Purchasing and Negotiation Training

Valery Zelixon, Managing Director SupplierEvaluations.com

Editor’s note: Valery Zelixon is a frequent contributor to this blog. SupplierEvaluations.com specializes in qualifying, evaluating, and helping small and medium size companies to select the best low cost county suppliers.

The internet has drastically altered the paradigm of international trade. While it has become an enabler for many things that were not remotely possible before, it has also opened the flood gates for people who want to make money more than make a difference. While big businesses have established a fairly good system to cull the imposters and risky companies in their supplier selection processes, small to medium size companies remain the most vulnerable when qualifying new suppliers, especially in the international setting. 

Sample contact from suppliers who do not get it about western procurement

 Every day at SupplierEvaluations.com, we receive messages of this type from suppliers in every possible category (spelling and language sic):  

“Dear Sirs/Madam, 

Greetings, we are pleased to introduce our company ABC who established itself in 1974.We are manufacture cum exporters, having latest machinery and can produce Surgical Instruments, Dental Instruments, veterinary Instruments, medical gloves, knife, plier, including scissors, plier of all description and covering hollow ware as well commonly used in hospital and clinic. We also export resalable common surgical instruments and all types of common scissors. Good prices and excellent quality.”

English proficiency aside, the essence of the offering remains the same – buy from us, we offer low price and great quality. Interestingly enough, this is true for both small and large companies from areas like China, Bangladesh, India, Pakistan, Brazil. These suppliers believe that having a product is enough to get western buyers. In most cases these suppliers have a really tough time understanding what it takes to do business with the west.

Click to see Supplier Evaluation services

 How SupplierEvaluations.com serves the small to mid size business buyers

• Develops reliable supplier qualification and evaluation processes to research and disclose important facts about prospective suppliers.
• Provides supplier directory with built in search engine. Only suppliers that provide complete and responsive data survive our approval process. Buyers can then communicate with suppliers on our site to begin the business relationship
• Offers a variety of services that help buyers select the best supplier for their needs:
  • Writes simple supplier verification reports that verify supplier status.  We collect data from multiple sources and aggregate them in a concise format.
  • Screen for scam. This service has an added benefit of local resource calling the company in question in their own language and making sure this is not an imposter. Many present themselves as actual manufacturers while in reality they can use a stolen identity or be a front for business that cannot export goods outside the country.
  • Inspect supplier business operation. We send an inspector with camera to take as many pictures as possible to give buyers an idea of the operation they are going to work with. This becomes a very beneficial tool when you have certain quality expectations.
  • Audit resellers and trading companies. We send an inspector to check out the reseller. You’d be surprised to learn how often they are not who they say they are
  • Audit supplier quality processes and practices. We help you ensure that you get what you think you will get. This service helps aligning your quality standards with this supplier’s standard. More often than not, it is an on-going process that you should be ready for. 

One of the key benefits that buyers will get from our site is in having a one stop shop for their supplier management and qualification needs. We offer supplier evaluations as a part of supplier management service with simple wizards to manage supplier performance online.

Editor’s note: Stu Schlackman is a frequent contributor to this blog.

"Shorten your sales cycle & increase your win rate through competitive excellence"

What makes a value proposition compelling? Does it set you apart from your competitors? Is it unique to your market? As Jack Trout says, “Differentiate or Die.” A value proposition should be a clear and concise series of factual statements that show the tangible results of your products and services. It must be targeted to the customer. It’s not about the characteristics of your products and services, but how they meet the specific needs of your customers. In other words, the customer is the key to the entire process; therefore they drive the value proposition. So what makes a compelling value proposition?

Specific

Three key components for developing a value proposition must grab the customer’s attention. First, your value proposition needs to be specific. What you uniquely claim that set’s you apart from your competition? Everyone talks about increasing revenue, decreasing costs and improving customer retention, but what makes you different? What do you specifically deliver that customers see as a benefit to their businesses? Here is how Dell answers this question:

Dell Computers began with a unique value proposition that it would custom build a computer, exactly as and when a customer orders it, and deliver it at a very competitive price, because it’s “just in time” (JIT)system eliminated the cost of overhead and mistakes in calculating demand.

