Monday, March 26, 2012

Market Intelligence

On linkedIN someone suggested that market intelligence could aide in negotiations. That is true and market intelligence works on both sides.

For a supplier there are a number of different forms of market intelligence they may perform.

1.There is market intelligence that occurs in the product or service development stages where companies seek to identify a unique feature or service the can develop that they will use to differentiate their product or service from their competition,

2. There is market intelligence to understand what your potential competitors have or don't have at the present time. This type of intelligence can include not just the products or service they offer and their pricing or terms. It can also include keeping track of things that can affect their competitors being able to meet the customer’s needs such as available capacity and lead-time.

3. Another form of market intelligence goes on in the selling process where the sales person is seeking to understand what the customer’s problems are, what they need or prefer. This gives a supplier an edge in understanding how they stand against their competition and how they will need to price them item or what they may need to agree to for terms to be competitive.

4. Another form of supplier market intelligence is being able to read the bid or proposal documents to clearly understand what the customer is telling you about what they want and what is important. For example if they find that schedule is very important and they have done market intelligence and know a key competitor will not be able to meet that schedule, they will know they don’t have to compete with that supplier to win and may be able to charge a premium as they can meet those needs.

Purchase decisions are frequently made based upon the features a product or service has and the perceived benefits to the customer. If the Supplier can accurately read the situation that may be able to charge a price premium and still get the business when compared against competitors that don’t offer those same features and benefits. If a supplier determines they don’t have those advantages or the customer doesn’t need or want to pay the premium for what you offer, it that unique feature provides you no advantage. In that situation if the supplier wants to win they need to compete on price or show other value they can deliver that the customer will see as benefitting them and be willing to pay for.

For buyers they can also perform a variety of market intelligence that can both aide in the negotiation but also in determining the right contracting strategy to use. Let’s look as some of the procurement market intelligence approaches:

1.Pre-qualification of suppliers and their potential competitors is a form of market intelligence.
2.Tracking product or industry trends is a form of market intelligence.
3.Understanding where a product is within the life cycle of the product is a form of intelligence to help determine the length of the contract or the fixed period for pricing.
4.Benchmarking is a form of market intelligence to help determine what is both standard and best- in-class.
5.Requests for information or requests for quotations is a form of market intelligence.
6.Interviews of suppliers, their references and subcontractors or material suppliers is a form of market intelligence that you may use in determining who to select or what may be needed in a contract.

On the buying side its important to manage and control the amount of market intelligence a supplier can perform within your own company as you simply do not want to be providing them with information that can be used against you or be providing them with information they will use to attempt to charge you a higher price.

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