Have you ever found yourself trying to get business from a large company, and then all of a sudden, your contact in the company refers you to the purchasing or procurement department?
As a general rule, I recommend brokers avoid or work around the procurement department as often as possible.
Procurement departments are populated with “professional buyers,” people who are highly trained and experienced. That means they have a built-in advantage over sales professionals like real estate brokers.
That doesn’t mean you disrespect professional buyers, show hostility toward them or have disdain for them. Sometimes, despite your best efforts not to, you will have to work with procurement. They are human like you and me. Building rapport and trust with them can be very effective.
Nevertheless, you are almost always better off prospecting end users and decision makers at companies instead of going through procurement. You’re almost always better off doing the deal with the decision maker and either avoiding procurement all together or only interfacing with them when the process is essentially a formality. Don’t look at procurement as an enemy, but they aren’t one of your close friends either.
Sometimes the decision maker or end user will send your proposal to procurement for approval and final negotiation. When that happens, don’t assume anything. You still have to actively shepherd your deal. Procurement will likely have less of a sense of urgency than you and the decision maker do. You’ll likely have to keep in communication with your contact in the procurement department.
Negotiation expert, Ray Makela of the Sales Readiness Group, wrote about the 5 sales negotiation tactics procurement departments use to commoditize your offering and get concessions and discounts from you.
The first one is “Deflect or discredit your value proposition.” Procurement often attempts to discredit or decouple all of the value you worked to build with the business unit buyer. Procurement’s goal is to demystify your value proposition so that they can then compare prices among vendors. Procurement would like to focus on discrete units instead of the overall deal so they can compare least common denominator pricing and get the best deal.
To counter this tactic, Makela recommends you build strong relationships with as many end users and decision in the company as possible as early as practicable.
The second procurement tactic is “Commoditize and control responses.” Procurement likes to control every aspect of the deal so they can do an apples-to-apples comparison with your competition. The problem is, your apples special right?
To counter this tactic, Makela recommends you focus on value-based selling that quantifies the overall value of your offering and present a total solution that can’t be dismantled into component pieces and commoditized. Educate the business stakeholders and Procurement on why your solution is different.
The 3rd tactic is “Limit access to the business.” This means procurement gets control-happy. They want to take over and keep the business-unit people out of the process.
To counter, Makela recommends you leverage resources at the prospect company to help you get the lay of the land before Procurement puts a gag-order on vendors. If you’re told you can’t contact anyone outside of the RFP process, you have a business decision to make in terms of the risks and rewards of following those rules. Most business decision makers aren’t aware of these rules and may not agree with them.
And now the 4th tactic: “Use past performance/history against you.” Procurement would like to have as much ammunition as possible in their arsenal to use against vendors in an effort to drive down prices and negotiate a commodity deal. They research background information on each vendor to determine if there is information that could be used against a vendor.
Makela says you should anticipate issues and concerns that may come up and have your responses prepared. Consider a pre-emptive strike to disclose negative information so that you are in control of the discussion. Return the focus of the sales negotiation to the deal at hand and your overall value proposition.
Finally, tactic #5: “Good Cop/Bad Cop and mystery decision makers.” In order to maintain their leverage, procurement might bring in additional decision makers or create hoops to jump through late in the process. This keeps the vendor guessing and vendors are then often forced to renegotiate the deal late in the game when the clock is ticking to get it done.
To counter, Makela recommends you determine who all the decision makers are and how the decision will be made as early as you can. If a “Bad Cop” is introduced late in the game, attempt to determine their position and interests, and refer back to the agreements you already made with the “Good Cop.”
Despite your best efforts, sometimes you’re going to be sent to procurement to negotiate the final purchase price. Regardless of whether you negotiate with procurement or with the decision-maker themselves, one thing is always true: you don’t want to go into negotiations lacking confidence.
The number one reason brokers are in a week position at the negotiation table is an empty pipeline. When you don’t have enough opportunities in your pipe, you feel desperate. As the old saying goes, you can smell desperation in a broker’s breath. You don’t want “commission breath.” That’s the bad “smell” you emit when you’re too desperate for any one deal. Commission breath is like blood in the water to procurement sharks.