Dell makes its value proposition specific by talking about the uniqueness of their JIT system which has set it apart from their competition by delivering exactly what the customer wants, when, at a very competitive price. 

Targeted

The second component of your value proposition needs to be targeted. Who are you addressing? Are you trying to go and inch deep and a mile wide or a mile deep and an inch wide. Can your products and services be for anyone as Wal-Mart touts- Everyday Low Prices? Or are you addressing a very specific market niche like BMW– The Ultimate Driving Machine? It is all about the specific needs of the customer. Do they have a need for low prices (what they value) or prestige (high price and luxurious as a BMW)? Again, knowing your target audience is critical to your success by understanding it’s not about selling your products and services as much as it is about meeting your customer needs.

Having a value proposition that is specific, targeted and tied to your company’s strategy is critical in capturing your customers. 

Good Selling!

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

Salaam Alaykum

For several years, I have been engaged in Golden Cost Trading Partners, a venture to source, negotiate, and purchase western goods, principally American made, for export to Middle Eastern countries.  The shrinking value of the US dollar has made high quality US products more attractive to foreign buyers.   

However, almost all requests from Middle Eastern “businessmen” prove that there are many obstacles to overcome in doing business with these folks.  Let me cite some of the business facts of life and embedded cultural problems that must be addressed by those considering selling to the Middle Eastern countries.  

The countries and their heritages 

The Middle East is a patchwork of many different countries, mostly of Arab descent, language, and culture.  Almost all share a heritage of centuries of totalitarian control.  Two notable differences are the countries of Israel and Iran. 

Surprisingly to some, Israel a westernized democracy the geographic size of New Jersey but with the GDP of Alabama, has a 20% Arab population; Jews and Arabs are of common Semitic origins.  Iran is primarily of Caucasian extraction although predominantly of Islamic culture but which has an ancient history of trade and commerce. 

GCC-6 countries 

There are relatively wealthy countries like Saudi Arabia which is renowned for its petroleum deposits.  Yet other GCC -6 or Gulf Cooperative Countries on the Arabian Peninsula like Qatar and Bahrain have a much higher per capita GDP than many western countries including the US.  The other GCC-6 countries are Kuwait, United Arab Emirates, and Oman.

These countries are far from democracies but they have embraced limited capitalism as a way to free their citizens from third world status and provide other revenue streams besides petroleum exports to fund their emerging economies. Unfortunately, a law intended to encourage their citizens to become entrepreneurs has created the opposite effect.  

The 51% Rule

The GCC-6 wants to attract businesses of all kinds from big box retailers to franchise food and beverage to broad scale manufacturing, to locate to their countries.  The problem for the western investor is two fold:

1. The venture must be sponsored by a GCC-6 citizen who must either own 51% of the operation or 51% of the profits
2. The re-locating business faces the monumental problems of lack of commercial infrastructure, reliable demand, and doubt about creditworthiness of customers.    

Most of the GCC-6 “entrepreneurs” fail to understand that because o f the 51% factor, the locating company must double its sales or margins just to match what it already has in the west – and this says little of the 20% to 30% factor for doubt, risk, local culture issues, etc.  Given these impediments, the prospect of doing business in the GCC-6 tends to lose it luster.  

President and CEO of Golden Cost Trading Partners

Iraq

Other countries in the lesser developed Arab world have little concept of business.  An ideal example is Iraq.  It has been free but moments compared to its centuries of dictatorial domination.  As such, there is very little understanding of routine commercial practice.  Citizens are so eager to sell that everyone wants to touch the deal.  Here is how the process usually works.

