Common Negotiation Ploys: Some Basic Counter-Tactics

In Common Negotiation Ploys, we discussed that while while your goal as a procurement and contract professional is to get the best deal you can, the sales people at each and every vendor that you deal with have the same goal. And while you’re splitting your time between determining internal customer requirements, writing RFXs, negotiating contracts, managing contracts, and educating and managing your internal customers, your sales counterparts get 100% of their time dedicated to sales — and they’re spending all of that time trying to figure out ways to get more money from you.

We also discussed how your average sales professional has a dozen ploys ready to go before they even contact their first customer, (because they get weeks of training before they’re let out into the field while you get a 2-hour crash course in negotiations, if you’re lucky) and defined 16 common ploys that a salesperson might use to take you for a ride.

Today we’re going to discuss three of these tactics, how you spot them, and some basic counter-tactics you can use to stop them dead in their tracks.

Surprise!

The vendor calls you up and says they’re in your neighbourhood and can meet now or just shows up at the reception desk. The goal is to catch you off-guard and unprepared so they can soften you up for another ploy down the road.

This ploy is easy to spot even in the early stages when the vendor makes a point of only calling at lunch or at the end of the day when you are most likely to be at your desk and not in a meeting or, even worse, just shows up at your office.

Countering is easy. Don’t take calls at lunch or at quitting time unless it is from a known number and its important that you take the call. If the vendor representative calls and says they’re in town, thank them for the offer but explain that you’re too busy to meet now, and if they show up unannounced, explain that you can’t meet today because of other commitments (and if reception escorts them to your office, have security escort them back to the door if need be).

Bracketing

The vendor tries to determine what you want to pay and what you’re willing to pay in an effort to work you to the top of the “acceptable” range.

This is a little harder to spot because a good salesperson will never come out and ask what you’re willing to pay, but, over time, and many conversations, will ask innacuous questions that will allow them to create a range. For example, they’ll say “I bet the competition doesn’t charge any less than ABC” and then at a later time say “I could provide a high quality service for XYZ“, ABC << XYZ and if you didn’t refute the ABC, they know they can charge at least that, and if you didn’t tell them to outright jump off a pier at XYZ, they have a starting range.

The counter-tactic is to respond in non-committal and uninformative ways. “I’m not sure what my customer is paying now.” Or “I don’t know what this other vendor charges or if I could release that information“. Or “I’d have to check into that“. Or respond with a question of your own by asking if they could meet a considerably lower price.

Misdirection

The vendor attempts to misdirect you, your line of questioning, or attention away from a shortcoming or issue so that you only hear what the vendor wants to say.

Unless the misdirection takes the form of silence in response to your question, this can be very hard to sport because it can take the form of misleading statements, incomplete facts, or a number of other tricks innocuously injected into the conversation to lead you away from a dirty little secret the vendor doesn’t want you to know.

Your only chance to identify this is to look for verbal cues such as “this is only our test environment“, “that’s going to be in our next version“, or “I’ll get back to you” and your only chance to counter it is to dive deep on critical topics with counter questions such as “what do these numbers mean“, “how many users can this type of environment support“, or “what’s the defect rate of this part in production” and ask again and again until you get a clear answer to the question you’re looking for. If you can’t, and your gut says the vendor can’t deliver, your gut is, in all likelihood, right.

These are just the tip of the iceberg. For a deeper discussion of these ploys and their counter-tactics, as well as thirteen other ploys that an unscrupulous vendor representative might try to use on you, I’d recommend picking up a copy of Stephen Guth’s Contract Negotiation Handbook — it’s an eye-opener!

Do You Really Think It’s A Good Idea To Have Your Head In The Clouds?

eWeek.com recently published an article on how “many data centers [are] unprepared for disasters” that’s downright frightening. According to the recent AFCOM “State of the Data Center” survey that polled 358 data center managers from around the world,

  • more than 15% of respondents said their data center had no plan for backup and recovery,
  • 50% of respondents have no plan to replace damaged equipment after a disaster,
  • 65% have no plan to deal with cyber criminals!

Well sufferin’ cats!

This says that if you outsource your data center management, you have a:

  • 15% (1 in 7) chance of losing your data
  • 50% (1 in 2) chance of being down for an extended amount of time after a natural disaster
  • 65% (13 in 20) chance of getting screwed if you’re targetted for cyber crime.

Do you really like those odds?

Brazil is About to Get a Lot More Popular

China might be the tiger, but Brazil was pegged to be the tortoise of the decade. (Remember, slow and steady wins the race!) After all, in last year’s special report on business and finance in Brazil in the Economist, Brazil was pegged for 4-5% year over year growth, while most countries, like the US, are struggling to achieve a mere 3%.

