Sales Training Tip #332: The Purchasing Department and Cost of Switching?

Often a Purchasing Department expressing they will “switch suppliers” doesn’t really know the cost of switching. Do you?

Know what the cost of switching is. Purchasing Departments will always be quick to say they can find a new supplier, but they rarely go through the process.

This is a key reason why it is so important for you to know as much as possible about how they operate their supply-chain, including such things as inventory management, computer systems, etc. A Purchasing Agent will be very quick in saying how your pricing is forcing them to switch to another supplier. The reality is the cost of switching to another supplier is usually at least twice as expensive as they initially believe and always dramatically more than they will ever tell you.

In addition, when a PA says they can switch and save money due to somebody else offering a lower price, they will not understand the differences in performance standards between your company and the other supplier. You need to be prepared immediately to begin asking the PA technically-oriented questions regarding performance. Get the PA to see the risk with which they would have to be prepared to deal should they switch.

A PA will switch only if they believe they can both save money AND not incur difficult conversations with others regarding why they are switching. This is a key reason why it is so important to have relationships with others in the company who are advocates of your company and understand the performance standards you provide.