• A specification for Product A typically consists of ten or so spoken words
• A “purported” buyer (who is never identified, credit checked, and may not even exist in reality) asks four or five confederates for a price (nothing else) to buy Product A
• These four or five confederates seek prices from another four or five confederates, and many others across the internet, and so forth
• Each middleman hopes to get rich on every deal so Product A, with a $50,000 value may be priced at $250,000 by the time it is proposed to the end buyer
•  Moreover, there may be many prices for different products because the specification is insufficient 

This fools’ game collapses inward of its own weight because no Iraqi buyer able to spend $50,000 would ever pay $250,000.  Further, the logistics of payment are not understood so never discussed.  How the first middleman will get the money to pay the seller, and the second middleman to pay the first, and so on, is ignored making this a game of charades.  Western business pros soon tire of this gerbil in a cage game of chase.   

Foreign Corrupt Trade Practices Act 

Another challenge for foreigners, particularly Americans, is the engrained cultural practice of bribery.  Bribery is illegal under the federal Foreign Corrupt Trade Practices Act but not illegal, and expected as part of doing business in many Iraqi transactions.   

For Americans trying to help Iraqis do business, be aware that there are at least 100 deals talked about for every one completed.  A good piece of advice to observe is that if your Iraqi contact talks a lot, it is because he has never done anything but talk.  This is no joke.  In the same way that the dog chasing the car would not know what to do if it caught it, they prefer just to talk – they do not know how to do. 

So what can you do? 

Most of the western world ignores under developed country markets because of these many reasons.  You will save yourself much time, money, and frustration if you get a trusted partner in that part of the world.  My partner is a Middle Eastern born US citizen who has temporarily relocated back to the Middle East to address these problems.   

Doing so has improved our business but has not been the great success that we envisioned.  The only way we have found to prove a customer’s sincerity is to have them pay a retainer.  This practice separates the 1% real customers from the 99% pretenders and saves enormous amounts of wasted time and energy.  

We use this retainer to source, negotiate, buy and export on their behalf.  Further, we credit the amount of the retainer toward the sale.  Those involved in foreign trade understand that they must pay before the goods leave.  In our case of services, we demand the same.  In all cases, we are able to substantially reduce their costs. 

For those interested in selling for export or potential customers of western product for import to the Arab world, contact me at RobertMenard@RobertMenard.com   

Alaykum Salaam

Steve Hague, author, speaker, and Certified Purchasing Manager

Editor’s note: Steve Hague is a frequent contributor to this blog.

What do you feel when you hear phrases like “car salesperson”, “car dealership”, and “car buying”?  If you’re like most people, these terms send shivers down your spine and remind you of unpleasant experiences.  In fact, most people would rather have extensive dental work than visit a car dealership. While buying a car is usually the second largest purchase that most people make in their lifetime, it doesn’t have to be an unpleasant experience.

I’m not talking about the pleasant experience of the invigorating smell of a new car’s interior or the gleam in your eye as the sun glistens off of the untarnished exterior.  I’m talking about having a painless experience during the process of visiting the dealership whether you’re buying new or used. 

A Sobering Profession

A 2007 USA Today/Gallup poll finds that car salesmen are the least trusted professional.  That’s no surprise you say, but did you know that while 2/3’s of consumers said that they were at least “satisfied” with their experience at the car dealership, 10 years ago that number was 80 %.  How could that percentage have gotten worse when there is much more focus on customer service in most businesses these days?  There are a few related reasons for this such as: higher turnover of salespeople, less commission based sales, more educated consumers leading to lower profit. 

Take Control and Be Prepared

So how can any man or woman prevent unfair treatment, unprofessional sales tactics, and outrageous offers by auto salespeople?  The easiest way is by obeying the scout motto: Be Prepared.  By preparing yourself  before entering the lion’s den, otherwise known as the auto dealership, the salesperson will have no choice but to treat you fairly, act professionally, and respect your wants, needs, and desires. 

