Advanced Analytics as Leverage by the Buyer in Negotiation
An overview of the process, by Chris Webber of Foxleigh
Jane is a Business Manager for a large food suppler, she is part of an account team for a large retailer. She has done the job for many years and has been successful. Her categories are doing well, but some lines are slowing as consumer habits change.
Jane has excellent relationships with her buyers and has always been able to protect her range of products by investing to support the performance on slow lines and persuading the buyers to support her promotions. This month things changed. Jane went to a meeting with the buyers and was presented with an array of data from them that illustrated some; “serious problems with the range that will force them to delist”.
The retailer has always had data from consumers via the loyalty cards which they offered to suppliers for a fee, but they never really used it, until now! Today the buyer shared that they now combine this data with insights gathered from artificial intelligence that predicts performance using analytics.
Jane feels she is in trouble and is worried about what is going to happen. For the first time in her career, she knows less about her range than the buyers, and they are using data from shopper insights and advanced analytics against her. In other words, the traditional Buyer-Seller knowledge base i.e. Buyer knows a little about a lot, Seller knows a lot about a little, has been reversed…
This is not a far-fetched scenario. These tools and insights are available today and are being used by procurement teams across industries to leverage value.
Research by Foxleigh into the use of data and artificial intelligence in procurement uncovered the extent and power of the practice. Buyers are using information on market trends, supplier performance, buyer intent, historical purchases, seasonality, comparisons and so on, at a highly granular level to drive their decisions. They use it to force down prices and remove poor performing lines.
The days when outliers could be used as evidence by suppliers to justify investments are disappearing fast. Buying teams are better armed than ever before to understand what they are buying, how much they should be paying and how it is performing.
Humans are still making decisions, but relationships are no longer the main driver of choices.
Negotiating versus Artificial Intelligence
The overwhelming feeling of suppliers, when faced by the wealth of information and analytical decision making that is now part of buyers toolkit, is fear. Fear that they have lost all the power and that they will inevitably lose. But is that the case? Will the algorithm always win?
The question is not will the algorithm win, but what are you asking it to calculate. Suppliers should have incredible insight about their consumers, their needs and desires and what motivates them to buy, but are you really using it?
Retailers in the past have been unable to execute very detailed plans because the information that they used and had access to, was limited. They were unable to mix and implement a range across different format stores and into different geographies because they were limited by their supply chains.
Has that changed? Does this new insight create opportunities for you to more closely match your proposition to the consumer behaviour? If the retailer is now more able to match shelf and promotion to the specific consumer then this could be a great moment for you.
The challenge for supplier representatives is becoming comfortable in a data-led world. It is now more important than ever that you know your data, are armed with it and are confident to use it. It is essential to recognise that you still have the advantage that you are responsible for at most four categories, whilst the buyer has to spread their attention over many more. In fact, this may cause them to accept the recommendations of a seller using AI ‘properly’ and instead focus on those NAMs ‘flying blind’.
Each retailer will be different and have different consumer characteristics; the pressure now shifts to suppliers to find the products and SKU’s that fit with the right consumers in the right retailer and within the right format – including online.
Advanced analytics means that you need to fight data with data – and be prepared to tailor solutions to retailers. In other words, meet buyer needs, and help the buyer to buy your ideas.
Great negotiators still need to understand what is driving decisions in order to package up the proposals and solutions effectively. It is just that now a key decision-maker is the advanced analytics tool-kit.
Artificial Intelligence is not going away, it is simply another customer type, and you will find it difficult to deal with unless you adapt and build your own bank of power from information to which you both have access.
Foxleigh specialises in helping you deal with difficult customers – even if that is an algorithm – for further details, email: [email protected]
[NB. Given the extent of NAM interest in AI-aided negotiation, Chris has prepared an additional three papers focusing on the use of AI in Preparation, Conduct and Post-negotiation analysis. These will be published shortly]
