5 Procurement Negotiation Strategies to Use with Your Sales Process
In business negotiations, Procurement teams often aim to control every aspect of the sale, from limiting access to decision-makers to controlling the format of your response to discrediting your value proposition and possibly using past performance against you. To overcome these tactics, you must be proactive and develop a strategic approach to the negotiation process.
Over the past few years, Procurement departments have become more powerful and sophisticated and sometimes seem intent on commoditizing every aspect of your solutions. For sales professionals, negotiating with Procurement can be an ongoing struggle when dealing with third-party negotiators, blind RFPs, reverse auctions, commodity pricing, and hardball sales negotiating tactics.
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’ll be better positioned to work with Procurement and achieve a successful sales outcome.
The underlying goal of the sales professional should be to treat the Procurement Department not as an adversary in the negation process but as another stakeholder in the process whose needs and priorities need to be understood and addressed.
5 Comment Procurement Negotiation Tactics (And How to Respond)
Here are five common negotiation tactics used by Procurement and their business goals, together with corresponding counter-tactics you can use in response, together with tips on how to leverage them to the fullest.
1. Deflect or Discredit Your Value Proposition
Procurement often attempts to discredit or decouple all the value you’ve 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 to compare the least common denominator pricing and get the “best” deal.
Build stronger relationships with the business unit buyer in the first place. Start early, sell wide and deep within the business unit. Develop strong customer coaches and present a compelling business case for your solution.
Be proactive in addressing any objections or concerns that Procurement may have about your value proposition. Anticipate their questions and concerns and provide evidence and data to support your claims. It will demonstrate your expertise and credibility and help to build trust with Procurement and Sales.
2. Commoditize and Control Responses
Procurement would like to control every aspect of the sale so they can avoid surprises and make an apples-to-apples comparison with your competition. The problem is that your apples are different, and you need to convince the business unit buyer of this in the first place, or you’ll never get past the comparison spreadsheet.
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 differs and restate your value proposition often.
During the sales process, ask targeted questions to uncover the business unit buyer’s specific needs and challenges and tailor your solution to address them. It will demonstrate that you understand their unique situation and can provide a customized solution that delivers greater value than your competitors. Focus on the value you’re creating for each stakeholder and the company as a whole, and whenever possible link your solution to their strategic initiatives.
3. Limit Access to the Business Stakeholders
Procurement wants to control all aspects of the deal, including whom you can speak to. They don’t want to be surprised by a business unit leader making a decision that undermines or supersedes the procurement process. Procurement hates surprises.
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’re told you can’t contact anyone outside of the RFP process, you have a business decision to make regarding 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.
Develop a clear understanding of the organization’s decision-making process and the key decision-makers. By doing this; you’ll be better equipped to navigate the procurement process and avoid being caught off guard by Procurement’s restrictions on communication. Building strong relationships with business unit leaders can also help you better articulate your value proposition and build a compelling business case for your solution before Procurement limits your access.
4. Use Past Performance/History Against You
Procurement would like to have as much ammunition as possible against vendors to drive down prices and negotiate a commodity deal. They’re trained to research background information on each vendor to determine if there’s information that “can and will be used against” the vendor.
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 brings to the business.
Don’t wait for Procurement to find damaging information on your company or solution. Instead, be transparent and disclose any potential concerns upfront. It will help build trust with the procurement team and keep the focus on the value of your solution rather than damaging information that could derail the negotiation process.
5. Good Cop/Bad Cop and mystery decision maker(s)
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 (such as IT, Financial, Legal review, etc.). It keeps the vendor guessing, and vendors are often forced to renegotiate the deal late in the game when the clock is ticking to get it done.
Work hard during your discovery phase to determine who all the decision-makers are and how the decision will be made. Make a timeline for the decision process and ask the customer to respond to the schedule. It helps to highlight any additional steps that may need to be addressed and helps prepare you for what’s 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 already made with the “Good Cop.” Procurement wants to keep all the vendors in the game as long as possible 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.
Don’t be afraid to push back when selling to Procurement. If additional decision-makers or hoops are presented late, remind the customer of the agreed-upon timeline and decision-making process. Stay firm on your solution's value proposition and overall benefits, and don’t be afraid to walk away from a deal that doesn’t align with your goals and values. Remember, the power dynamic isn’t always as one-sided as it may seem.
Procurement departments have become more powerful and sophisticated in recent years, aiming to commoditize every aspect of solutions. However, by understanding Procurement’s objectives, sales professionals can be better positioned to work with them and achieve successful sales outcomes.
The five negotiating tactics include deflecting or discrediting value propositions, commoditizing and controlling responses, limiting access to the business, using past performance or history against you, and using hardball negotiation tactics.
As a sales professional, you must be prepared to counter these tactics 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’re 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 the General Manager of the Sales Readiness Group, A Part of SBI. 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.
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