ptg8106388 ptg8106388 Negotiating with Backbone ptg8106388 This page intentionally left blank ptg8106388 Negotiating with Backbone Eight Sales Strategies to Defend Your Price and Value Reed K. Holden ptg8106388 Vice President, Publisher: Tim Moore Associate Publisher and Director of Marketing: Amy Neidlinger Executive Editor: Jeanne Glasser Editorial Assistant: Pamela Boland Operations Specialist: Jodi Kemper Assistant Marketing Manager: Megan Graue Cover Designer: Chuti Prasertsith Managing Editor: Kristy Hart Project Editor: Anne Goebel Copy Editor: Paula Lowell Proofreader: Christa White, Language Logistics Indexer: Erika Millen Compositor: Nonie Ratcliff Manufacturing Buyer: Dan Uhrig © 2012 by Reed K. Holden Publishing as FT Press Upper Saddle River, New Jersey 07458 FT Press offers excellent discounts on this book when ordered in quantity for bulk purchases or special sales. For more information, please contact U.S. Corporate and Government Sales, 1-800-382-3419, corpsales@pearsontechgroup.com. For sales outside the U.S., please contact International Sales at international@pearson.com. Company and product names mentioned herein are the trademarks or registered trademarks of their respective owners. All rights reserved. No part of this book may be reproduced, in any form or by any means, without permission in writing from the publisher. Printed in the United States of America First Printing May 2012 ISBN-10: 0-13-306476-X ISBN-13: 978-0-13-306476-6 Pearson Education LTD. Pearson Education Australia PTY, Limited. Pearson Education Singapore, Pte. Ltd. Pearson Education Asia, Ltd. Pearson Education Canada, Ltd. Pearson Educación de Mexico, S.A. de C.V. Pearson Education—Japan Pearson Education Malaysia, Pte. Ltd. Library of Congress Cataloging-in-Publication Data Holden, Reed K. Negotiating with backbone : eight sales strategies to defend your price and value / Reed K. Holden. p. cm. Includes index. ISBN 978-0-13-306476-6 (hardcover : alk. paper) ISBN 0-13-306476-X 1. Selling. 2. Customer relations. 3. Negotiation. 4. Pricing. I. Title. HF5438.25.H638 2012 658.8’101 dc23 2012007845 ptg8106388 This book is dedicated to my children: Rebecca and Mark. You are successful individuals in your own ways with lots of backbone. You make a dad proud. ptg8106388 This page intentionally left blank ptg8106388 Contents Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 PART I THE GREAT GAME OF PROCUREMENT 15 Chapter 1 Tough Selling—The New Normal. . . . . . . . . . . . . . . . . .17 Company-Supported Sales Traps to Avoid 20 Encouraging Desperation Pricing . . . . . . . . . . . . . . . . . . . 20 Succumbing to the “White Horse Syndrome” 21 There Is Hope if You Play the Game Right 24 Chapter 2 The Tells of the Game . . . . . . . . . . . . . . . . . . . . . . . . . . .27 Recognizing “Tells” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Evaluating Procurement’s Position 31 Dealing with Procurement Styles . . . . . . . . . . . . . . . . . . . . . . 33 Chapter 3 Stacking the Deck in Your Favor 37 Understanding Your Customer’s Game . . . . . . . . . . . . . . . . . 39 Finding Your Hidden Power 41 Limiting Exposure of Senior Executives 42 Firing the Customer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Avoiding the Endowment Effect 46 Customer Games 49 Chapter 4 Getting the Tactics Right the First Time . . . . . . . . . . . .51 Qualify, Qualify, Qualify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Understand Your Foundation of Value 56 Develop Give-Get Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Try Give-Get Bluffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Provide Value-Added Services 64 Use the Concepts of Scarcity and Availability 65 Provide Choices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Map the Buying Center 67 Where Appropriate, Build Trust 70 ptg8106388 viii NegotiatiNg with BackBoNe Use the Policy Ploy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Delay, Delay, Delay 73 Redefine Risk 75 Dealing with Reverse Auctions 78 Do Your Homework 81 PART II EIGHT KNOCK-’EM-DEAD SCENARIOS FOR WINNING THE GAME. . . . . . . . . . . . . . . . . . . . . . .83 Chapter 5 Negotiating with Price Buyers. . . . . . . . . . . . . . . . . . . . .89 Price Buyers 90 Scenario 1: The Penny Pincher 93 Considerations for How to Price the Deal and the Negotiation for Penny Pinchers . . . . . . . . . . . . . . 94 Planning the Negotiation for Penny Pinchers 94 Scenario 2: The Scout . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 Assessing the Price Buyer Position and Tactics for Scouts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 Considerations for How to Price the Deal and the Negotiation for Scouts 101 Planning the Scout Negotiation 101 Chapter 6 Negotiating with Relationship Buyers 105 Relationship Buyers 106 Scenario 3: In the Pack . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 Assessing the Buyer Position and Tactics if You Are in the Pack 109 Considerations for How to Price the Deal and the Negotiation if You Are in the Pack 110 Planning the “in the Pack” Negotiation 110 Scenario 4: The Patient Outsider . . . . . . . . . . . . . . . . . . . . . 112 Assessing the Buyer Position and Tactics for the Patient Outsider . . . . . . . . . . . . . . . . . . . . . . . . . . 115 Considerations for How to Price the Deal and the Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 Planning the Patient Outsider Negotiation 116 ptg8106388 coNteNts ix Chapter 7 Negotiating with Value Buyers 119 Value Buyers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 Scenario 5: The Player 122 Assessing the Buyer Position and Tactics of the Value Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 Considerations for How Price Plays in the Deal and the Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 Planning the Player Negotiation . . . . . . . . . . . . . . . . . . . 124 Scenario 6: The Crafty Outsider . . . . . . . . . . . . . . . . . . . . . . 