1. —–Know your budget – Only you (NOT the salesperson) should know how much you can spend.  Hey, I’d like to be driving a Lamborghini, but I know at this point in my life all that I can afford and the vehicle that suits my needs is a Camry. 

2. ——Secure Financing – Unless there are special manufacturer to consumer financing incentives, go to your bank or credit union, make some calls and look at some websites and get the best finance rate you can.  It will almost certainly be better than any that the dealership will give you.

 3. —–Research, Research, Research!  – You’ve determined your budget.  Now look at the various websites such as Edmunds and Kelley Blue Book that will give you an idea of the dealers approximate cost for the vehicle(s) you want to test drive.  Assume a 2 to 3 % profit depending on make and model, and you’ve got an idea on what it will cost. 

4. —–Test Drive and Be Quiet – After researching within your budget, driving habits, safety needs, etc., you’ll have a good idea as to what vehicle or vehicle class will suit your needs.  Put the pedal to the metal and put the car through its paces.  Tell the salesperson you’re there to test drive only and will not be discussing anything other than questions on the car or cars you’ll be driving.  They won’t like this because their job is to get as much information from you as possible, but they’ll respect you more for being up front on your intentions and won’t pester you with questions.

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5.—– Give Them an Offer They Can’t Refuse– Instead of wasting countless hours visiting multiple dealerships trying to haggle with a professional who’s prepared to rebut and refute anything you say, use the information you’ve collected in your research and tell them what you’re willing to pay.  Talk to friends and family to get an idea of what they may have paid for similar vehicles.  Try offering exactly what you’ve calculated the dealer’s cost to have been without adding profit.  That way if they deny your offer, you can always add small dollar increments to the offer instead of having to beat them down. 

6. —–Pat Yourself on the Back – By following these steps, you’ll be on your way to getting your way when it comes to buying a car!

"Shorten your sales cycle & increase your win rate through competitive excellence"

Editor’s note: Stu Schlackman is a frequent contributor to this blog.

How does the prospect view your solution? Will they buy or decide to wait? Is there a sense of urgency on their part to make a decision? My favorite saying is, “If you can’t price your value, all you can price is your cost.” If that’s the case, the customer will more likely view your solution more as an expense than as an asset which means they can live without it. Perceived value must always trump the cost of your product or service. Customers buy when it’s obvious to them that the benefits of the gain or alleviation of a pain far outweighs the financial investment.

Let me give you an example. Let’s say Joe goes to the doctor for his annual physical and he’s told he needs to lose twenty pounds. The doctor tells him about a new diet that will help him lose the twenty pounds in six weeks and the cost for the diet is two hundred dollars. Joe weighs the cost versus the benefit of the weight reduction and comes up with the decision to hold off. Why? Well, Joe knows he needs to lose twenty pounds since his doctor has mentioned it the last five years. Is it too much money? Can Joe do it on his own (well he hasn’t in five years)? Let’s make one change to this scenario. Joe’s doctor says if he doesn’t lose the weight this time he’ll have to start taking medication to get his cholesterol down. Joe asks how much the prescription will cost and the doctor says roughly $250 per month until his deductible is met.  Now we have Joe’s attention to take a harder look at the diet for $200. Why? The perceived value of losing the twenty pounds just moved up becoming more important than the $200 for the cost of the diet.

Customers buy when they perceive that the value  outweighs the cost of the investment. What we need to realize is that there are three components of value; economic, business and personal. All three have an impact on the customer’s view of the investment.

Economic value is the financial impact of the investment. What will be your return on  investment? What will it do for the company financially? Will it cut operational costs, increase inventory turns, increase revenues or cash flow? Economic value is of most importance to the economic buyer – someone who makes decisions based solely on the financial elements of the solution.

Click for Bob's 2 CD set

Business value is the primary consideration to the user of the solution. What can the investment do for the organization and how can it increase productivity, efficiencies and effectiveness for those that use the solution.  Even those sold on this value can meet obstacles when they try to convey the value to the C-suite.  The problem with business value is many times when we sell to the user group that sees great value; they can’t convey that value to the economic decision maker such as the CFO. In other words the business value needs to be conveyed in economic terms to other decisions makers involved.

