No one-not even the Doomsayers–had a clue the DJ would slide 33.8%, that the S&P would sink 38.6%, or that Nasdaq would tumble 40.5%.  Our date with fate in eight has left each of us angry and confused.  We might hope for a turnaround in 2009, but few are willing to bet on it.  

As we begin a new year, both buyer and seller find themselves in a new world where vast swaths of territory are marked “unknown and uncharted.”  Take commodities for instance.  One metals client remarked, “On the Fourth of July, we were in heaven.  By Thanksgiving, we were in hell.”  

Demand for basic materials weakened as the financial crisis spread and the world’s economy tipped into recession.  Oil went from $145.29 a barrel to $33.87.  Copper from $4.00 a pound to $1.26.  It might be even harder for the buyer and seller in 2009.  The prospect of fewer players and tighter credit makes for tougher conversations-on both sides of the table.

Commodity buyers and end users may have increasing interest in hedging against price swings.  But, it’s very tricky when demand is declining and supply is contracting.  It might lead to a floor on pricing-a bottoming out.  But nothing is certain, even when prices get slashed, it doesn’t always mean that demand picks up proportionately. 

Selling commodities in a volatile market is daunting.  We’ve never met such beleaguered buyers-those who are wondering if their job is OK or if their company is the next to go belly-up.  It’s not easy managing a PA’s attention when they’ve got three or four networking sites going…just in case.

What then, is the line for nine?  Consider using the following approaches with the price-focused, tight-fisted buyers you’ll be facing on sales calls:

Lead With Lower Prices-Arrgh!  It’s at the top of every buyer’s list anyway, so you might as well deal with it.  Here’s the strategy and the word tracks:

More is less-”If you can increase your quantity on this purchase by xx%, we can lower the price by $xx.  You save money with a volume purchase and we save money with a volume sale (i.e. lower warehousing costs, storage, etc.)  That’s a ‘win-win’ for both of us.”

Buy ahead-”By projecting your purchases ahead by 30-60 days, you can increase your purchase power and reduce costs.  This insures price protection, lowers today’s price by increasing the volume, and reduces any concerns for product availability.”

Consolidate Suppliers-We’re not advocating single-sourcing-that’s often not realistic or practical in any buying climate.  But, reducing the head count makes a lot of sense for a lot of reasons-especially in cost containment.

Streamline administrative costs-”It is very costly to maintain multiple suppliers in tough times.  It leads to confusion, wasted time and extensive paperwork.  Do you REALLY need three bids for each requisition?  You’ll save time, money and reduce frustration if you consolidate your purchases and suppliers.”

Reduce the number of POs you cut-”The average cost of cutting a purchase order today is about $150.  Another benefit of consolidation is reducing your acquisition and administrative costs.  So, if you cut your POs by 40 next month, you’d save $6,000.  Those are hard dollars, not soft dollars, by the way.”

Stress Product Availability-Product availability will trump lower price on occasion.  After all, what good is a lower price if the buyer can’t get it when he needs it?  It’s moot.  Here’s the conversation:  

Have a bird in the hand–”We have it in inventory and the price is $xx.  That’s a very good price.  In the kind of a market we’re in today, suppliers are cutting inventories to reduce costs.  You’ll waste time shopping around for a lower price, just to find out our competitors don’t have it in stock.  Let’s place the order NOW!”

Reserve it-”If you can’t give us the order now, we’ll place it on hold.  Some of these items may be hard to source based on our market data.  I’ll check with you by the end of the day-that way we can be sure you’ll get it when you need it.  OK?”

Suggest a Substitute-If the product is not currently available, you don’t have to walk away from the sale if you have a viable substitute (assuming the product isn’t “specified”).  This benefits both you and the buyer in several ways.  Try this:

Can you live with an alternative?–”We don’t have that exact product in inventory, but depending on your needs, we have an alternative that will provide the same functions and benefits at a very competitive (maybe lower?) price.”

Similar product-lower cost-”If you’re open to saving money, we have a similar product that compares in most every way to the one you’re looking for except that the price is lower.  Might you be interested?”  

Trade Off With Services-Maybe you can’t increase quantities and the buyer won’t bite on consolidation.  Product availability isn’t an issue either.  Protect your profit margins by trading other services (where your margins are greater.)  Say:

Can save you money in another way-”We can’t cut the price any more, but we can save you money by giving you a discount on… (software, packaging, shipping, cutting, training, etc.)  You’re going to save money you would have to spend anyway in another area.”

Will stock and hold for you-”We can’t lower the price on this item, but we can temporarily warehouse it for you and ship it to you when you need it.  A consignment program such as this  saves you money in storage and inventory management.”

Reduce to the Absurd-You can’t use this approach with every buyer, but it’s used every day on TV–the life insurance policy is just ”50-cents-a-day”.  That workout “What-cha-ma-call-it” is only “twelve monthly payments of $17.33!

It’s not worth you time-”Our price is only .32 cents a foot when you break it down–that’s peanuts.  You’ll spend more than that checking around for a lower price.  You have better things to do.”

Save it for the big buys-”The price is fair for what you’re ordering.  Over the life of the product, it’s about a dollar a day.  On a small buy like this, it doesn’t make sense to waste any more time on it.  Your time is too valuable.”

Split the Difference-If trade offs and other strategies don’t apply, maybe you have to give a little to get a sale-especially if you have a lot of the product sitting on the shelf.  Maybe there’s some “wiggle room” in your quote?  Try the following for leverage:

If you order now, here is what we can do-”It looks like price is the only thing standing in the way of your giving us the OK on this, right?  In this case, we’ll split the difference with you (50/50) to expedite this purchase.  Fair enough?”

One-time only on this proposal-”We can’t do this on every quote, but we are in a position today to save you some money.  If you place the order now, we’ll split the difference with you (50/50).  How does that sound?”

Offer a Hedge Against Price Swings-In the complex, commodities market we’re in today, safety and security are strong motivators for both buyer and seller.  Long-term agreements benefit everyone-especially if you have a forecasting model that’s fairly reliable and predictable-given the volatility in current commodities markets.

More stable purchasing with fewer spikes-”Everyone is looking to for improved methods to even out violent swings in availability and pricing.  A contract (or LTA) helps us get better volume purchases that we can pass on to you in return for a commitment on your part for the long run.”

Safety, security and peace-of-mind-”A long-term agreement provides both parties with stability.  As business partners, that’s a good deal any way you cut it-especially with the volatility in today’s market place.”

So there you have it, Super-Commodities-Salesperson!  Our best swing at the 100 mph fastballs you’ll be facing throughout this buying season.  Stay loose, don’t dig in too deep and duck when times demand.