Supply & Demand

An essay on the paradox
between Purchasing and Sales

This probably won’t go over well with anyone and everyone who works, or has worked in, the field of sales, for whatever industry they’re involved. They’ll even take exception to the term salesperson, simply because, over time, it has evolved into a negative connotation for that person’s chosen job description. The Hollywood stereotype did nothing to improve on it either, but at least they cover both sides. Example: Glen Garry Glenross and Jerry Maguire. GGG showed how ruthless the sales field is, via four different sales strategies, while JM showed the same ruthlessness in the beginning, it proceeded to show the personal side, and the fact it is possible to maintain integrity in the process. Of course, this was Hollywood, and would tend to believe in reality, JM would represent the minority. A very small minority.

Personally, it wasn’t the scene with Jerry returning home to his wife that was most appreciated; it was the scene outside the locker room, between Maguire and Tidwell (Cruise and Gooding, Jr.). and the subsequent take between his former boss and the player who turned Jerry down, and even more so, the introduction of Troy Aikman to Maguire.

As an aside, this paper could almost be construed as identical to the “memo” Jerry Maguire “penned” in the beginning of the film, delving on the true relationship that should exist between the agent and the player, with what I see as a perfect analogy of the same relationship between the buyer and the seller. Unfortunately, as much as I wished to see that “memo”, it was merely a token item in the script, by name only, to emphasize a point, a philosophy, and/or an observation, as a plot item splitting the perception of the perceived relationship between the player and the agent. deep, huh?

Replacement terms are now incorporated to disassociate themselves from that stereotype: the general versions, “account executive” and “account representative”, since they maintain a roster of customer accounts, or Sales Manager”, one who is on salary, but is responsible for supervising the Sales staff, providing incentives, leads, and bonuses; and the more specific “investment executive”, relative to the financial/investment community. You see my point. Ultimately, they’re in Sales. And they know it. We all do. Suffice it to say, I’m not a fan of Sales, in any way, shape or form. But to be fair, in an unbiased forum, here are some basic views on how the mind of Sales works. and while I’ve deliberately chosen to not work in Sales, it, in now way is indicative I have no experience in Sales. all evidence to the contrary. Below are two examples of that experience. One need not take part or experience Sales directly, to learn and adapt to what Sales is all about.


Junior Achievement

Back in high school, I used to think Sales and Marketing were identical. After all, both involved selling the company product. Thanks to a national educational non-profit, known as Junior Achievement, my eyes were opened. If you’ve ever heard of JA, you know what I’m talking about. If not, allow me to briefly open your eyes, as to what they’re about, and how they excel at what they do, along with my own personal experience.

JA is an after-school program offered to both public AND private institutions. Executives from major corporations in America, donate their time for a couple hours on one night per week. Students are gathered to learn how the corporate structure of business works, from the top down.

Fake stock is sold to family and friends, to generate funds, to pay for raw materials, that will be developed into a product, and sold in the marketplace. That’s your basic, generic business model, in its rawest of forms. This, of course, does not include expenses that would normally be incurred in an actual business model, such as office space (rent), utilities, supplies, payroll, and a multitude of overhead expenses.

Executive positions are then voted on, to establish a level of management to govern each department that will delegate, maintain, and manage the various operations of the pseudo-company – President, and Vice Presidents of Accounting, Marketing and Production. The remaining students were divided between the sales force and production staff. In this case, all participated in both divisions.

The corporate sponsors participated in a hands-on capacity, arranging for the necessary raw materials to construct or build the company’s product, to be sold in the marketplace (it was usually pre-determined, in advance). The student President oversaw the management of each department, but also participated in the production and sales of the product. The VP of Accounting spent most of the time keeping the books (accounts receiveables/payables). The VP of Marketing spent most of the time mapping out a sales strategy while working with the sponsors on upcoming conventions, as well as other techniques, such as mail order pieces, and door-to-door sales. The VP of Production coordinated the construction and building of the product itself. It is here where I learned the difference between Marketing and Sales.

Basically, marketing involved the presentation of the product, whether by flyer, advertisement, or some other avenue to bring it to the attention of the buying public. Sales involved the actual strategy and selling of the product to the buying public. I was my company’s VP of Marketing, which, in this case, also included Sales, but, for the most part, the majority of companies had separate VP’s for both marketing and sales. I created and distributed flyers and advertisements, exposing our product to the public. At the same time, I had to establish, coordinate and facilitate, a sales strategy, to sell our product.