Personal value is the third type of value that needs to be considered. This is more of an intangible value. What will the decision do for me personally? Will I get a promotion, a bonus, peace of mind, or improve my influence with other organizations? Personal value is equally as important as the business and economic and sometimes can be the determining factor in the decision. Why? We need to understand that in the brain emotions always trump logic. We make decisions based on emotion and then back them up logically. Personal value can only be uncovered when there is trust and a strong relationship with the decision maker. We also need to realize that personal value will be different for each person involved in the decision making process since personality styles influence what is valued.

As sales professionals we need to understand each aspect of value and how it impacts each of the decision makers. There is not a “one size fits all” for value. Asking the right questions will help you understand what’s most important to the customer.

Here are some example questions that address each type of value:

• What do you consider being the most important benefit of this solution?
• What is the most important financial consideration for this investment?
• What are the benefits of this solution for you personally?

Good Selling!

Harry Hough, PhD, founder of the American Purchasing Society

Editor’s note: Dr. Hough is a regular contributor to this blog.  This story first appeared in the March 2003 edition of Professional Purchasing. 

Supplier selection is not easy. To their detriment some companies never look for new suppliers. Other organizations change suppliers far too often. In the first case, the reasons may be fear of changing for the worst or to avoid the work of finding an acceptable replacement. In the latter case it is usually because of the former supplier’s mistake or because a competitor has low-balled the price in order to get in the door.

There is a cost involved when suppliers are changed. Ideally the cost is more than offset by a reduction in price or other types of savings. Sometimes it is necessary to change sources even though a new supplier’s cost is may be higher because the usual supplier went out of business or for other reasons. In such a case, the cost of changing to a new supplier should be compared with the cost of each supplier who is bidding for the business.

The cost of obtaining material with an existing supplier, the cost that will be incurred with a new supplier, and the cost involved in making the change should be carefully evaluated. Because of the risk of making a change from a longtime supplier, some purchasing professionals will not consider re-sourcing unless there is an estimated savings of at least 10%.

online training in purchasing, negotiation, and sales

Care must be taken by the buyer to be certain that a long time faithful supplier’s mistakes are not blown out of proportion. A record of the frequency and types of mistakes could reveal a cause that may not be the responsibility of the supplier or there may be a shared responsibility between the supplier and the buying organization. Correcting the problem is often easier than changing sources. Buyers should not be too quick to jump simply because some employee within the buyer’s organization wants to change. Discuss the reasons with the employee. Explain the history with the existing source. Ask other employees for their opinion.

An evaluation of the cost involves looking at the prices paid to the old supplier and comparing them with the prices offered by any new sources. Delivery lead times must be compared. Will the new sources be able to deliver the quantities need, when needed, and with the quality that is required? Transportation time for the goods must be compared and added to each supplier’s lead time.

Part of the cost of changing sources is the hourly wages of all involved in finding and evaluating each potential supplier. The cost of transportation of the goods must be compared and added to the total.

The amount of checking and analyzing depends on the importance of the goods involved and the expected expenditure for those goods. Major items necessary for the business require multiple bids, analysis of those bids, and negotiation to obtain the lowest cost. Counter proposals by the buyer are helpful in reducing the cost, but they extend the time required to reach agreement and add to the cost of making the change.

Before making any change, it is wise to check inventory and determine if the new supplier can provide material when needed. One or more additional orders may be necessary with the old supplier before the new supplier is able to meet schedules. Make sure the new supplier has the capacity to produce the quantity required and the facilities to produce the quality desired.

If there is enough similarity of product it is a good idea to get delivery of material from the new supplier while still using the old supplier. You can then use a percentage split of business based on performance with the best performing supplier getting the most business and the other the balance. Each year this percentage can be changed. Check the quality level of the first shipments carefully. Check invoices. Evaluate how the new supplier has met the delivery schedule and compare it with what was stated.

