Public or Private Sector Buying? by raycollis

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Public or Private Sector Buying?
Does It Really Matter?




 Everybody knows that selling to the public sector is different
 to selling to the private sector. But the old public-private
 dichotomy is blurring and that means sellers should be
 cautious about letting it prejudice their sales process.       “The  public-private
                                                                     distinction can
 In this article we will see that while many public and private
                                                                  hide as much as it
 organizations still conform to the stereotype, a growing                  reveals.”
 number do not. To overcome this challenge we will provide a
 new way of looking beyond the public-private dichotomy to
 get to the core of how different organizations buy.
Is The Public-Private Dichotomy Out-of-Date?

Trends in modern buying mean that the old ways of looking at the
differences between public and private sector buying are being
undermined. The reality is that the public-private distinction can hide
as much as it reveals. That is not a problem however as there is a
better way to look at the issue.

It is important to go beyond the superficial public-private
distinction to examine the style of buying. That involves
examining dimensions that are more relevant and meaningful
for the salesperson instead of trying to decide what sales
technique to adopt.

We have developed a tool that will help you to get to the core
of an organization's approach to buying. It is called the 4
Procurement Styles and involves placing an organization, public
or private, along a spectrum that examines key dimensions of
procurement best practice:

  The Focus of Procurement – Some procurement
   organizations are focused on achieving results, while others
   are more concerned with complying with the rules.
  The Role of Procurement – Some procurement teams try to
   control all buying decisions, while others seek to enable, coach
   and support those closest to the decision.




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Where an organization fits along these two axes determines the
optimal way of selling to them – as shown in the diagram.



Why Map Procurement This Way?

There are many dimensions of best practice procurement, but the
two we have chosen (i.e. Role and Focus of procurement) are of
particular importance to sellers. They determine so many aspects of
the buying decision, including the:
   − Level of interaction between buyer and seller,
   − Degree of sensitivity to risk,
   − Formality and structure of the buying decision,
   − Decision making criterion,
   − Composition of the buying team.

As a result the two axes (the Focus and Role of procurement)
determine the best way to sell to the organisation in question.
                                                                        “Traditionally, it
                                                                         was easy to tell
                                                                          the difference
The Traditional View Of Public-Private Buying
                                                                         between public
Traditionally, it was easy to tell the difference between public and         and private
private sector buyers and to predict how each would act. That made              buyers.”
selling easy.

Public buyers were generally assumed to be rules obsessed - focused
on the lowest price and somewhat controlling in their approach. At
the other end of the spectrum private sector buyers were expected to
be more results-focused, with a greater degree of flexibility when it
comes to buying.




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It is fair to say that compared to the private sector, public sector
buying is dominated by procedures and regulations. Indeed, when it
comes to the Procurement FOCUS, compliance is the 'true North' for
public sector buyers.

When asked for his views on the difference between public and
private sector buyers, one sales manager joked ‘it is about 10,000
pages of regulations backed up by directives and even treaties!’

In the public sector there are rules, lots of them, and everybody must
apply them. It is not a voluntary code and there are penalties for non
compliance. In the private sector the rules vary from company to
company, but more important still; compliance is (with a few
exceptions) not generally mandated by law.

Of course some public sector buyers would rightly argue that you
cannot have results, without rules, however the dominant view of
public procurement would be that rules come first and results come
second.




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If rules matter then policing them becomes very important. That often
results in procurement adopting a controlling, rather than
coaching role and pushes the organization into Quadrant 1
and Quadrant 3 of the grid. In such organizations
procurement is often seen as the 'policeman on the beat'
when it comes to buying decisions.

Most public buyers will admit to an obsession with the rules,
while most sellers in turn see public buyers as bureaucrats.
But anybody who says public procurement is not measured
in terms of results achieved would in the case of most public
organizations be wrong. But do public sector buyers see the
results differently.

Cost savings have certainly come to dominate public procurement, but
of course getting the lowest price is only one measure of what
procurement can achieve. By its very nature public procurement is
however limited in terms of the criteria it can consider (something you
can find out more about here).

