Deciphering negotiating strategies

…purchasers have trouble overcoming a negotiating strategy if they can’t identify that strategy.

October 28, 2011
Sandy MacIsaac

Purchasingb2b: September 2011

Do you always know what your supplier’s negotiating strategy is? That’s a question posed by a recent report from Next Level Purchasing. The report says purchasers have trouble overcoming a negotiating strategy if they can’t identify that strategy.

To illustrate the point, the report gives the example of an IT supplier who—rather than engaging a procurement professional—negotiates with an IT professional who has little negotiating experience. The supplier’s strategy is to:
• Make the IT professional feel as though she got a “good deal” so that she resists any procurement involvement that would diminish her negotiating glory; and
• Set up a defense against negotiation like “there’s no room to further reduce my price because your company already negotiated it down.”

Defeating this strategy would involve collaborating with the IT department, the article says, in order to reach an understanding of the suppliers’ strategies and establish clear roles—in advance—for who conducts technical evaluations and who negotiates.

Another example the article gives involves an incumbent supplier proposing an inflated price, based on the assumption it would be too hard to switch suppliers. That supplier’s negotiating strategy might be to stand firm on price and say “if other suppliers bid lower than us, they don’t understand your requirements like we do.”

Defeating this negotiating strategy means procurement professionals must ensure they qualify other suppliers and are ready to switch, the report states. Purchasers must know more about the incumbent’s competition than the incumbent, and let suppliers know they’re considering other options. b2b

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