Where Great Leaders Earn Their Stripes

BY Reed K. Holden – HARVARD BUSINESS REPORT

Every supplier knows the drill: You identify your most valuable customers and classify them as “strategic accounts.” You can’t afford to lose them. Whatever they ask for, you deliver with your best team and best turnaround — even if it’s unreasonable or unprofitable. The customers know they are a strategic account, so they’ll try everything to wring out cost savings. Even customers that use extensive analysis and a rigorous qualification process to identify the ideal vendor have learned that discounts will flow if they put a supplier through the procurement price “buzz saw.” It’s a brutal process. No wonder a recent study showed that salespeople worry more about the price conversation than any other part of the sales cycle.

But you can shift the conversation away from ruinous discounts and back to firmer footing by introducing a new word to your lexicon: “preferred.” You are the “preferred vendor” for your strategic accounts, and though they may put you through a gauntlet, they need you, too — they’ve chosen you because they believe you are the best solution for their needs. Smart sellers identify when they are in the preferred supplier position and don’t given in to customer demands for discounts by cutting their prices. After all, price concessions just train the customer to expect more price concessions in the future. Here are three ways to shift the conversation.

Focus on the value you create for these customers. There’s a reason you’re their preferred supplier. Focus on that, and stop wasting energy worrying about losing the business. Instead, worry about giving up too much in the process, because you’ll never get it back. Procurement tactics are designed specifically to rattle the confidence of salespeople and executives so that agreements are made in the heat of the moment when they threaten to take the business away. Customers know that if you are worried about losing the business, you’ll grant bigger discounts.

Limit the involvement of senior executives in negotiations. Yes, I do mean that. Procurement people are specifically trained to get senior executives to the negotiation table because those executives are able to, and often will, grant bigger discounts — much bigger. But a better role for senior executives is to support the salespeople and managers to hold the line on price and protect value. If executives want to develop better account relationships, they need to do it before negotiation time.

If a customer is really pressing you for a discount, talk about features or services the customer would be willing to give up to get it — a “give-get.” These little gems force buyers to recognize that while they may be able to reduce costs, there will be less value in the solution offered. Give-gets force the discussion from price back to where it should be: value. This leads the conversation away from haggling, to a more illuminating and productive discussion around what the customer really values. They show their hand when they say, “Wait a minute.”

Finally, don’t sweat delays in these negotiations. If your customer goes dark, doesn’t return phone calls, and ignores you, don’t get rattled. Remember, you are their preferred supplier for a reason, and there will likely be substantial switching costs if they want to change vendors. Silence is a powerful negotiation tactic; don’t let it pressure you into giving a revenue-destroying discount.

Negotiations with major customers can be stressful, but an understanding of the value you provide, using tactics like give-gets, and not falling for tactics like silence can move the relationship back to where it should be: cooperative, collaborative, and based on trust.


Reed K. Holden is the founder and coach of Holden Advisors in Concord, Massachusetts, and the author of Negotiating with Backbone.