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Why pay for suppliers' wasted selling costs?

Author: Martin Kelly, CEO and Founder, INNOVO Network

How much money do your suppliers spend trying to sell to new customers?

Why should you pay for your supplier to acquire new customers?Your suppliers have already won you as a customer yet you are paying for their ongoing costs in trying to acquire new customers. These selling costs are included in their price to you. Ask them how much of their price to you is to cover their new customer acquisition costs.

They might respond that they need new customers as a business in order to survive. However, a very high proportion of their selling costs are wasted because sales and marketing activities have such low response rates. The many areas of wasted selling costs can be seen in the diagram:

Anyone selling to organisations will recognise the sales pipeline for new customer acquisition. The marketing team approaches many targets down different channels in order to generate leads for the sale team. “Good” response rates are under 10%. Yet this means that over 90% of approaches have failed. Even when the sales team gets the lead, a meeting is not guaranteed. In spite of all of this effort, 91% of sales meetings will fail to yield a sale according to the Harvard Business Review.

Why does selling to organisations have failure rates of 90% - 99% when everything else in the world involves processes which are now 99.99% reliable? Imagine if flying, hospital operations or even the products we all buy had failure rates of 90% - 99%!

As a customer, you are paying for all of this waste at your suppliers. These wasted costs can amount to over 9% of the price you pay. In fact, it’s even more than this because your suppliers are in turn paying for wasted selling costs at their suppliers!

INNOVO believes we can change this. With the amount of time and money spent innovating things today; there must be a way to increase the efficiency of the sales department. Would you agree? 

What if you could actually lower your procurement costs with your suppliers offering savings to you without you asking? Wouldn't this disrupt the traditional pressing for lower prices from suppliers by buyers, creating a win-win in procurement? Interesting, wouldn't you say? At INNOVO we've come up with an innovative way to do just that, but I'm curious what you have to say. 

Tagged under: Procurement

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