5 Procurement Negotiation Tactics to Avoid Commoditization
Negotiating with Procurement can be challenging. In this video, you'll learn five sales negotiation tactics you can use when negotiating with them.
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***Video Script ***
We often hear from our clients about the challenges they have these day negotiating with Procurement. This is no surprise. Over the past few years, procurement departments have become more powerful, more sophisticated, and at times seem dead-set on commoditizing every aspect of our solutions. For sales professionals, sales negotiations with Procurement is an ongoing struggle of dealing with third party negotiators, blind RFP’s, reverse auctions, commodity pricing, and hardball sales negotiating tactics.
So what can sales professionals do to avoid having their solutions commoditized? Let’s dig a little deeper into the role of Procurement, and understand what they are trying to accomplish. By understanding their objectives, we will be better positioned to work with Procurement and achieve a successful sales outcome. Below are five common negotiating tactics used by Procurement and their business goals together with corresponding counter-tactics you can use in response.
1. Procurement Tactic: Deflect or discredit your value proposition
Procurement Goal: Procurement often attempts to discredit or decouple all of the value you have worked so hard to build with the business unit buyer. Procurement's goal is to demystify your value proposition so that they can then compare prices among vendors. Procurement would like to focus on discrete units instead of the overall deal so that they can compare least common denominator pricing and get the “best” deal.
Counter-tactic: Build stronger relationships with the business unit buyer in the first place. Develop strong customer coaches and present a compelling business case for your solution. Start early, sell wide and deep within the business unit.
2. Procurement Tactic: Commoditize and control responses
Procurement Goal: Procurement would like to control every aspect of the sale so they can avoid surprises and do an apples-to-apples comparison with your competition. The problem is, your apples are different and you need to convince the business unit buyer of this in the first place or you will never get past the comparison spreadsheet.
Counter-tactic: Employ a value-based selling approach that quantifies the overall value of your solution and presents a total solution that can’t be dismantled into component pieces and commoditized. Educate the business stakeholders and Procurement on why your solution is different and restate your value proposition often.
3. Procurement Tactic: Limit access to the business
Procurement Goal: As we discussed, Procurement would like to control all aspects of the deal, including who you can speak to. They don’t want to get surprised by a business unit leader making a business decision that undermines or supersedes the procurement process. Procurement hates surprises.
Counter-tactic: Build a strong network within the business organization. Leverage inside and outside resources to help you get the lay of the land before Procurement puts a gag-order on the vendors. If you are told you can’t contact anyone outside of the RFP process, you have a business decision to make in terms of the risks and rewards of following those rules. Most business decision makers aren’t aware of these rules and may not agree with them. If you find that you are responding to an RFP and you don’t have any other business relationships within the organization, you should seriously consider your chances of success in this deal. Blind RFP responses seldom produce desirable results for the responding party.
4. Procurement Tactic: Use past performance/history against you
Procurement Goal: Procurement would like to have as much ammunition as possible in their arsenal to use against vendors in an effort to drive down prices and negotiate a commodity deal. They are trained to research background information on each vendor to determine if there is information that "can and will be used against" the vendor.
Counter-tactic: Be proactive. Anticipate issues and concerns that may come up and have your responses prepared. Consider a pre-emptive strike to disclose negative information so that you are in control of the discussion. Return the focus of the sales negotiation to the deal at hand and the overall value proposition your solution is bringing to the business.
5. Procurement Tactic: Good Cop/Bad Cop and mystery decision maker(s)
Procurement Goal: Procurement would like to keep the power and leverage on their side, and they can do this by presenting additional decision makers or hoops to jump through late in the process. This keeps the vendor guessing and vendors are then often forced to renegotiate the deal late in the game when the clock is ticking to get it done.
Counter-tactic: Work hard during your discovery phase to determine who all the decision makers are and how the decision will be made. Map out a time line for the decision process and ask the customer to respond to the schedule. This helps to highlight any additional steps that may need to be addressed and helps prepare you for what ahead. If a “Bad Cop” is introduced late in the game, attempt to determine their position and interests, and refer back to the agreements and decisions that have already been made with the “Good Cop.” Procurement wants to keep all of the vendors in the game as long as possible in order to provide leverage against the competition – so remember that they want us there. We typically have more power in this situation than we may give ourselves credit for.
These are just a few of the sales negotiation tactics commonly used by Procurement. As a sales professional, you must be prepared to counter these tactics, primarily by planning, leveraging your relationships, and reinforcing the shared interests and value proposition you have worked so hard to develop for your customer. Remember, you are selling a solution that will help your customer accomplish their business objectives – don’t let this get diminished or commoditized by an overzealous procurement department.
About Ray Makela
Ray Makela is CEO and Managing Director at Sales Readiness Group (SRG). He oversees all client engagements as well as serves as a senior facilitator on sales management, coaching, negotiation and sales training workshops. Ray has over 20 years of management, consulting, and sales experience and writes frequently on best practices for coaching and developing sales teams.