Tactics, when used alone, are quickly recognized by the skilled sales person who will use appropriate counter-tactics. Tactics work best when there are multiple tactics used and there is reasoning or an explanation that goes along with the tactic. It is easier to get people to agree if they can understand the issue or reason why you need something. One of the reasons why you need to build the knowledge is so you can reason or explain why you need something different.
For example, a basic tactic in negotiations is called a “Stone Wall ”. A simple No is a good example of a stonewall. It is a tactic used without any further explanation. It is a position that you take without any movement. Sometimes it will work, other times it will create an impasse. When the stonewall tactic is backed up with a reason such as a competitive need or a budget problem, it becomes easier for the other party to understand and agree. The same is true when the stonewall tactic is backed up with an explanation on the unique problem which you face which you “share” with the Supplier. When you provide reasons or explanations along with the basic tactics, those reasons or explanations can be additional tactics. Here’s an example.
“We have reviewed your price and you have to do better. You're not competitive with the other potential suppliers and your price is far more than our budget. Our customer has explained to us the price sensitivity of their product and if they can’t meet their budget there is no product.”
In this we started with the tactic “you have to do better” (which is the buyer’s number 1 tactic, probably because when you don’t know other ways, this is the bluntest way to send the message). That was followed by another tactic “remind them of the competition” (another top purchasing tactic) which provided them with a reason for having to do better (being competitive with their competition). The mention of the price sensitivity was an explanation of your unique need for the reduction. The reference to the Customer’s budget sets the stage for the use of another tactic - “This is all I have to spend”. The language about the customer meeting the target budget or their is no purchase provides them with a further reason and the criticality of the decision.
If you were on the other side of the table, which would have been a more convincing argument for a price reduction: The simple comment "you have to do better" or, the more detailed explanation?
In a negotiation what you are trying to accomplish is have the other side take a dollar out of their "pocket" so that you can put it in yours. Most people won’t willingly let that occur, so you have to sell them on why there is a good reason to do so. Good negotiators are also good salespeople in selling their points.
It is important to the buyer to know when to stonewall, know when to reason and know when to explain their specific needs. If you can show valid reasons for your positions it’s harder for the supplier not to agree. If you can show the supplier solid reasons why you need what you are asking for, it’s harder for them not to respond to those.
Here’s a few example of mixing and matching tactics.
USING REASONING AND EXPLAINING IN CONJUNCTION WITH OTHER TACTICS.
TACTIC USING THE STONEWALL APPROACH | WITH REASONING | WITH EXPLAINING OR “TELLING WHY” |
You have to do better. (Tactic- you have to do better) | You have to do better as this will make you un-competitive versus others (remind them of their competition) | You have to do better. It doesn’t meet the customer’s budget. If we don’t get a lower price the project won’t proceed /or they will select a different supplier we’ll both lose. |
Here’s my price, take it or leave it. (Tactic - take it or leave it) | Here’s my price, take it or leave it. It is reasonable versus others | Here’s my price, take it or leave it. Any higher and we won’t be competitive in the market. |
All I have is _______ (Tactic - the well is dry) | All I have is _______ which is reasonable based on our assessment of the market and your competition | All I have is _______ that is based on what the customer needs to make this a viable product. |
If we can’t do better I have to buy from your competition. (Tactic - remind them of competition) | While we would like to buy from you we can’t ignore the competition’s pricing | The customer prefers ___; to use you I need to show them a pricing advantage. |
We need 1000 but at your 10,000 piece price. (Tactic - Make high demands) | We want to buy at your 10,000-piece price because there is no real cost difference. | We want to buy at your 10,000 piece price because the only cost difference is administrative order processing and we will do EDI |
All we are asking for is a $.50 reduction. (Tactic - Use funny money) | A $.50 reduction is similar to what we are getting from our other suppliers | We need a $.50 reduction to win this business with our customer |
We hear your proposal and will review it with the others (Tactic - Exercise patience) | It takes a while to review a proposal of this significance | Once we have reviewed it at the user level, we then have to review all proposals at management level. |
We will continue to consider others (Tactic - keep the pressure on) | We will continue to consider others as your proposal hasn’t fully met our needs | We will consider others as we and our customer believe it should be in __ price range |
If you throw in _____ we will have a deal. (Tactic - Nibble away) | All our other suppliers are providing this as part of their proposal | We need something to sweeten the pot to get our customer to agree. |
No. We cannot accept this (Tactic - don’t give in) | No. This is not something we do with any of our suppliers | No, we can’t accept this because ... |
You have until ____ to give us your best and final offer. (Tactic - use deadlines) | We need your best price by _____ so that we make a decision by _____and stay on schedule. | Our customer’s bid is due on. I need your best price before then for you to be considered. |
