with the plan manager.
He tells me my solution’s the best thing since sliced bread whilst they are not understanding what has already happened, maybe in a global scope or in a regional scope. And that procurement professional might help you to understand, we either already have a supplier or we have already five suppliers that do exactly what you’re offering here. So you need to maybe go above and beyond what you’ve initially offered, or on the flip side might be saying, oh, that’s amazing what you’re offering here in the us. Let me talk to my people in Thailand to introduce you also in Thailand, right? So this could be the opportunity. So I would always advise all the clients that we talk to reach out to procurement early and sense check that because you will be in touch with them at some point anyways. And you want to have that conversation early and use it as an opportunity to upsell, cross-sell and to land a better solution than with just focusing on one stakeholder that might be that user that you initially targeted
Yeah. So how would a salesperson find out who the right procurement person is and how do you think that first conversation goes?
And this is not an easy one, right? What I always find surprising since we talked about LinkedIn early on as well, procurement professionals are very active on LinkedIn. I’m always surprised how inactive salespeople are on LinkedIn. I think this would always be my first approach. Check out who the buyers are and what they do on LinkedIn. They’re normally very vocal on what they do, what spend they manage, and how strategic they are. So you can find out a lot about who your buyer potentially is in an organization and then position your solutions in a certain way. What normally happens is there is somewhat of a central function. So normally procurement is centrally organized. So yes, you might have a local buyer in the respective countries, but you want to find out what is the next level hierarchy, right?
So by quizzing your stakeholders that you’ve maybe built a relationship with early on, this is where I would start by saying, okay, so who are the central buyers that are responsible for this respective category that we’re talking plant equipment, machinery, software? And this in combination with doing your research on LinkedIn could, could lead you the path on identifying who the buyers are. Sometimes it’s very difficult if you just ask, you know, again, a user that you have established a relationship with to tell you exactly the name of the buyer that you should be interacting with. They might not even know the buyers themselves. So it’s a little bit of research that you need to be doing. And again, the second part of your question, the first meeting with the buyer, you need to, it obviously should happen before the negotiation take place.
If the buyer switches into negotiation mode, you probably will end up in that scenario that you’ve been in properly that you described early on. You want to provide them with value long before the negotiation takes place. Information about the market that you’re presenting, this is something that I’m always after as a buyer, right? Something that I might not find out myself. Something that you might know about my competition that is not confidential information, but something just makes me shine within my own organization that is gold. Because what also a lot of salespeople don’t understand is buyers are also responsible to set the budgets. So they need to be knowledgeable in the market. Their finest team wants to know what we are going to be paying for plant equipment in 2024, and where do I get this information from? Yes, I can Google it. Yes, I will go to conferences, but mostly I rely on suppliers that I’ve built a trusting relationship with that supply me with information. So that is something that I can only recommend to anybody to do, interact with them early, provide them with value insights that they’re not able to gather themselves. That’s how you start building that relationship.
Nice. So it’s almost like you’re making them a hero inside their company so that then they like you and, and are nicer to you.
I would even say, I mean, you’re familiar with the buying journey concept and there’s a lot of sales methodologies out there that you as a salesperson should be an enabler of that buying journey. Whilst my thinking is actually the procurement professional is the enabler of the buying journey of the internal stakeholder. And they can do it best by having a salesperson on the supplies helping to be that facilitator. Because what procurement professionals are not good at is the sales skills that you bring in, right? Because they need to convince their internal counterparts, finance, R&D to also buy into that solution that you offer, right? Or into the price that you put onto the table, et cetera, et cetera. And you as sales professional can help them to get and become a better facilitator.
So for me, it’s that where really value is created, where the sales professional on the supply side and the procurement professional on the customer side really work hand in hand to promote a solution. And yes, if you build that trusting relationship all that tacticalness goes out the window. And I really want to collaborate with you because again, I’m not getting my promotion because you offered me a 3% discount. I will get my promotion because I’ll be standing in front of the CEO and saying, hey, we have this new supplier that creates 10% more sales. We have a great sustainability story. This is where I get my accolades where I really shine. And this is the new mission of procurement at the end of the day.
Nice. Hey, let me change topics slightly. Talk to me briefly about a preferred vendor list.
Yeah, I mean, this question we get a lot as well. How do I get on, and we call it in procurement lingo approved supplier list often. And what it really says is, and it comes down to risk, right? I mean, let me maybe explain that a bit more in different terms here. Let’s stick with Procter & Gamble. They have 40,000 suppliers and supplier proliferation, again, another lingo from the procurement world is a big, big issue. You don’t want everyone to go out there and pick up the phone and introduce new suppliers to the company because it costs a lot of money to manage these supplier relationships. And at the same time, you also want to focus your energy on these suppliers that really deliver value.
