PROPOSAL SOLICITATION & SUPPLIER SELECTION
The buyer invites qualified suppliers to submit proposals. If the item is complex or expensive, the buyer will require a detailed written proposal from each qualified supplier. After evaluating the proposals, the buyer will invite a few suppliers to make formal presentations.
Business marketers must be skilled in research writing, and presenting proposals. Written proposals should be marketing documents that describe value and benefits in customer terms. Oral presentations should inspire confidence, and position the companyâ€™s capabilities and resources so that they stand out from the competition.
Consider the hurdles that Xerox has set up in qualifying suppliers >>
Xerox qualifies only suppliers who meet the ISO 9000 quality standards, but to win the companyâ€™s top award certification status a supplier must first complete the Xerox Multinational Supplier Quality Survey. The survey requires the supplier to issue a quality assurance manual, to adhere to continuous improvement principles, and to demonstrate effective systems implementation. Once qualified, a supplier must participate in Xeroxâ€™s Continuous Supplier Involvement process.
The two companies work together to create specifications for quality, cost, delivery times, and process capability. The final step toward certification requires a supplier to undergo additional, rigorous quality training and an evaluation based on the same criteria as the Malcolm Baldridge National Quality Award. Not surprisingly, only 176 suppliers worldwide have achieved the 95 percent rating required for certification as a Xerox supplier.
Before selecting a supplier, the buying center will specify desired supplier attributes and indicate their relative importance.
Business marketers need to do better job of understanding how business buyers arrive at their evaluations. A study of business marketers main methods used to assess customer value found eight different customer value assessment (CVA) methods. Companies tended to use the simpler methods, although the more sophisticated ones promise to produce a more accurate picture of customer perceived value.
The choice and importance of different attributes varies with the type of buying situation. Delivery reliability, price, and supplier reputation are important for routine order products. For procedural problem products, such as a copying machine, the three most important attributes are technical service, supplier flexibility, and product reliability. For political problem products that stir rivalries in the organization such as the choice of a computer system, the most important attributes are price, supplier reputation, product reliability, service reliability, and supplier flexibility.
The buying center may attempt to negotiate with preferred suppliers for better prices and terms before making the final selection. Despite move toward strategic sourcing, partnering, and participation in cross-functional teams, buyers still spend a large chunk of their time haggling with suppliers on price. In 1998, 92% of buyers responding to a Purchasing magazine survey cited negotiating price as one of their top responsibilities. Nearly as many respondents said price remains a key criterion they use to select suppliers.
Marketers can counter the request for a lower price in a number of ways. They may be able to show evidence that the â€˜total cost of ownershipâ€™, that is, the â€˜life-cycle costâ€™ of using their product is lower than that of competitorsâ€™ products. They can also cite the value of the services the buyers now receives, especially if those services are superior to those offered by competitors.