The article, which noted that Brazil could be one of the world’s five biggest economies by mid-century, joining China and India who are also climbing, pointed out that FDI (Foreign Direct Investment) in Brazil was up 30% year-over-year when the global average was -14% and GDP has been outpacing inflation in Brazil for five years.

And now, as per this recent article over on CNet, “Foxconn is looking to invest 12 Billion in Brazil”. That’s almost 1% of the annual GDP of Brazil! That’s quite a boost to the local manufacturing economy. Then when you add the proximity to North America, the deep cuts in taxes Brazil is granting to foreign companies, and the rapid growth projected for the coming years, Brazil is likely to get a lot more popular in the years ahead.

I Want Ranting


To the tune of I Want Candy by Bow Wow Wow

I know a blog that’s tough but fair
It’s so fine you can’t compare
It’s got everything that you desire
Lights the blogsphere on brush fire

I want ranting
I want ranting

Time to read it when the sun goes down
Ain’t no finer blog in town
It’s my fix, just what the doctor prescibed
So blunt, it makes me feel alive

I want ranting
I want ranting

Out on the web, there’s nothing so fine
And all of the posts are free from vendor bribes
Some day soon truth will be mine
And we’ll read SI all the time

I want ranting
I want ranting

Purchasing Practice on Supply Management Transformation: Lead on Innovation

In keeping with one of SI’s major themes for 2011 on Next Generation Sourcing, today we are going to discuss the recent Transform white paper from Purchasing Practice (a strategic procurement advisory company). Entitled The Brave CPO: Leading on Innovation, the white paper defines the CPO’s role in innovaton with respect to business strategy and procurement strategy and discusses how the CPO can leverage external innovation networks.

The white paper starts off by discussing the need to understand the company’s growth strategy, which generally falls into the Market Penetration, Market Development, Product Development, or Product and Market Development buckets, and how Procurement can help. According to the white paper, innovation is increasingly sourced external to the organization, placing the skills and responsibilities of the procurement function right at the heart of its process. This is a very important, but overlooked point. As companies continue to outsource more and more of product design in addition to manufacturing to strategic suppliers, the importance of Procurement and Supply Management to successful innovation increases exponentially. It’s literally the difference between smashing success and abject failure.

Plus, without Procurement’s help, as they are in the best position to understand supplier capabilities, the business won’t be able to answer the critical questions necessary to select the growth strategy. Specifically,

  1. Target customers can only be identified once the organization is sure it can provide the products or services they require.
  2. Products and Services can only be selected once the organization knows that it can offer those products or services at a profit (which can only be known once cost is known).
  3. Product and Service Delivery can only be determined once the efficiencies and costs of the different options (which will often include 3PL or third party support) are determined.

Then the white paper discusses some core innovation drivers, which generally fall under business, market, technology, and environmental categories. These drivers fit nicely with CAPS recommendations for creating tomorrow’s value, as outlined in SI’s post on VFS Level 3. Especialy since a good innovation strategy optimizes costs and resource utilization, improves organizational flexibility, and promotes sustainability in the long term.

After addressing the innovation drivers, the paper moves on to a discussion of the Procurement innovation strategy (and the need to connect it to the organizational growth plan). A good strategy is one that reduces costs through cycle time reduction, exclusive knowledge or intellectual capital, preferential access to scarce resources, increased agility, environmental friendliness, or sourcing innovation, since cost reduction is always a concern of CXOs and increases the chances of organizational support across the board. The strategy is often identified through an analysis of the organization’s competitive priorities to determine which one Procurement can make the greatest contribution to.

Once the Procurement innovation strategy is selected, it’s then up to the CPO to make it happen. This will require proactive leadership as the CPO must convince the C-suite it’s the right way to go and the team that their effort will pay off in the end. In addition, the CPO must define, commit to, and meet targets, metrics, and budgets to gain the respect the Procurement department will need for continued success over the long term. In addition, CPOs must make sure the right organizational, procurement, and individual capabilities are in place for success.

Finally, the white paper discusses the concept of Innovation Centered Procurement, which is Purchasing Practice’s equivalent of CAPS Value Focussed Supply, The MPower Group’s Next Practices, Tompkins’ Associates Supply Chain Value Creation Framework, Bravo Solution’s High Definition Sourcing, and Greybeard Advisors’ Next Level Supply Management. Since it’s not much different from the other frameworks, we won’t discuss it in detail, but will suggest that you definitely add this white paper to your Next Generation Sourcing library. To obtain a copy, send an e-mail to info <at> purchasingpractice <dot> com with the subject heading “Leading on Innovation“. The discussion of high level enablers and leveraging external innovation networks is a must-read for anyone trying to take their supply management organization to the next level.