Purchasing and Negotiation Training

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

In Part I we examined big picture negotiation concepts.  In Part II, we’ll delve into questionable customer behavior and stress the value of negotiation strategy over tactics.

Hot Potato tactic

Instead of stressing lowest TCO in the work-a-day world, we fall prey to our own lack of negotiation skill.  Here is how the customer out-negotiates us with the Hot Potato tactic.  He invites you to his office to “negotiate”.  He makes you comfortable, shares a little small talk, then looks into your eyes while intoning insincerely, “Your Quality, Service, and Delivery are all top notch or you would not have a seat at the table – so it call comes down to Price.  What can you do?” 

In one smooth maneuver, the customer has buttered you up and crammed the Hot Potato of Price down your throat.  If you swallow it whole, you may convince your self that the customer appreciates your higher value and “in this Price competitive market”, you must lower your price. 

He won everything, getting the lowest cost and a lower price.  Negotiation is never just a matter of Price.  Furthermore, for the same reason that we do not buy heart surgery from the lowest bidder (who even compares prices), the other cost advantages of QSDP are more important.  Any professional buyer knows for an absolute certainly that she can always get a lower price.  He also knows that a low price often come at a high costs. 

Strategy over Tactics

The uninitiated think of negotiation as the deft application of tactics and parrying of counter tactics.  Certainly, that is part of it.  But the focus on TCO yields far better results for these reasons:

1. The customer is best served by the lowest TCO
2. TCO puts all four cost balls in play at the same time, giving us quadruple the negotiating power.
3. Everyone knows that higher quality comes at a higher cost – just ask that cardiac surgeon

Some customers will not care about lower costs and only want low prices.  You must decide if you want this type of business for what ever strategic reasons you have.  There will be customers that you do not want to serve.  There is nothing wrong with that and indeed everything right with it.  When we delude ourselves into thinking that we need the sale, or the cash flow, or other ways we convince ourselves to take a sale at a loss, no negotiation skill will rescue us from our selves.