Suppliers' Secrets For Negotiating With Purchasing
PurchTips edition #106
By Charles Dominick, SPSM, SPSM2, SPSM3
What Do Your Suppliers Think When Negotiating With You?
I recently interviewed Ken Knudsen, the CEO of sales coaching firm Eagle Rock Enterprises, about suppliers' thoughts when negotiating with purchasing managers. We identified several negotiating principles for purchasing managers.
From the supplier's side, "the key to negotiation is that you have to start with a pretty wide spread," Knudsen shares. "If my goal is to sell something for $20 a case and I open at $20, we don't have negotiation room. Most sales professionals have something in their 'back pocket'."
So what can compel a salesperson to offer the better deal in her "back pocket?" The goal of many salespeople is to earn more and work less. That goal is best accomplished by working with customers with long-term relationship potential.
But that doesn't mean that a purchasing manager's only necessary negotiating tactic is to promise a long-term relationship. Salespeople are trained to identify whether a purchasing negotiator is serious or bluffing.
Before negotiating, they consider the states of the purchaser's company and the industry. While negotiating, they evaluate
the body language of the purchasing manager. Certain actions may signal a dishonest representation, such as:
- Keeping the hand over the mouth
- Scratching the nose
- Failing to make eye contact
There are really two lessons to be learned with regard to body language:
- The purchasing manager must be aware of her mannerisms, as they may be being interpreted by the salesperson; and
- The purchasing manager should also observe the salesperson's body language
"One of the things that I coach clients on is that you should always take someone into the sales call with you because they're observing while you're trying to present," explains Knudsen. "Most purchasing managers try to (negotiate) one-on-one or one-on-two" and, therefore, fail to be as effective at observing the supplier's body language.
To Knudsen, an indicator that the purchasing manager is interested in a long-term relationship is the manner in which the purchasing manager communicates. I pointed out that purchasing managers often open a sales call or a negotiating session with a phrase like "You have five minutes, what do you got?" Knudsen identified that as one of many "red flags" that positions the purchasing manager as a "short timer" and compels the salesperson to withhold better deals.
Knudsen acknowledges that one of the salesperson's objectives is to get the purchasing manager to talk, but also says "Most purchasing managers should try to get the salesperson to talk more." By learning about a salesperson's objectives, the purchasing manager can uncover opportunities for good deals that the supplier is withholding for potential long-term relationships or "reference accounts." Sometimes, salespeople are sent into a meeting with the instructions: "Price is not an issue. Get the account." But purchasing managers risk never discovering that if they don't foster an open dialogue.
Purchasing managers are often reluctant to share information, and Knudsen sees that as a barrier to their success in negotiating. He says that the sharing of information is often important for a salesperson to be able to go back to her management for approval to offer a better deal.
I agree, but I also feel that purchasing managers need to be proficient at distinguishing good-intentioned salespeople from
unscrupulous ones who are just seeking a negotiating advantage. So, no single rule applies to the sharing of information
in a negotiating situation. The purchasing manager has to make the decision that is right for the specific circumstances.
More open communication may make some purchasing managers nervous as some feel that developing a relationship plays to the salesperson's advantage and to the purchasing manager's disadvantage. That does not have to be the case.
By communicating openly, the purchasing manager can learn the objectives of both the salesperson and the supplier and how a win-win result can be achieved. And a relationship-building demeanor has many times influenced Knudsen to believe in a higher probability of a long-term relationship which gave him the "ammunition to go back to my boss or my boss' boss or the company to help (the purchasing manager's company)."
So, to summarize the negotiating principles that arose from my discussion with Mr. Knudsen:
- Salespeople often enter negotiating situations with available improvements in their "back pockets."
- A significant motivator for salespeople to offer improvements is the potential for a long-term relationship.
- Skilled salespeople evaluate your body language as well as your openness and friendliness in communicating in determining the likelihood of a long-term relationship and, therefore, how much improvement to make to their offers.
- Purchasing managers should observe, or have a colleague observe, suppliers' body language in negotiating situations.
- By asking questions and getting a salesperson to talk, you may uncover available opportunities for better deals.
- Sharing information is critical to developing the long-term relationships that result in good deals. But you have to be careful to distinguish good-intentioned sales people from unscrupulous ones and share or withhold information as dictated by the specific situation.
- The belief that developing a relationship plays to the salesperson's advantage and to the purchasing manager's disadvantage is a myth. By having an open relationship, the purchasing manager can learn a lot about the objectives of the salesperson and the supplier and can be better positioned to achieve better deals and a win-win situation.
- A relationship-building demeanor on your part may compel the salesperson to seek a better deal from management.
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