Negotiation Tactics with Naughty Vendors
As discussed in Common Negotiation Ploys, 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.
And if they can't get it from an honest day's hook, the vast majority have no problems getting it by a con man's crook. 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.
So what can you do? First, you can learn what the common ploys are (as discussed in Common Negotiation Ploys and Some Basic Counter Tactics) and how to spot them, then you implement basic counter-tactics, as described in Stephen Guth's Contract Negotiation Handbook, and, finally, you take the offensive using some negotiation tactics of your own.
There are at least eight solid counter tactics that you can use to counter the sixteen plus ploys an average vendor will throw at you. This post will discuss three of my favorites.
Power of No
If the vendor won't budge on price or terms at all, and you know there is considerable margin in the deal, just say "the deal is off" (and give reasons such as the internal customer changed their minds, budget was not approved, etc.) and wait. The vendor will then start e-mailing / calling everyone looking for a chink in the armour to exploit and revive the deal, but if everyone holds fast, and the deal is for a significant amount of money, the vendor will eventually make concessions to save the deal.
You may have to "burn" yourself with the vendor to make it work, where the customer becomes the primary negotiator and you work behind the scenes, but it almost always works, as long as everyone holds fast and provides a unified front of "no deal" because vendors panic when they think they have lost a (big) deal, especially if they thought it was "in the bag".
If you're willing to become the slow-witted police detective that uses his shabby appearance and absent-minded persona to lull suspects into a false sense of security, and wait until the deal is done to try for "one more concession", and the concession isn't ridiculous, it's often an easy way to get one more concession from the vendor.
Columbo was successful because he always started out by pestering suspects with seemingly trivial questions, which wore them down, and then he was able to pop his signature tactic of exiting the scene of a conversation but then stopping in a doorway or returning one moment later with a "just one more thing" on the unwitting suspect who then went berserk and confessed. It worked because the subject had already mentally closed the door on the conversation and dropped his or her guard.
In the same way, if you wait until the vendor thinks the deal is done and all that is left is getting the contract executed, and you ask for just "one more thing" that is reasonable, you can take advantage of the vendor's strong desire to close the deal quickly to get the contract signed. For example, a few days of free training, an extra few months free before maintenance fees, better on-site service guarantees, which don't cost the vendor much but cost you dearly because of their mark-ups, can often be acquired at the last minute with no negotiation effort on your part if your customer is willing to sign tomorrow.
Price Slice and Dice
This requires some mathematical and technical skill on your part, but if you're willing to dive into the data, you can often reverse engineer the vendor's pricing to determine how much you really should be paying. If you can get a variety of pricing scenarios from the data, not only can you attempt to interpolate or curve fit them to various models until you find one that works. However, if you get enough data, you also increase the chances the vendor will slip up and provide you with additional data that is favourable to you (such as formulas in spreadsheets, etc.) that maybe the vendor didn't want you to see.
The great thing about this negotiation tactic is that it's easy to get a variety of pricing scenarios from a vendor that wants your business. First of all, the vendor wants to seem helpful and will, thus, have no problem answering innocous requests for various pricing scenarios and, secondly, because the average sales person doesn't have a lot of mathematical skills (and knows basic math skills are approaching an all time low in North America where less than 1 in 7 American adults are "proficient" at math), he will see no harm in providing different pricing scenarios.
For a deeper discussion of these tactics, and five others (good negotiatior / bad negotiator, silence is golden, signature limit lasso, endless BAFO, and school zone), I strongly recommend picking up a copy of Stephen Guth's Contract Negotiation Handbook. In addition to a deep dive into common ploys, counter-tactics, and negotiation tactics of your own, it outlines five tactic-killers that your internal customers could unwittingly use to pull the rug out from under your feet and some tips that can make the difference between a great result and a good one.