Five Tips for Negotiating with Procurement
We have seen a significant shift in Procurement’s role in organizations. Due to the increased challenges businesses are facing in achieving their goals and objectives, Procurement now has voice at the highest levels in the corporation. Once a back office or basement operation in many organizations, Procurement’s negotiating involvement is now seen in all levels of an organization, across a wider range of industries.
This shift has created a challenge for sales professionals. They now find themselves across the table from highly trained and effective negotiators; (we know because we have trained and worked with several of them). In response, more and more organizations are recognizing the need to better train their sales professionals on basic and advanced negotiation skills, arming them with the skills they need to negotiate on a more level playing field.
As we like to say, “The Sale is made in the Selling phase of the Sales Process…the Profit is made in the Negotiation.” How sales professionals manage every single opportunity determines the overall profit or lack thereof for their organization. Does this challenge sound familiar? It is to us. To help your sales team, here are Five Key Tips that we have found to be critical in Negotiating with Procurement:
Knowledge is Power: How do you think Procurement is incented and compensated? Too many sales professionals believe that Procurement is incented on its ability to negotiate lower prices on a deal. Think about what a game that would be…they would then want companies to come to them with very high proposals so they could look like heroes for beating down the price. The truth is, Procurement is responsible for quality and fit of solutions within an overall budget. Procurement is under more pressure than ever to partner with suppliers who can ensure reliable product delivery. Many rank suppliers and price is not the top factor. It is more critical than ever that sales professionals fully understand their target organization’s business drivers. This includes understanding the overarching business goals and objectives of the organization, the division, and even the individual stakeholders and users of your product or solution.
Relationships are Everything: Building relationships at the business leader levels is critical in order to gain access to ultimate decision makers and influencers. These senior level relationships lead to dialogues where sales professionals can discover the powerful knowledge cited above. We are also seeing a trend where sales professionals are building strong relationships with Procurement. We have even seen an increase in situations where Procurement becomes the sales professional’s customer Coach/Ally/Advocate. It makes sense to partner with suppliers that will ultimately make them look good.
Have a Negotiating Strategy: As we are known to say, “The best sales skills will not compensate for a weak strategy.” It is critical to have a clear and measurable objective and a plan to achieve that targeted objective. Knowing where you can compromise and trade, as well as what you need in return in order to achieve a win/win outcome is critical. A strong negotiator will visualize the outcome, carefully considering the quality and fit of their solution to determine if that outcome will be closer to their Opening Terms and Conditions or to their Bottom Line.
Don’t Tip Your Hand: Sales professionals can unknowingly send mixed messages or reveal their negotiating tactics. For example, in making concessions in equal increments you are demonstrating a pattern. Procurement is watching and listening to everything you say and do in a negotiation to see if you will reveal your strategy.
Don’t Succumb to Adversarial Tactics: Procurement negotiators have a reputation for using an Adversarial approach to negotiating. It is critical to be aware of the different types of Adversarial tactics a negotiator might use so that you can spot them in action and not fall prey to them. For example, in a recent negotiation a Procurement professional said to the Sales Professional, ”I don’t want to hear about your Value Proposition…I know that you are trained to develop and articulate your Value Proposition – but I don’t want to hear it…I only want to talk about price”. The Sales Professional smiled, looked at him and said “That’s pretty good. I’ll stop talking about our Value Proposition when you stop talking about price.” The Procurement professional smiled and it never came up again. He knew he was negotiating with the real deal.
While negotiating with Procurement can seem challenging – at times even intimidating – focusing on these key areas will give you the confidence to achieve great outcomes for all parties!
For information on preparing your team to negotiate with Procurement or any counterparty, contact Sphere. We would love to help you leverage your value and improve your profit margins.
Sphere is a performance improvement firm that has been improving leadership, sales and communications performance for more than 20 years. We work with Fortune 500 and FTSE 1000 organizations globally across multiple industries helping tens of thousands of professionals at every level in those organizations enhance their performance.
We do that by helping you determine what is working well with your organization, your teams and your people right now, while at the same time, with laser focus, helping you identify key areas for improvement. We then work with your leadership team and individual contributors and/or teams to help them leverage their strengths and refine their areas for improvement through incremental change. It is at once an individual and a holistic approach to defining and inspiring you to achieve your next level of excellence. You can reach us at www.sphereintl.com.