The marketing aspect was creative, challenging, and fun. The sales aspect sucked. I had to take a product and create a need for that product. Then, I had to convince those selling it, on its productive and positive points, that would inevitably be passed on to the public, in order to sell the product.

In a nutshell, our company had the second-highest sales in the nine-county Bay Area. And I was sent to JAMCO (Junior Achievement Management Conference), the regional management conference for high-performing students. That year, I was also up for VP/Marketing of the year, on a national level, but was not including in the competition. nonetheless, because of the company sales, and my own on a personal level (I had the highest in the company), I was awarded a trip to NAJAC (National Junior Achievement Conference) for my efforts. Junior Achievement was my only direct, hands-on experience in the field of Sales. As a salesman. for lack of a better term.


Purchasing

If you’ve never had the benefit or opportunity during your educational years, to experience the awesomeness of Junior Achievement, there is another field in the corporate structure, under the administrative banner, which companies classify as overhead. It’s referred to as Purchasing. Every business structure, whether they sell a product or service, has someone within the company responsible for the purchasing for that company.

Purchasing covers a broad field of responsibilities. It depends on what business the company is involved. Wholesale and retail companies require the purchase of goods, in either its raw form, to be constructed or built, for sale to retail; or by retail, to be sold at markup, as the middleman between the manufacturer and the general public, since most manufacturers produce in bulk.

The art of purchasing requires knowledge of the marketplace, as it relates to the buying habits of the general public, knowledge of the costs of the materials, when choosing between a number of vendors offering such goods, and knowing how the art of sales works, being the buyer on the opposite side of the spectrum.


Sales

If I had to share one anecdote to all the salespeople out there, trying to gain my trust, and become my primary supplier for whatever it is I need, I would have to say: offer, don’t sell. There’s a difference. Offer information about your product or service. But don’t sell me. And don’t expect me to switch to you, on a dime, based solely on price. This is the #1 mistake of all salespeople.

My area of expertise lies in office supplies and toner, with over 30 years experience, alongside mail. Both mail & supply, for the most part, went hand-in-hand for most corporate business, with the larger ones separating the two. All of my positions, with the exception of one, were a combination of the two. These two areas represent a billion-dollar business, both sold separately (how many times have you heard that before?). Not a day goes by I don’t get a call from either a supply company or toner vendor, selling their products and services, as if I was actually in the market to change from my current primary vendor. Large and small. Known and unknown.

Allow me to share some insights and observations on these calls, in the hope that you, as a current or future purchaser, won’t fall into the same trap; and if the price is right, negotiate a better deal for your company. Then, you can counter your company sales staff’s mantra that they pay your salary, when they actually don’t; they merely make the company money, and the company allocates it accordingly. what do you do? You save the company money by negotiating the best deal possible, and possibly replacing a previous vendor that charged more for their product. (That usually humbles them, and if you’re lucky, earning respect in the process.)

Or if, by chance, you’re in sales, you might be enlightened from a different point of view, and see where we’re coming from, as the buyer, or the customer, and not be so aggressive and insensitive, when you don’t make the sale on the spot. Next up, two billion-dollar industries (office supplies and toner), and the multi-billion-dollar financial industry.


Finance

First up, the investment community. I’m covering this first, since this is the area I have some experience, but to the effect of the other two. The finance industry, for the most part, is way over my head. But working in this industry in an administrative capacity, I have benefited from seeing the goings-on, from within.

For the most part, investment houses, often referred to as “stock brokerages”, are in the business of “selling” stocks and bonds. Again, the term is used loosely, where a large part of the business is referred to as “asset management”, “wealth management”, and “private equity” clients. In these situations, “managed accounts” are not so much “traded within” to generate income, via commissions, but simply monitored, with income generated via fees, as a service of managing the account. Basically, nothing is sold, per se. But smaller accounts may involve trading within the account, based on recommendations of the “account executive”, for the benefit of the client. If the “broker” (salesperson) is knowledgeable, he makes money for the client. But the client inevitably ends up paying out extra, to cover the commissions (income) generated by the account executive (broker/salesperson). The only other industry that makes money in either direction, is the field of law.

The “broker”, for better or worse, with motives, either genuine, or not, are unbeknownst to the client/customer. The scenario precipitating the pending sale, is prepared in a way to convince the client/customer the purchase or sale is the best course to go. More often the not, the client/customer enjoys a gain on the purchase or sale, but minus the commission for the salesperson. Was it really in the client’s/customer’s best interest? Could they have still benefited in the long-term, had they refused the offer to purchase/sell in the short-term? There’s a reason the term “churn’em and burn’em” exists.

