Defeating A Supplier's Negotiating Strategy
PurchTips edition #238
By Charles Dominick, SPSM, SPSM2, SPSM3
Do You Decipher Suppliers' Negotiating Strategies?
In a recent Next Level Purchasing Association webinar, presenter Tom DeMarco from ClearEdge Partners cited negotiation advice culled from the book "The Art of War" by Sun Tzu. The excerpt he quoted was "The key to victory is not defeating the enemy, but in defeating the enemy's strategy; therein lies their vulnerability."
But do you always know what your supplier's negotiating strategy is? You cannot defeat a negotiating strategy if you don't know what it is.
Let's discuss this via an example. An IT supplier may engage and negotiate with an IT professional who has little negotiating experience instead of engaging a procurement professional. The supplier's strategy will (a) make the IT professional feel like he got a "good deal" so that he resists any procurement involvement that would diminish his "negotiating glory," and (b) give the supplier a defense against procurement negotiation like "There's no room to further reduce my price because your company already negotiated it down."
Defeating this negotiating strategy would involve collaborating with the IT department to reach a common understanding of suppliers' strategies and to defeat them by establishing clear roles, in advance, for who conducts technical evaluations and who negotiates.
Another example may be an incumbent supplier who proposes an inflated price, thinking it would be too hard for you to switch suppliers. That supplier's negotiating strategy might be to be firm with its price and say things like "if other suppliers bid lower than us, they obviously don't understand your requirements like we do."
Defeating this negotiating strategy will require you to be serious about qualifying other suppliers and prepared to switch. You need to know more about the incumbent's competition than the incumbent does and to allow the incumbent to see visible evidence that you are seriously considering other suppliers.
Win-win negotiation is the norm today. However, if a supplier comes to the negotiating table with a strategy to "win" more than you, deciphering and defeating that strategy (not that supplier) is a key to favorable results.
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