Given the resource constraints of many mid-tier buyers and the requirement to show that they are purchasing wisely, if I were an indirect supplier, I’d do whatever I could to ensure that I provided my mid-tier clients with whatever information they needed to prove they are buying well when they are buying my products and services.
This is not as straightforward as it sounds because the skill with which one has purchased a product or service can only be judged relative to the price others are willing to pay. However, if I were an incumbent indirect supplier with significant market share, I would use my own customer base to provide the evidence my customers need to justify their decision to re-contract with me for another term and I’d willingly give up my ability to differentially set margins across my similar-margined mid-tier clients in the hope it would derail some of the tenders I’d otherwise be forced to participate in (assuming of course that the bulk of my profit did not arise from differentially pricing similar clients).
To do this, I’d meet with all of my mid-tier clients and, with their permission, talk about my pricing. I’d explain that I very much want to charge them all the same low price but particular idiosyncrasies in their buying patterns mean I can’t. I’d tell each of them what they can do to their own operations to allow me to service them at a lower cost. I’d summarise this in a document for each procurement manager and when she is asked to justify why she is re-contracting with me, I’d recommend that she say to her CFO, “We have been dealing with this supplier for 5 years and currently have no service issues. Our users report that they are happy with the service they are provided. I have met with the procurement managers of 5 of their other mid-tier clients and, given our idiosyncrasies, we are paying the same rates for their services as they are (and one of them took the supplier to market last year). Based on this, I recommend we focus our resources on a spend category we are less confident we are buying well.”