With your past performance we need X% because of _________ (Tactic - look at the record) | Your performance has been costing in both Inventory and quality costs and your price needs to reflect that. | You have cost us _____ because of your performance. For you to be competitive with others you need to reduce your price by ___to cover out increased costs. |
Let’s split the difference (Tactic - Split the difference) | If we split the difference it will make your price acceptable to our customer. | If you split the difference you will get the order which means $$$$$ |
I need ___ days to consider this (Tactic - Buy time) | I need ___ days to consider, as it requires agreement by a number of parties. | Here is our review process... it takes _____ days. All proposals are reviewed with management. |
If X matches or beats this they will get the order. (Tactic - Auction) | We are not convinced that the price is right and to get to that point we will need to get prices from others. We will let you beat their price | We went to you because we thought you would give us a competitive price If we don’t have agreement we will get prices from others. |
We can buy it for ___ (when you don’t have another option) (Tactic - Faking it) | We can buy it for ____, we just received another proposal | We went to you because we thought you would be competitive but we now have another proposal which is better |
We need detailed back-up for all this (Tactic - Overload requests) | All our other suppliers have provided this level of backup | We need the back up to convince our customer... |
_________ will be handling this now (Tactic - apparent withdrawal) | ____ will be handling this now as they have project responsibility | ____ will be handling this now, as I will be working at the Commodity Management level deciding the overall strategy. |
If you don’t do better don’t call in the future (Tactic - Doomsday) | You haven’t been competitive on the last _________ so if you can do better the odds are you will never get any business, so now is the time to give us your best shot. | It costs us substantial time and effort to review proposals and have these discussions and we can’t spend that money if we don’t have an indication you will be competitive by showing it on this activity. |
Many of these tactics are “Power” tactics in which you try to get the other side to back down so you win. How they are introduced is important. If all you used in a negotiation were “Stone Wall” tactics, with no reasoning or explaining, the tendency of the supplier will be is to resist. It is a concession without getting one in return. The more they see “Stone Wall” tactics used the more they will resist or fight back, withdraw. The reason for this is simple. No one wants to lose. The harder you make it for them to say no, the more they will resist saying yes.
On the other hand, when you provide reasons and explanations for your requests that are sound, rational, and easily understood by them, those requests will be viewed in a different light. These are not concessions sought for the sake of winning; these are concessions, which are requested based on real, understandable, reasons. When you can get them to understand your reasons, they will feel less like they have really given a major concession. In their mind you didn’t win, all you did was give them a reasonable explanation for your request.
Making it easy for them to say yes may require problem solving. To do that you need to explain your unique problem. Educate them on what you need and why and show them how it will be a win if we both can act together to solve your problem.
Here’s a quick example of a real situation. In purchasing a product for re-marketing under our own brand one of the concerns was the length of warranty. Our standard customer sales terms offer a twelve-month warranty from the date of installation. The supplier offered a standard warranty of twelve months from the date of their shipment. You don’t want to change your standard sales terms that your customer expects for a single product. The supplier was extremely reluctant to change their terms. In analyzing the impact of the difference you discover that there could be situations in which the material pipeline could be four months long because of shipments being held awaiting export approvals, being consolidated as part of a larger order etc. This would mean that under their terms, the warranty would be effectively 8 months and the remaining 4 months would be at your risk and cost, even though the product hadn’t been used in that period. This four-month period equated to a potential cost that would make them non-competitive.
We explained our situation and the reasons why we couldn’t accept their standard terms and ask for their help (with the implied understanding that if they didn’t help they would lose the business). What we finally agreed upon was their 12-month warranty from the date of shipment with a 4 month no charge maintenance agreement. They maintained their 12 Months from shipment warranty position for other customers and we received effectively what we wanted which was coverage for 16 Months from the date of shipment.
They came up with this creative solution to our problem because we took the time to explain the problem. We provided them with the reality and sound business reasons for agreeing. If we didn’t we would probably still be arguing.
To ensure the Supplier consider requests, you need to get them to think about:
1) What happens if we don’t come to agreement on this? (Will it kill the deal?).
2) What do you think I will do if we can’t agree to this? (Will I go elsewhere?).
3) What will you do if we can’t agree to this? (How much will the potential loss of this business effect you?).
For both 1 & 2 above the key is to make sure that they understand it, but that it is not presented as a threat, especially if in the end you really need or want them.
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