It is very important to check on any tooling that the old supplier has that is needed to produce the material. If it is owned by the buying company it can be moved to a new supplier if that supplier is going to be a single source. Otherwise duplicate tooling must be obtained. However, the old tooling may not even fit the new supplier’s equipment.

Tooling cost can be a major factor that determines if it is worthwhile to change sources. Tooling is needed to produce metal stampings, castings, and other items. Patterns, dies for metal parts, cutting dies for corrugated boxes, plates for printing, even software are needed to produce various items.

Don’t burn any bridges when you change to a new supplier. You may not want to return to th

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

Two decades of delivering training seminars to thousands of purchasing and supply chain professionals across the US and abroad has been a continuously rewarding, personally enriching, and invigorating learning experience.  Allow me to share some of that accumulated knowledge so that all practicing supply chain pros seeking to upgrade their expertise will know exactly what to demand. 

For a companion story, click here 

General 

• DO NOT insult the customer by talking about you.  If you have not prepared the audience in advance by sending ample introductory preparation material, you do not belong in the speaking/training business.   
• Respect the audience. The practicing adult professional arrives at the training session with a wealth of experience.  He/she has been bored before by uninspiring speakers and bland material; they may be jaded but with good reason.   
• The rule of, “Don’t tell ‘em, SHOW ‘em” dictates and control the learning environment. 
• Within 45 seconds of your first word, invite them to participate.  I use the zany tactic of asking them to raise hands if they grew up wanting to be a purchasing professional. 
• To paraphrase the advice to Chicago voters, “Get attendees involved early and often.”  They have valuable input, want to express themselves, and add texture and depth to the learning experience.   
• The input of the first few and brave attendees encourages the more timid and quiet to join the experience.  If the speaker/trainer is competent and skilled, he/she becomes the facilitator, never the lecturer. 
• The adult learner wants to work with the material, hear minimal lecture, and voice an opinion often, especially during report out opportunities. 
• NEVER READ the slides (or anything else) to them.  If they cannot read on their own, your eloquence will put them to sleep.  If you have a particularly relevant commentary, pit it in a hand out that they can read at their leisure. 

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Methodology 

• The ideal room set up is round tables (5 to 6 foot diameter) seated crescent with all chairs facing front.  This setting puts small teams in intimate contact.   
• Avoid classroom seating; it invokes unpleasant scholastic memories in the minds of many participants who did not like school.  If unavoidable, assign teams of “front and back” tables for interaction.  It does not work as well as round tables but a pro speaker/trainer must be able to kick butt from any position.   
• Use a variety of media to appeal to the different learning styles of the participants.  This means slides, carefully crafted verbal presentations, skilful questioning, occasional music and video snippets, written and verbal exercises, oral recitation by participants, round table talks, and other interactive techniques. 
• Capitalize on the small team dynamic from the beginning with an Ice Breaker exercise. The Ice Breaker exercise should come within the first seven minutes of the training session sets the tone for interaction.  Have them appoint a “Reporter’ to explain the team’s exercises and a “Scribe” to write on the flip charts set out at one per team/table.  
• Have them name the teams for fun but also for post seminar report; it will help them to recall, relive, and reinforce the experience. 
• Make liberal use of frequent spot exercises and occasional formal exercises.  Have them record their input on the flip charts and get as many teams as time allow to “report out” on their work.  Exercises may be the single most important component to effective training.   
• For corporate in-house training seminars, customization to the work place is essential.  Canned one-size-fits-all programs are the sign of an amateur. Allow time for participants to exchange ideas and chatter during exercises 
• To reinforce the learning experience, issue a Final Report that recaps the participants’ input.  I find it helpful to retain the flip chart input of the teams for this purpose.    
• Presentation style is important as it encourages or forecloses interaction.  If the seminar leader speaks too much, he/she is telling everyone else to be quiet.  Liven it up, make the material come to life.  If you do not know how to do it, invite proven talent to do it for you. 
• Participation, participation, participation  The trainer must know how to encourage, promote, and control it or the day will be very long indeed. 

