It’s neither easy nor difficult; it’s simply smartness. A buyer needs to be smarter than the supplier to be able to make a purchase. It’s not power as a buyer or purchase price of the product, it’s simply the knowledge of products, the raw material, production process, quality requirement and most importantly, the knowledge of consumer behaviour is the most important factor that helps make a purchase decision from a vendor.
The product:
A buyer has to know the complete anatomy of the product. It’s divided into mainly 4 parts, i.e., Core product, Tangible product, Augmented product & Potential product.
The core product is the basis on which a consumer buys a product in the same category. For example, a dinner set is used for eating across all the segments irrespective of competition, raw material used, quality etc.
A tangible product provides the touch and feel. Here comes the design, specifications, branding and packaging.
The augmented product represents the value addition that comes along with the product.
Finally, the potential product will determine the lifetime of the product. Whether it’s a short-term product or will provide benefits in the long run.
The above 4 factors are the most important factors one has to go through before going for purchase negotiations.
The Raw Material:
Knowledge of raw material is the most important factor. A final product can be made in different raw materials in the same category, which determines the quality & price and price of the product. The current raw material price update is a must for all buyers and sourcing professionals.
For example, a simple cotton T-shirt, which is made in cotton yarn, can be made in different yarn types, such as carded, Carded-combed, Carded-combed-mercerized. This applies to almost all kinds of raw material. Gold jewellery can be made in 24 carat, 22 carat, 18 carat, etc. The list is endless.
Production Process:
While taking a purchase decision, if the buyer is fully conversant with the production process of the product, he can easily decide on the costing, quality & delivery, the three most important factors of the buying or sourcing.
With a little bit of analytical skill, a buyer can imagine the conversion cost for the final product in terms of percentage of the raw material cost. Similarly, it can also help determine how difficult or easily to achieve the quality and the time taken for delivery.
Quality:
It will always be a relative term. The buyer has to thoroughly understand this. The quality parameter is set as per the market, customer segment and usage, etc. With a little bit of application of mind, a buyer can easily set the quality parameter required and make the vendor understand their requirement.
Consumer Behaviour:
From a buyer’s perspective, he has to understand his customer for whom he is buying. His customer’s socio-economic status, his aspirations, purchasing power, culture and most importantly, his emotions. A buyer from the upper strata of society who has gone to the country’s best school, studied in IVY league colleges and lived in the most upmarket localities can’t buy products for customers like Walmart, where most of the customers are from middle-class backgrounds.
Happy Sourcing!