Fanatical price negotiator will sabotage the long-term health of your business.
People generally fall into one of two camps when it comes to purchasing negotiating: the fight-fair camp, where everyone compromises to get an agreement, or the fight-dirty camp, where one party uses their power to squash the other.
The old-school purchasing approach is the latter, where the fanatical price negotiator pressures the supplier to drop their price and price is the only negotiable.
The problem with this approach is that after you squash them, your supplier will resent you for two reasons:
- Nobody likes to feel like a loser. If they feel like they’ve lost the negotiation, really lost it, they will have to save face. Imagine that conversation with the boss, which may sound like this: 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 costly mistakes. Your supplier put a lot of effort into making a sale to you, and that work did not pay off. Sure, they got you to sign a deal, but the cost was too high. It wasn’t worth the effort. They are annoyed with you but also with themselves for not walking away when you started squashing them. In order to avoid looking in the mirror and taking the blame themselves, they get madder at you.
When a supplier gives up too much in a negotiation, they will (consciously or subconsciously) start to extract revenge. True, their revenge won’t come close to The 6 Most Sadistic Superhero Revenge Schemes Of All Time (warning: this article is funny but contains R-rated language, inappropriate for children). Spiderman finally defeats Sandman by locking his consciousness away forever without the means to talk, see, or hear. Just think about that for a minute to get perspective. It won’t ever be that bad.
The supplier’s revenge has one consistent theme: it will be expensive for you.
How does your supplier sabotage you?
You may have won in the short term, but if the supplier doesn’t make enough on the deal with you, they will immediately start looking for ways to add costs to your projects. It’s time to implement, and something goes wrong. You need help. Guess what? That was not 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.
They may not be consciously thinking, “I hate this person, I am not going to return his calls” but it comes out in many, many ways over the course of a low-profit, one-sided, fanatical 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, you will hate one another.
The sad thing about this scenario is that it still happens all the time! Often business leaders claim success in the price war 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.
“In the hands of the enlightened, hate can be a tool for great change”
The HBO hit series Silicon Valley puts the spotlight on all the ways you can hate one another in business. The show is a humorous look at the often crazy tech industry and is (shockingly!) based on real stories and real people. There’s truth to the quote, “In the hands of the enlightened, hate can be a tool for great change” because strong emotions can be a catalyst to do things differently.
If you experience supplier unresponsiveness, you may be wondering why it’s happening. Let’s just admit that humans are not rational. We get angry, we feel defeated, we make business decisions based on personal reasons. When it comes down to the long-term health of your business, don’t risk a failed project because the supplier won’t step up when you need them to help you.
Gavin Belson, CEO in Silicon Valley said, “You know, a hundred years ago, men like me could have had people like that killed. Just like that.”
You cannot kill them, so you have to find a way to work with them. Here are two tips to change this cycle of sabotage:
- Enlarge the negotiation beyond just the price. You may be in the habit of focusing only on price because your bonus is based on the discounts you get out of your suppliers. That puts you in a tough place because every fiber of your being is focused on price even when you know (or suspect) it will be more expensive in the long run. 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’s important to the other party. Sometimes you’ll find that you can get your price if you find other things that will satisfy them. Work to give them things that are important to them and low cost to you. This will build a stronger partnership based on mutual success. Many times you may also get the lower price, but HOW you get it will diminish the need to get revenge. You are no longer the enemy to be sabotaged and it didn’t cost you more.
The Bottom Line
Your suppliers want to have a healthy relationship with you, one where you both win and you benefit from the relationship. Take a more holistic look at your actions in negotiations. If you’re using your power to squash your suppliers into submission, you will pay in the end.