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The Game Buyers Play with Vendors
Selling isn’t as fun as it used to be. There was a time when customers wanted to trust their suppliers.
Selling isn’t as fun as it used to be.
There was a time when customers wanted to trust their suppliers. They expected salespeople to take care of them. For the supplier, selling was all about figuring out what and how the customer wanted to buy. Relations between the two sides were cordial.
But that type of customer — the relationship buyer — has been in steady decline, replaced by the economic buyer, who is in the grip of Procurement. The economic buyer focuses on price and value, is brutal about the buying process, browbeats the supplier, and puts the salesperson through head games. That’s because Procurement’s goal is to get the lowest price, relationships be damned.
Suppliers are bending over backward to cater to this new breed of buyer. They’re spending millions trying to shift the selling focus to “understanding customer value.” But suppliers’ executives are missing an important fact about economic buyers: Most of them are playing poker with their suppliers. The goal of this high-stakes game is to get better prices by bluffing and intimidating vendors, and the buyers are winning.
A vendor can achieve a better balance of power by recognizing that the negotiation with the buyer is a game and by understanding that the customer is often trying to put the supplier into one of two roles: the rabbit or the advantaged player. Each role requires its own sales strategy.
The rabbit is included in the bidding process for the sole purpose of driving down another vendor’s — the preferred vendor’s — price. Because the rabbit’s presence is essential to this tactic, the rabbit will be told that it has a very good chance of winning the business. Nothing could be further from the truth.
A partner at a large financial services firm in the U.S. — I’ll call him Bill Jenson — had been trying to do business with a domestic manufacturer that had a close relationship with one of his competitors. The potential customer’s VP of finance contacted Bill and asked him to prepare a proposal for a multimillion-dollar initiative. Bill and a team spent several months preparing the bid. It was a work of art, and the price was 30% below the competitor’s. But the competitor matched the price and won the business, an outcome that had been preordained. Throughout the process, Bill was never allowed to meet with the decision maker, the CFO. Bill’s effort was a waste of time for his firm.
The advantaged player is a different kind of victim. The advantaged player is the buyer’s preferred vendor, but you’d never know that from the way it’s treated. First, the advantaged player is thrown into a bid with a warren of rabbits. Second, delays occur. Third, phone calls aren’t returned. All these tactics are designed to rattle the advantaged player and get it to reduce the price.
Consider a sales engineer I’ll call Martha Williams, who worked for a process-control design firm. She had a good relationship with the CEO of a medium-sized chemical company and had done a lot of work with the customer over the years. The chemical firm’s CEO asked her to prepare a bid for a new production line that the buyer needed to install quickly. Martha quoted a price of $300,000. She was lucky: The buyer didn’t trot out the rabbits or the delays, but the CEO said that if she reduced the price to $200,000, she could start work immediately. Martha held firm. She said the original price was fair, and she couldn’t discount it. The following day, the CEO folded and placed an order for the work at the full price of $300,000.
It’s often hard to tell when a buyer is playing games with you, but here are a few signs that you’re being set up as a rabbit:
- You’re asked to bid on a type of work with which you have no prior experience.
- You’re invited late in the bid process, and have just a few days to respond.
- The buyer blocks or limits your access to the real decision maker, whoever that may be.
Or as an advantaged player:
- You know you have the best solution for the client.
- Nevertheless, you have to undergo an extensive approval process because Procurement requires it.
- During that process, the buyer tells you that all competitors are the same or compares your price to an inferior competitor’s.
- The buyer threatens to put the order out to bid.
Once you figure out how you’re being played, the sales strategies are simple. If you’re a rabbit, you’ve got two choices. You can ask tough qualifying questions to try to become a serious contender for the business, or you can walk away and not waste your time. If you’re an advantaged player, you should bluff. The only question is whether you want to bluff hard, as Martha did, and stick to your price. The alternative is soft bluffing. In Martha’s case, a soft bluff would have involved saying “We’d be happy to meet your $200,000 budget, but we wouldn’t be able to include the process-control design for the production line.” Either way, Martha protects her price and her value, and wins — at least this hand.
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