But not all investment executives practice this strategy. Nonetheless, they still are in the business of sales, no matter how they spin it. Although I must say, the sales aspect is only predominant in the retail sector, dealing specifically with equity/stocks. The other area involves bonds, which are strictly long-term investments, which are sold in the same capacity that is Sales, but not sold in the same capacity as stocks; as in, turned over for the purpose of profit.

This is the stuff of finance, generally-speaking. I’m sure there are plenty of specifics that are out there, and most certainly would be pointed out by financial experts, to vindicate any ulterior motives alleged by my observations, but I stand by my views, as observed first hand, of the brokers themselves. Of course, I should remind you this is #3 of the three examples of sales in an industry other than what I’m an expert in, with this one being one I have extensive indirect experience. First-hand observation, even if there is no direct involvement, is enough to establish experience.
Office Supplies

To understand how aggressive this industry is, one only needs to see the consolidation of the industry, over the years. I watched it first hand, as one company after another, was purchased or acquired, hostile or otherwise, back in the 80’s. In every instance, it had a direct effect on my position as the office purchaser of supplies. And the sales side never changed, no matter which company was represented. for the record, the current supply market is dominated by the big 3: Staples, Office Depot, and Office Max. Here is an overview of their histories, and how they came to be, numbers’ 1, 2 & 3.

Back in the 80’s, in San Francisco’s financial district, there was once a retail supply store, called Kielty & Dayton. It’s only competitor at the time, at least on a retail level, was the high-end retail outlet, Patrick & Co. K&D were eventually bought by BT Office Products. The store location remained, but the sign above read “BTK&D Office Products”. Some time later, they merged with Redwood Office Products. Same location, new sign. BTK&D Redwood Office Supply. Eventually, they were acquired by Corporate Express. The location remained, but with a new sign – Corporate Express. Years later, Corporate Express would be acquired by Staples.

Office Depot grew in size, similar to Staples, but only acquired Office Club in the process, whereas Staples’ acquisitions enabled them to secure the #1 spot, over Office Depot.

OfficeMax sits at #3, through their own business, combined with being acquired by Boise Cascade, but maintaining the OfficeMax name.

There are a number of regional supply franchises that are holding their own, such as WB Mason on the East Coast, and Sierra Office Supply on the West Coast. One local vendor, by the name of Give Something Back, stands out, simply because they contribute 10% of their profits to charitable organizations.

History aside, here is the #1 problem with office supply salespersons, as it pertains to their strategy, approach, and primary selling point, to curry favor, and switch from your current vendor, to them. That being...PRICING.

What it comes down to is, the size of your company. Small businesses tend to deal only with local vendors. To the national vendors, there was no profit in local and small businesses. Mid-size to large companies dealt primarily with one of the big three, because of the volume and frequency of the orders. Gone were the days of switching vendors on an annual basis, based on orders only being placed for the local office, called “going, or putting, out to bid”. Salespersons who’ve been in the business for decades, still use the “bid” term today, when calling.

For the last decade and beyond, companies became more concerned with streamlining the ordering process, and began combining all the offices throughout the US, into one contract; thereby benefiting from ordering in bulk, even if it was spread out over multiple offices; hence, the introduction of “contract pricing”. This new pricing structure, based on bulk and/or continuous ordering of common items, resulted in a 20% discount over catalog/retail pricing.

Accounts today are highly complex, unlike the way they were decades ago. Today, for a mid-size-to-large company, one supply company is used, and usually it’s one of the big 3. Why? Contract pricing. But wait, there’s more. Everything today is done electronically. So while pricing is top priority, other aspects are sold as a way of promoting the service aspect. Unfortunately, it is the service aspect that fails, in the day-to-day process. And the salesperson/account rep has no control over it.

The other unfortunate aspect of this new, complete and complex account arrangement, is that, more often than not, it is set up on a national level. All offices are instructed to purchase all supplies online, through this one vendor. Billing is on a national scale, since all the accounts are linked together, which is a benefit, but only for accounting and budgetary purposes. In some cases, all satellite offices submit their orders individually, but those orders go through the company’s home office, for approval, to monitor orders and keep excessive purchase at bay. It is this structure that makes it difficult for the customer to even consider switching to a new vendor.

What does all of this have to do with sales? The daily and weekly calls from competitive and smaller vendors, attempting to gain new business. Which brings us back to their primary selling point – Pricing.