Knowledge and Skills

Most of the purchasing and supply chain crowd approached education and training from a skeptical position.  Recognize that these are the facts of a purchasing pro’s life.  Because they are actively engaged in a career, effective training for purchasing pros must be a blend of knowledge and skill.   

If the trainer you are considering does not have all these horses in the barn, go to another barn.

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

Editor’s note: this story was first published in the Canadian Precast/Prestressed Concrete Institute  (CPCI) magazine in 2005.

At the Pathways Across Canada in held in Toronto, the CPCI asked me to lead the roll out a practical program in advancing the the Total Precast Building concept.  Negotiation expertise, from the scientific skills of planning, research, concessions to the artistic skills of communication and personality management has proven to be the short cut to greater profitability in other industries but precast is a unique situation in Canada.   Building upon a foundation of Total Cost of Ownership (TCO) to negotiate effectively with direct and indirect customers, the challenge remains “How do we apply negotiation to make the precast industry the system of choice for construction in Canada?” 

A question of negotiation strategy

How can the precast industry continuously supply the lowest TCO solutions to customers so that precast gains in market share and the increased sales add to earnings?  One pathway is through a system approach to precast where all architectural and structural elements of a building’s interior and exterior walls, floors, and auxiliary features (retaining walls, stairs, etc) are designed, fabricated and erected in precast concrete.  Moving to an all precast system for structural and architectural building elements comprises strategic advantages that benefit our customers and the precast industry. 

As experienced sales pros and negotiators, we seize upon the cost advantages.  Precast enjoys two extremely powerful advantages that have no parallel: the weather and the economy of building trades.

Weather

Only with precast is weather a negligible concern in Canada.  Atmospheric and climatic conditions impose formidable challenges to most other competing building systems.  In much of Canada, as the expression goes, there are four seasons: Almost Winter, Winter, Still Winter, and Dominion Day.  These atmospheric facts of life are bad news for wet trade and steel frame competitors, but have little to no effect on the precast industry which can cast and erect the building in all weather conditions, remaining almost completely unaffected by extremes that stop or drastically drive up the costs other systems.

Wall Panels and trades

The other great advantage is the economy of trades, a veritable fantasy to the owner, the ultimate consumer.  Precast buildings rise quickly with a crane, a few laborers and ironworkers, and maybe a cement mason.  A battalion of other tradesmen for competing methods needlessly complicates and bogs down the process. 

Building trades

If the end customer gets a higher Quality product at a quicker completion time (Delivery) and skips all the coordination problems (Service) and attendant delays, the choice of precast is the quintessential “no brainer”.  A strategic negotiation plan to enhance market share and supremacy stresses these major cost advantages to the customer.  Put another way, the more precast opportunities in the market, the more times the industry can get better prices, pass up marginal jobs, and still provide the lowest TCO to the customer.

The industry is positioned to promote and define needs and uses for precast.  We may not have thought of negotiation in these terms, but as we move toward the next level in business, we must take our negotiation mastery and apply them in a more strategic fashion.

What is the major obstacle standing in the way?  The precast industry!  In 2004 at the Precast/Prestressed Concrete Institute (US PCI)  and again at Pathways, I heard comments such as, “We don’t do walls,” or “We furnish, not install.”  These statements are the negotiation equivalent of suicide.  They negotiate away your greatest advantage and sentence you back in the pack of price focused sellers who dig the hole of lowest Price.

At the PCI Sales School in Las Vega 2004, Paul Todd, an architect, Degan Hambacher, an engineer and Buck Reinking, precast expert all agreed that precast systems are the norm in Colorado and that Price is competitive with other systems.  This is the ideal Win-Win negotiation result, lowest cost and lowest price.  We spoke at the 2005 Pathways of price reductions in the form of cost reductions with preferred customers.  The first step on the Pathway toward achieving the Win-Win of precast systems in the Canadian market is the recognition that we can negotiate this victory.

