I hope that you have enjoyed the article “Defeating A Supplier’s Negotiating Strategy.”
In the article, I gave a couple of examples of suppliers’ negotiating strategies and how they could be identified and countered. I’ll use this blog post to describe one more strategy.
I call this negotiating strategy “taking the sauce off of the pizza.” While everyone’s favorite pizza toppings vary – and some people don’t like any toppings, including the cheese – most of us expect at least sauce on our pizza.
New suppliers will sometimes try to unseat an incumbent based on the promise of a lower price. How do they achieve such a lower price? They strip components or attributes of the product or service away.
Sometimes, this is a good thing. It’s like value analysis: if a component or attribute of a product or service isn’t adding any value, then it should be eliminated and it’s cost taken out.
However, with these types of situations, you have to recognize when a new supplier’s proposal is stripping value along with cost. Going back to the pizza analogy, you may be able to have a meal that beats back your hunger if you have sauceless pizza, but are you sacrificing satisfaction by foregoing an important ingredient like sauce just to save a little bit of money?
If you are sacrificing satisfaction, then it may be worth spending more. You really have to scrutinize new suppliers’ proposals, identify how lower cost is possible, determine whether there is a potential sacrifice to be made, and decide whether any sacrifice is worth the cost savings.
Coincidentally or not, it’s lunch time…
To Your Career,
Charles Dominick, SPSM, SPSM2
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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