We tell them we’re happy with our current vendor. Response: but aren’t you interested in saving money? There’s nothing a buyer hates more than that one line. What that tells me is, they’re amateurs. Why? Because that’s one of the first lines a salesperson uses, in their attempt to sell me on their company.

I’ll tell you what I tell every salesperson that calls, trying to gain my business. I’m happy with my supplier. As for saving money, whatever pricing you offer, that either matches, or undercuts my current price structure, my vendor will match, if he has to. If he can’t, it means you’re offering pricing “at cost”, which means you’re waiving your commission/profit, in an effort to get my business, after which time later on, prices go up, without informing me of the fact. At the same time, “house” products begin to be substituted for the name brands originally quoted on, to increase the profit margin, and the salesperson’s commission.

But pricing touches only the surface. The biggest discrepancy between purchasing and sales is not pricing at all. Pricing is negotiable. And the difference between vendors as it pertains to pricing, is inconsequential. The problem is that Sales is only concerned with pricing, while Purchasing is more concerned with service. Purchasers convey this point time and time again, but Sales always fails to understand that importance, all the while continuing to push pricing. You’d think Sales would eventually understand this, after continually being hung up on.

Service. Let me repeat that. SERVICE. The accounting department only cares about pricing. But the accounting department deals with the pricing once a month, when the invoice arrives. The rest of the deal is all about SERVICE. Next day delivery. Returns. Credits. Online capabilities. Inter-office-linked ordering and billing. If you think you can get me to switch from my current vendor, who’s set up billing-wise, with all office accounts linked together, and filtered through me for approval, based simply on your pricing being slightly lower than mine, click.

And another thing: if I tell you who my vendor is, and you’re smaller than them, do me the courtesy of thanking me for my time, and say good-bye. Just because you service another company in my building, doesn’t mean you are able to do the same with my company.

Two cases in point: Give Something Back. This is a company that donates 10% of its profits to charitable institutions. The problem with this is that they use this practice as part of its marketing strategy; and not just its marketing, but as part of its company name; so, it is, in essence, hypocritical in nature. Another company, who’s name escapes me, but is based in the Bay Area, continually calls and drops by, leaving flyers and catalogs.

Catalogs. Let me tell you about supply catalogs. All sales reps for all supply companies are aware of what I’m about to divulge, but most purchasing reps are not. I was early on, and was able to respond in kind, much to the surprise of the sales rep I was meeting with, at the time.

All major supply companies have their own catalogs. These catalogs are smaller versions of a larger, universal catalog, often referred to as a “supplemental” catalog. The supplemental catalog contains everything in existence, with the item number being the manufacturer’s number. The smaller catalogs specific to the major suppliers, contain approximately 2/3 of the items in the larger supplemental catalog. Furthermore, all of the items in the smaller catalog, has an item number specific to that major supplier. The corporate and contract pricing discounts are more prevalent in the smaller, vendor catalog; whereas, the pricing in the supplemental catalog, are as indicated.

Also, this supplemental catalog has its own name. It’s called United. It is regional in nature, so United is the company for the Western US region. It’s primary, and only, warehouse is located in Sacramento. While the major suppliers produce their own catalogs, with their own item numbers, alongside the manufacturer’s numbers, smaller supply companies don’t have that luxury. All of their supplies are filled out of the United warehouse, as opposed to the major suppliers filling orders out of their own warehouses.

Furthermore, these small suppliers that use United exclusively, have a working agreement to use the United (supplemental) catalog as their own. This agreement includes changing the cover to reflect the company using it.

Case in point: when a sales rep visited my office, his obvious goal was to sell me on his company’s product. I asked him what differentiates you from all the others. He pointed out the four supply catalogs I had on my shelf. He asked me to pull them down and turn them all to the same page. Lo and behold, all four catalogs were the same (United), but with four different covers. He picked up all four and dropped them in the trash can.

At first, I was shocked. Then it dawned on me. His catalog was most likely the same, since he wasn’t a major supplier. He laid his catalog in front of me, and said his was the only one I needed. Not to be outmaneuvered, I turned his catalog to the same page, showing him it was the same as the others, and said, if that’s so, and yours is the same as the others, what do I need you for, if my current vendor uses the same catalog? As I was saying that, I ripped his cover off the catalog, and threw it in the trash. For the first time, a salesman was speechless. I thanked him for his time, and showed him the door. I think it’s safe to say, he’ll never use that strategy again.