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How to negotiate precast’s cost advantages of Quality, Service and Delivery?

• Quality is superior as we manufacture in lab controlled conditions yielding precision products to high chemical and physical tolerances.  It is not subject to the vagaries of a changeable work force and inclement weather
• Delivery speed and cycle time from order to completion provide enormous costs for the customer
• Service from the perspective of the owner or facility manager represents a dream come true.  The fewer trades and all weather benefit of the system are unmatched by any other system.
• Price is often thought of as higher for precast, but in parts of Canada and the US where precast has become the established leader, it enjoys a Price advantage and the volume of precast allows manufacturers to make and store product during off times.

Indeed, precast used almost anywhere in Canada affords cost advantages to the owner that should allow us to out negotiate any other system.

"Shorten your sales cycle & increase your win rate through competitive excellence"

Editor’ s note:Stu Schlackman is a regulr contributor to this blog.

Of course the answer is “it depends.” The more important question to the customer is “when it comes to investing in the solution, what’s most important to you?” That will more closely address which is more important, solving the pain or creating a gain.

Customers make buying decisions based on needs. As Miller Heiman mentions in their model, customers take action when they are in “trouble” or “growth” mode, not “even keel” or “overconfident.” So the need is generated from a problem or challenge they are facing or the potential growth or gain they are looking to achieve.

Customers also buy for both business and personal reasons. The business reason is tangible and objective, the “Result.” It’s to increase productivity, decrease operation expenses, improve market share or their competitive position. The personal reason is the “Win.” This is the intangible and subjective result which says what it will do for the decision maker. Will it give them peace of mind, a promotion or a bonus? Both business and personal reasons drive the decision, but understanding which reason might move the customer to decide is key.

In Rick Page’s book “Hope Is Not A Strategy” it says this about pain. “Pain doesn’t come from the business problem; pain comes from the political embarrassment of the business problem.” I believe this is so true. Customers don’t make decisions until the pain hurts to a point that it must be alleviated, which includes their own embarrassment for not taking action. Pain needs to be heightened from both the business and personal perspective. We need to explore with the customer which need is hurting the most. Pain is a present existing condition, which is easier to address than exploring potential gains, which is a promise in the future. Rick also says that to create a sense of urgency to close business, we must creatively take the invisible costs and make them visible and politically painful. In other words we must put a price on the customer’s procrastination.  Giving out more price cuts or discounts doesn’t create a sense of urgency to buy unless it’s for a stereo system on sale just for the day! With complex sales situations emotional issues usually override cost justifications.

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 I agree with Rick Page that emotional and political problems drive buying activity more than logical ones. That’s why we scratch our heads when our pipeline forecasts look like a cloudy weather report. Customers make decisions emotionally and back them up with logic to justify their decisions. Our goal then is to ask the key questions that get to the heart of the decision maker and build trust and confidence leading to a long term consultative relationship. We need to be a partner to the customer and not a vendor. Vendors sell hot dogs. When we become a trusted partner the promise of the “gain” in our solution becomes a reality to the customer based on their confidence and our track record to deliver.

We should always prepare questions prior to our meeting with a customer which can gain us credibility and earn us the right to continue down the path to winning the sale. Most sales people don’t ask the tough questions since it will ruin a perfectly good forecast. Some example questions that I like to use to engage the customer are:

• How have these issues impacted your business?
• What are the critical success factors you expect from the solution?
• What is most important to you for this project?
• What other impacts might this problem have on your business?
• What do you see as the benefits in solving the problem?
• For you personally what’s most important?

These are some examples of some pain and gain questions that can help us to dig deeper into the real issues the customer is facing from both a business and personal perspective. Asking our customers better questions gives us better answers and a leg up on our competition.

Good selling!