5 things to consider when negotiating with procurement – Episode 14
In this episode of Pricing College – we discuss 5 things that you should consider when your sales team is negotiating with procurement.
TIME-STAMPED SHOW NOTES: NEGOTIATING WITH PROCUREMENT
[00:45] We have to know what is going wrong to make improvements.
[01:05] Sales teams can be too focused on features and benefits – rather than problems the customers may have.
[01:40] A meeting is not the time to be likable and make friends.
[02:00] Sales teams often do not know about pricing nor do they have the ability to discuss and negotiate on pricing.
[03:00] Sales sometimes do not really understand the customer’s business. So, ask how you can help their business.
[03:45] Aidan suggests that the sales team can often feel in a lose-lose situation.
[05:05] Sales can come across as needy – which pushes down pricing.
[05:30] Joanna says she will cover some more positive stories in future episodes.
In today’s episode, we want to talk about five common mistakes that salespeople in a B2B environment often make when negotiating to discuss projects or tenders with procurement.
Negotiations, everyone knows, can be quite nerve-racking. But we want to get to the bottom of what you can do to make things a bit better. But to do that, you’ve got to understand some of the common mistakes that maybe you or salespeople make. So, I’m just gonna cover some of those.
And Joanna drew the first or the short straw. So, she has to cover three topics whereas I only get two.
The first point I’m going to talk about is often, salespeople can go into a negotiation with their heads full of details about the products. They think about the features and the benefits of the product. Also, they think often about the value in use. I think we’ve covered this before in a different podcast, rather than maybe some of the problems that the customer may have. Now, that’s why they’re asking for those particular products.
I also think that a lot of salespeople go into negotiations trying to make friends with the other person. When this isn’t the right time to do that, they often waste, maybe a quarter of their time. And you’ve got an hour to get to the point of wasting it on trying to be likable and being liked. It doesn’t work in that context.
Number 2, and this is so much based on personal experience. In many B2B companies, people in the sales area often do not know the pricing shape. It’s certainly in a tender environment where there are many products and services. They can go into the meeting and they’ve come from maybe a lower level of sales where it’s more personality-based.
Now, they have a red card and it has been provided to them by the finance department or some other department. They really don’t understand it where they don’t have any ability to move or negotiate on those prices.
So, if there is pushback, they will have to leave the meeting and discuss it with somebody else and that leads us to a very unsatisfactory meeting. It gives them no real room to negotiate. But one thing we often see is the finance department is very wary of many companies that go into these meetings. They tend to be a little bit fearful of that confrontation.
Right. So, maybe another point I’d like to make is that often, salespeople can go into meetings with a light fuzzy idea about the customer’s business. And really that’s unacceptable. You should be completely across what your customers do – how they operate, what their problems are.
An excellent area to break the ice, to get to the nub of the problem, is to see how your products and services can’t meet that need. And a lot of salespeople just don’t know what those problems are. In fact, they don’t know the objectives. Therefore, you have very limited discussions that don’t mean anything to either party. And maybe we can move forward from there.
Point 4, my second point. I often think that the sales personnel in that meeting, they’re feeling that they’re between a rock and a hard place. I think the concept of the complaining salesperson is very common. But in many regards it is correct.
So, if they go into that meeting, they are given a red card, or to discuss the tender. Then they’re almost going into their bright-eyed, bushy-tailed hoping that the customer, the procurement team will just agree to that red card. If there is pushback in any way to the salesperson company, there are other stakeholders, you know, operations, etc. They will likely be very negative and bash that salesperson.
So, the salesperson feels that it’s confrontational both ways. The procurement team, there’s a confrontational aspect to it. And then their own company when they get back to head office, they’re in trouble there too.
That leads to knock-on effects like they go into the negotiation with pricing that’s very similar to everybody else. Everybody’s trying to get the lowest price, Therefore, commoditising the whole market, the industry.
Now, it makes the negotiation quite pointless and difficult. From there, you can seem kind of needy because you kind of know that’s what everybody else is doing. So, everybody’s competing into the bottom result and race to the bottom. And then, in doing so, you don’t know subconsciously that looks quite needy in wanting the business. The procurement team knows that and then you fall victim to all their techniques.
That’s right. And I think techniques and framing are something we will discuss in our next episode. So, from today’s procurement lesson, let’s leave it there.
And just remember where we were going over some of the mistakes. I’ve seen some excellent work and negotiations being held by sales teams as well. And we’ll also cover that in another episode.
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