There are generally two types of negotiators when it comes to purchasing negotiation: the fight-fair camp, which is inclined towards compromises to reach an agreement, or the fight-dirty camp, where one party uses their power to win at the expense of the other.
Negotiators that tend to be more “old-school” use the latter fight-dirty styles, consistently pressuring the supplier to drop their price. To them, price is the only negotiable, and it’s either their way or the highway. These persistent price negotiators will sabotage the long-term health of your business.
The problem with the old school fight-dirty approach is that after you squash the supplier on price, your supplier will resent you for two reasons:
- Nobody likes to feel like a loser. If the supplier feels like they’ve lost the negotiation, they will be pushed to save face. Just imagine that conversation with the boss, “Yes, I had to go to the bottom of my price, but don’t worry, boss, I will charge them more for installation change orders – and everything else!”
- Nobody likes to admit that they made a costly mistake. Your supplier put a lot of effort into making a sale to you, and that hard work did not pay off as expected. Sure, the supplier got you to sign a deal, but the cost ended up being too high. Because of the fanatical price negotiators, the deal wasn’t worth the effort of the supplier. The supplier is not only annoyed with you, but also with themselves for not walking away when the fanatical price negotiator started badgering them on price. In order to avoid looking in the mirror and taking the blame themselves, they get madder at you. “I can’t believe the nerve of that guy! I prepared everything and they still asked for every penny possible!”
When a supplier gives up too much in a negotiation, sooner or later they will consciously or subconsciously start to exact revenge. A supplier’s revenge has one consistent theme: making things much more expensive for you.
How might your supplier sabotage you?
Sure, you might have won in a short-term victory, but if the supplier doesn’t make enough on the deal with you, they’ll likely start looking for ways to add costs to your projects.
- It’s time to implement? “Something” went wrong.
- You need help? Support wasn’t included in the deal.
- You find that specifications need a slight adjustment? Not included.
- You need tech support? Not included.
- You need training? Not included.
- Response time is slow and getting slower.
- When you do get a callback, it’s from the junior guy on the team who hasn’t even been through new hire training yet.
Your supplier might not be consciously thinking, “I really hate this person and I’m going to make things miserable for them,” but their revenge comes out in many ways over the course of a low-profit, one-sided, price-focused relationship.
Constant nickel-and-diming takes its toll on everyone. It’s exhausting. It’s like the negotiation never ends.
In the end, persistent price pressure will damage your relationships with your suppliers.
The unfortunate thing about this scenario is that it happens all the time! Think of how many otherwise pleasant business relationships are cheapened by the zero-sum logic fanatical price negotiators use.
Sometimes, it’s not even easy to track the effects of nickel and diming because the additional fees show up on someone else’s budget. Extra costs for training can be pushed to the Learning and Development budget. Extra costs for tech support can be pushed to the IT budget.
Humans are not rational. We get angry, we feel defeated, we make business decisions based on personal reasons. It’s hard to avoid. When it comes down to the long-term health of your business, don’t risk failing a project because your supplier is forced to operate from their base level emotions.
Tips to neutralize price negotiators
Here are two tips to change this cycle of sabotage:
- Enlarge the negotiation beyond simply just price. You might be in the habit of laser focusing on price because your bonus is based on the discounts you receive from your suppliers. This puts you in a tough position because every fiber of your being is focused on one goal (price) even when you might suspect it will be more expensive in the long term. Put effort into making the deal more of a win for everyone. Try this: just ask one question, “let’s take the price off the table…what else would make this a good deal for you and your company?”
- Figure out what else is important to the other party. Sometimes you’ll find that you can get your price if you find other things that will satisfy the other party. Work to give them things that are important to them and low cost to you. Doing so will help build a collaborative effort to find a mutually successful outcome. Most times you might also get the lower price, but HOW you get it will determine whether the ongoing relationship is positive or negative. You are no longer an enemy, and it didn’t cost you anything more.
Final Thoughts – The Bottom Line
At the end of the day (or financial quarter), healthy business relationships are more profitable than those based on price badgering. Your suppliers want to have a healthy relationship where you both win and benefit. Take a more holistic look at your actions and the actions of your negotiators. If you’re using your power to squash your suppliers into submission, you will likely end up paying, one way or another.
To learn more…
Download our Supplier Negotiations whitepaper to learn RED BEAR’s counterintuitive method to make more profitable purchases and build stronger relationships.