It’s inevitable that we will market to suppliers

The task of managing suppliers relies upon building good relationships with them. And to do this, Procurement teams will inevitably adopt a ‘supplier marketing’ approach.

To define what I mean by ‘supplier marketing,’ let’s consider the well-established practices in the modern world of marketing. Philip Kotler, widely known as the Father of Modern Marketing, defines marketing as “The process by which companies engage customers build strong customer relationships and create customer value in order to capture value from customers in return.”

Let’s consider that in the context of suppliers for a moment. You could easily replace ‘customers’ with ‘suppliers’ and define supplier marketing as, “The process by which companies engage suppliers, build strong supplier relationships and create supplier value in order to capture value from suppliers in return.”

Digitalization reveals stakeholder needs

When the deployment of technology supercharged how businesses gathered insights from consumers, they could use those insights to create superior experiences and build better relationships.

Therefore, as the Procurement technology landscape continues to explode with new best-of-breed innovation and as ever-more sophisticated digitalization takes place, it is logical to assume that one outcome will be the rise of supplier marketing.

And it’s needed. In this era of greater global instability, the long-held ambition for an enterprise to be the “customer of choice” for its suppliers is now more urgent than ever before. Reiterating comments from Procurement leaders, Adam Brown who heads up Procurement Strategy & Transformation at Maersk says, “Procurement is the Salesforce of the bottom line. We are selling our ability to buy stuff. We want to be the customer-of-choice because it means we are that customer that everybody wants to work with. It means we’re going to get the best deals, the best flexibility and the best working relationship, throughout the duration, with all the trust.”

The key motivating factors—ensuring engagement, building relationships and creating value—mirror those of consumer marketing.

Businesses’ need for data burdens suppliers

The changing role of Procurement because of digitalization is also a driving factor. As Procurement sits closest to supplier data, their role as the primary data collector, or the orchestrator of data collection initiatives, in areas such as environmental impact, sustainability, diversity and inclusion will only increase. Therefore, the number of initiatives that suppliers must complete is also set to increase. This is already a burden for suppliers today. As the HICX Voice of the Supplier survey revealed, 60% of suppliers to some of the largest organizations globally feel that they spend too much time on customer-driven admin, a statistic that is only likely to increase if current practices and trends prevail.

In one enterprise model, considering the number of touchpoints with relevant suppliers today, in terms of necessary initiatives, and modelling the projected number of touchpoints required by 2025, the impact equates to a fifteen to twenty times increase in full-time equivalent hours. Current ways of working will not be sufficient to support this.

Meanwhile, talking about the future of Procurement, Dr Elouise Epstein, partner at Kearney, recently commented, “As we think about supplier experience, and certainly from an enterprise point of view, the greatest risks to your organizations come through your third parties, your suppliers. And the greatest opportunities come through your suppliers. And so, we must be able to get better at engaging with suppliers when we talk about supplier experience.”

Technology lets mass communication be personal

Let’s consider consumer marketing again for a moment to understand how technology has been used to drive better efficiency when moving from a model of ‘one message, one audience’ to multiple messages to many different targeted audiences.

Technology in this space has focused on relevancy – it’s all about delivering the right message, at the right time to the right person to achieve the specific desired outcome – in the consumer marketing world this might mean a purchase, but it could also be a sign-up for content or participation in a competition. It involves segmenting audiences at a granular level and then tailoring experiences to that audience.

The same will be needed for suppliers. In a simple analogy, to manage the number of initiatives and the required responses to those initiatives, ensuring that a specific supplier only receives the right initiative with the right content at a convenient time is going to be more effective than requesting the information from a larger group in which each supplier must determine the relevancy of the initiative and the priority themselves. Overall, the supplier engagement is going to better.

The onus is on the enterprise to put the effort into supplier marketing to derive the value. It is their brand, their risk, or their opportunities to innovate that are at stake.

Thinking ahead

If we accept therefore that the inevitable evolution of Procurement is becoming more digital, data-focused and communicative, then two questions remain: First, who are going to be the leading proponents of this change, and what will be the characteristics of such enterprises who are able to derive this value the quickest? And second, what can be learned from general marketing principles and from an area that has already had to learn from decades of evolution driven by similar requirements?

One principle will become core. Segmentation, as used in marketing, will be key to unlocking the efficiencies and the automation required to service these new demands and to successfully collect and analyse the data that follows. Fortunately, these are the areas that technology is best at.

The other side will rely on businesses successfully applying these principles.

Therefore, it will benefit businesses to think ahead about supplier segmentation, the idea of relevancy to drive supplier behaviours and the value this could bring. And for a glimpse into where this might take us, we can always look to marketing.