Sellers will talk of public procurement as being blinded by lowest
price. That is despite the fact that buyers are constantly reminded of
the importance of MEAT (Most Economically Advantageous Tender)
and total rather than lowest cost.

                                                                             “Buyers are
Problems With The Traditional Stereotypes                                       failing to
In the past sellers making traditional assumptions about how public
                                                                          conform to the
and private buyers would act were generally proven to be correct.              long held
But, that is no longer the case. Buyers are failing to conform to long    stereotypes...”
held stereotypes and are refusing to be pigeon-holed. They are giving
sellers a surprise.

Some public buyers are behaving like private buyers: they are
innovating around procurement to achieve new results. Perhaps more
alarming still (from the seller's point of view), some private sector



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buyers are acting like public sector buyers: implementing new rules
and procedures to regulate buying.

7 Trends That Blur Public-Private Distinctions

There are seven reasons why the traditional distinctions between
public and private buying are being eroded:

1. There is not just one approach to public procurement, but
many. That is to say there are considerable differences across
public procurement regimes in different countries (the rules
may be the same across Europe, but that still leaves great scope
for clever approaches to implementation).

2. The gap between public and private sector buying is
narrowing, for example:

   − Buying in the private sector is becoming more rules
     driven, with managers increasingly being required to
     follow a defined set of steps or procedures in respect of
     buying decisions.

   − Buying in the public sector has become increasingly results and
     costs focused, with strict targets set for the curtailment of
     spending across the public sector.

3. Public procurement is undergoing a process of review so many
aspects of what define public procurement within the EU are 'up for
grabs' (we have written about the review of EU procurement).

4. What is public and what is private can be confusing. Public
procurement has a wider reach than many would suspect, with
organizations with significant public ownership, or in receipt of public
funds being governed by regulations.

5. Public sector buying comes in many shapes and sizes, for example
the Utilities directives governing public Telcos and Electricty
companies provide for greater flexibility when buying. In addition
different schedules, classifications and thresholds determine what


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rules apply and when. To complicate matters even further buyers in
the public sector are increasingly prone to follow EU procurement
rules even if they are not mandated.

6. Traditionally the private sector procurement executive was better
paid and had a greater chance of being promoted up the ranks.
Procurement in large organization has won for itself a seat at the table    “What matters
in terms of senior management decision-making. However, it is the
golden age of procurement in the public sector too and as many
                                                                           more than public
sellers have noticed there are clear signs of increased professional-      or private, is the
ization and sophistication among public sector buyers.
                                                                                extent best
7. Public bodies may not be as well represented in the speakers line              practice is
up at global procurement conferences, but there are organizations,                 applied.”
such as; La Poste France whose stories of procurement best practice
are as inspiring as any other.

The bottom line is that it is not whether an organization is public or
private that matters, but the extent to which best practice is applied
and neither the public nor private sector have a monopoly on that.

Equally important is the notion of 'fit for purpose' buying. There is no
one ideal way to buy, rather that depends on a range of factors, such
as; the level of risk, cost and complexity involved. Quite simply, you
don't buy office stationary the same way you buy a new ERP, or CRM
system. That is yet another reason why a simple public versus private
view is inadequate.



Conclusion

The bottom line is stereotypes can be dangerous. So don't
pigeon hole the buyer too soon and let it prejudice how you
sell. In today's marketplace sellers must look beyond the
traditional public-private labels and take each buying
organization on a case-by-case basis.

Where do your customers fit on the dimensions shown and
does it affect how you sell to them?


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The Science Behind This Paper


These insights and tools are based on:


1. Buyer Research – our ground-breaking research into how modern
   buying decisions are made and the implications for sellers.


2. Best Practice Research – Over 1 million pages of best practice sales
   case studies, books and research.


3. Common Practice Research – Our peer comparison benchmark of
   1,000s of your competitors and peers.




The Sales Engine® and SellerNav are trademarks of The ASG Group.
The entire contents of this document are copyright of The ASG Group and cannot be
reproduced in any format without written permission.




Want help in tackling your sales challenges? Contact
enquiries@theASGgroup.com

www.theASGgroup.com




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