So you want to keep the number of suppliers down as much as you can, or you even want to reduce them. So at least you don’t want to increase it per se, right? So that’s how approved supplier list, vendor lists come into play, where you say, as a procurement professional and as an organization, these are the suppliers that we want to be working with. They have been proven in the past that they are solid businesses, that the risks have been assessed. For instance, if you don’t employ child labor that you are fulfilling all the regulations that you’re financially stable, all these checklists have been applied to you as a supplier account, so that we as a company are comfortable that we can be doing business with you. So that’s the concept of the approved supplier list. How to get onto that is obviously convincing.
Predominantly procurement, who normally owns these processes that you are a valuable addition to the company. So you as an incumbent supplier might have an advantage because you have already proved that. But as a new supplier, you need to go above and beyond explaining to the company, explaining to procurement why you should be on that approved supplier list. And many sales teams tell us that this is sometimes where they feel really, how can I say, frustrated because they feel, well, we pretty much offer the same as our competition. We may even do it slightly better than competition, but competition’s only proof supply list but we are not, but the trick is, you need to be significantly better than the incumbent, because the incumbent, I know what risk they carry, how good or bad they are. So I know them but I don’t know you. And to get really onto that approved supplier list you need to go above and beyond what the incumbents are doing and to show the customer that it’s worthwhile adding another supplier to their little microcosm. This is pretty much what it is.
So can a company buy their way onto an approved supplier list? And by that, I mean, offer a super low price so that I can get on?
I wouldn’t rule it out, right? I mean, look, I mean, your customers and procurement they’re only human as well, right? So I mean, definitely price can play a role but I would say in most cases price plays a role because there’s certain resources that I need to be advocating for as a buyer internally in my own organization to make you get qualified or to get onto that approved supply list. Again, let’s stick with the example of P&G. Let’s say you want to, your new ingredient supplier or even a spare part supplier for a manufacturing side, I want to run some tests that your product is actually okay, right? I mean, yeah, you tell me in your PowerPoint deck, it’s the best product. You have all these great customers, but are you really fit for purpose on what we are doing, as a customer?
So probably we require some engineering resources. We may have some downtime in one of our production site to test your product. Maybe you want to even convert it into an end consumer product. And these things all cost money, right? So if you as a supplier, say, look, I understand, and that comes back to the understanding element which is so important. We understand your processes, we understand that you incur these costs, we will help you as a supplier with that burden. This definitely will help. So this is probably where I see more value than just saying, okay, we give you a 30% discount to what competition is doing. Does it open doors? Maybe? But again, I would say it’s probably not sustainable because a buyer would know, especially if they’re very, if you are in a very mature industry, probably buyers will know what a reasonable price is, and how sustainable that price could be long term. So again, supporting the buyer on getting you qualified is definitely something that I would consider. Having a price just for the sake of getting in, is probably not sustainable. Sometimes it might work, but I think it’s not really a tactic that I would support.
Yeah. Cool. Yeah, this has been fascinating, but I’m going to ask you the final question, if I may. What’s one piece of pricing advice that you would give our listeners that you think could have a big impact on their business?
When you get into that situation that Mark has been into, like where you’ve really been put on the spot in that negotiation, don’t budge on price, because if you give me a10% discount, 20% discount the first time you meet me and where I put pressure on you, I will know as a professional buyer that something is not right. And I will put some resources into that category that you represent and onto that industry, and we’ll figure out how we can drive even more savings with you as an account because you pretty much told me the first initial price that you put in front of me wasn’t accurate. So hold your ground there. Try to build a relationship with them first. Get out of that negotiation circus, which is just a bunch of tactics at the end of the day. Try to get them and build a relationship with them and explain what value you really offer. So don’t budge on price in the first discussion with procurement.
All right. Fabulous advice. And I have to say, Jens, in all honesty, you are making me dislike procurement people a little less.
I’m pleased to hear that. Look, we are building bridges between procurement and sales one brick at a time. So hopefully we’ll lay another brick here with you, Mark, onto that bridge. So, I take this as a big plus that you dislike them a little less.
So Jens, thanks so much for your time today. If anybody wants to contact you, how can they do that?
Yeah, check it out. Check us out on LinkedIn. We are always very active there, otherwise, check out our website, www.fivis.io. And send us a message. Always happy to help and convince you that procurement is not necessarily the bad guys.
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