126 Planning the Crafty Outsider Negotiation 128 Chapter 8 Negotiating with Poker Players. . . . . . . . . . . . . . . . . . .131 Poker Players . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 Scenario 7: The Advantaged Player 135 Assessing Buyer Position and Tactics for the Advantaged Player . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 Considerations for How Price Plays in the Deal and the Negotiation for the Advantaged Player . . . . . . . 138 Planning the Advantaged Player Negotiation 138 Scenario 8: The Rabbit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 Assessing the Buyer Position and Tactics for Rabbits 141 Considerations for How Price Plays in the Deal and the Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 Planning the Rabbit Negotiation . . . . . . . . . . . . . . . . . . . 142 Advanced Gamesmanship . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 PART III IT’S A NEGOTIATION, NOT A SURRENDER 147 Chapter 9 Beware the Signs of a Losing Game . . . . . . . . . . . . . . .149 Don’t Kid Yourself 150 Get a Devil’s Advocate 153 Beware Red Flags . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 Customers Have No Experience with You or Your Firm 154 Procurement Runs the Process Tightly 155 The Process Is Controlled at the Manager Level . . . . . . 155 Buyer Has a Well-Established Incumbent . . . . . . . . . . . 156 [...]... (B2B) sale expected to negotiate and offer discounts with the reward of more volume Salespeople developed relationships with customers over time, developed a more intimate view of their needs, could anticipate their needs, and earned a measure of trust In other words, you 1 2 NegotiatiNg with BackBoNe established yourself as a preferred vendor, with a badge that gave you the freedom to walk the halls... instead of going in and fighting, I withdrew? Would backing off work better than going in swinging? A few weeks later, I had an opportunity to test my theory We had agreed to start a pricing project on behalf of a new DEC product The request for the work had come from Susan (not her real name), a senior executive with whom I had good relations She asked 8 NegotiatiNg with BackBoNe us to deliver the project... project back on track as quickly as possible 10 NegotiatiNg with BackBoNe This story offers a number of lessons Sometimes you have to push back; but when you do, never take it personally and never blow your stack In other words, be cool In the musical West Side Story, the gang members receive a lesson in survival that applies equally well to those negotiating with powerful companies: “Go man, go/ But not... trust with strategic suppliers? I know many procurement people who operate on this belief and work toward building good, even great, high-trust relationships with their suppliers They are professionals who treat their suppliers with 12 NegotiatiNg with BackBoNe respect Unfortunately, given the demands of the globalized economy, these professionals are increasingly in the minority More and more, procurement... high-value industries services are seeing their margins shrink due to run-ins with procurement This situation is not going to go away when the recession ends Buyers have learned to get lower prices and will continue to use that power until vendors figure out a way to blunt those efforts with better tactics of their own 20 NegotiatiNg with BackBoNe Company-Supported Sales Traps to Avoid Many tactics can cause... off Although your relationship buyer might still work closely with you, he usually has a new partner—procurement—that runs interference The proposal might even still be vetted with your closest relationship contact, but that contact no longer makes the decision Off it goes for another vetting with parties who are not invested in a partnership with you Rather, they are motivated and compensated to cut... of interviews with procurement people The research examined trust in seven different industries offering both high- and low-tech products I studied what analysts had to say on the importance of strategic buying and developing good relationships with suppliers The results were not surprising: Who would argue with the proposition that definite value exists in creating and maintaining trust with strategic... this research was an eye-opening experience because although 6 NegotiatiNg with BackBoNe I was a fairly successful salesperson, I came to understand how little I actually knew about the dynamics of selling, pricing, building trust, and the unconscious motivators of buyers and sellers The biggest of these motivators, I learned, was trust Without trust, leveraging the value your company creates for its... the company’s relationship with its salespeople The story of the CEO of a high-quality software company seems to be the best example of dealing with this type of buyer His sales team spent considerable time qualifying and understanding the needs of a large global technology customer and developed great relationships with the committee of customer managers who had been tasked with making the purchasing... constructive, and while too many to mention—your help was appreciated Our internal team of consultants, led by Alison Yama with Alexander Beram, Jacqueline Davis, and Ellen Quackenbush, all worked tirelessly to shape up ideas into true training content for salespeople xii NegotiatiNg with BackBoNe I owe a special thanks to the many procurement professionals over the years For the sake of reputation, I won’t . ptg8106388 ptg8106388 Negotiating with Backbone ptg8106388 This page intentionally left blank ptg8106388 Negotiating with Backbone Eight Sales Strategies to Defend Your. 70 ptg8106388 viii NegotiatiNg with BackBoNe Use the Policy Ploy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Delay, Delay, Delay 73 Redefine Risk 75 Dealing with Reverse Auctions. Yama with Alex- ander Beram, Jacqueline Davis, and Ellen Quackenbush, all worked tirelessly to shape up ideas into true training content for salespeople. ptg8106388 xii NegotiatiNg with BackBoNe I