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206 PART 3 CONNECTING WITH CUSTOMERS

are characterized by low budgets and captive clienteles. For example, hospitals must decide what
quality of food to buy for patients. The buying objective here is not profit, because the food is pro-
vided as part of the total service package; nor is cost minimization the sole objective, because poor
food will cause patients to complain and hurt the hospital’s reputation. The hospital purchasing
agent must search for institutional-food vendors whose quality meets or exceeds a certain mini-
mum standard and whose prices are low. In fact, many food vendors set up a separate sales division
to cater to institutional buyers’ special needs and characteristics. Heinz produces, packages, and
prices its ketchup differently to meet the requirements of hospitals, colleges, and prisons.ARAMARK,
which provides food services for stadiums, arenas, campuses, businesses, and schools, also has a
competitive advantage in providing food for the nation’s prisons, a direct result of refining its pur-
chasing practices and supply chain management.

ARAMARK ARAMARK Where ARAMARK once merely selected products from lists provided
by potential suppliers, it now collaborates with suppliers to develop products customized to
meet the needs of individual segments. In the corrections segment, quality has historically
been sacrificed to meet food cost limits that operators outside the market would find impos-
sible to work with. “When you go after business in the corrections field, you are making bids
that are measured in hundredths of a cent,” says John Zillmer, president of ARAMARK’s Food & Support
Services, “so any edge we can gain on the purchasing side is extremely valuable.” ARAMARK sourced a
series of protein products with unique partners at price points it never could have imagined before.These
partners were unique because they understood the chemistry of proteins and knew how to lower the
price while still creating a product acceptable to ARAMARK’s customers, allowing ARAMARK to drive
down costs. Then ARAMARK replicated this process with 163 different items formulated exclusively for
corrections. Rather than reducing food costs by 1 cent or so a meal as usual,ARAMARK took 5 to 9 cents
off—while maintaining or even improving quality. 75

In most countries, government organizations are a major buyer of goods and services. They typ-
ically require suppliers to submit bids and often award the contract to the lowest bidder. In some
cases, they will make allowance for superior quality or a reputation for completing contracts on
time. Governments will also buy on a negotiated contract basis, primarily in complex projects with
major R&D costs and risks and those where there is little competition.
A major complaint of multinationals operating in Europe is that each country shows favoritism
toward its nationals despite superior offers from foreign firms. Although such practices are fairly
entrenched, the European Union is attempting to remove this bias.
Because their spending decisions are subject to public review, government organizations
require considerable paperwork from suppliers, who often complain about bureaucracy, regula-
tions, decision-making delays, and frequent shifts in procurement staff. But the fact remains that
the U.S. government bought goods and services valued at $220 billion in fiscal year 2009, making
it the largest and therefore most potentially attractive customer in the world.
It is not just the dollar figure that is large, but the number of individual acquisitions.
According to the General Services Administration Procurement Data Center, over 20 million
individual contract actions are processed every year. Although most items purchased cost
between $2,500 and $25,000, the government also makes purchases in the billions, many in
technology.
Government decision makers often think vendors have not done their homework. Different
types of agencies—defense, civilian, intelligence—have different needs, priorities, purchasing
styles, and time frames. In addition, vendors do not pay enough attention to cost justification, a
major activity for government procurement professionals. Companies hoping to be government
contractors need to help government agencies see the bottom-line impact of products.
Demonstrating useful experience and successful past performance through case studies, especially
with other government organizations, can be influential. 76
Just as companies provide government agencies with guidelines about how best to purchase and
use their products, governments provide would-be suppliers with detailed guidelines describing
how to sell to the government. Failure to follow the guidelines or to fill out forms and contracts
correctly can create a legal nightmare. 77