When trying to win new business, it’s frustrating not being able to set yourself apart from your competition who are vying for the same contract. Having a range of supplier negotiation strategies in your arsenal, along with a solid grasp of negotiation skills (https://piscari.com/negotiation-
training/) can mean the difference between winning and losing deals when negotiating with tough procurement professionals.
7 Negotiation Strategies For Suppliers
Build Rapport
Building rapport is an integral part of being able to get a deal over the finish line. Maintaining open communication channels with clients while having a solid negotiation strategy helps build rapport and strengthen the quality of the deal. Being responsive, attentive, and approachable is absolutely key when it comes to forming crucial relationships with decision-makers, and can often be the deal breaker if there are multiple suppliers trying to win the same contract.
Reach Out to Procurement More
Build a relationship with Procurement 12-18 months in advance of negotiating a deal with them. Here’s some tactics to engage busy procurement professionals:
Send them your latest thought leadership, not your sales pitch
Follow them on LinkedIn and make meaningful comments on their posts
Invite them to breakfast roundtables with their (non-competing) peers
Know Your Customers and Build Credibility
You can’t pitch if you’ve not done your discovery call effectively. Have a predefined list of questions that help you understand the client’s context in a lot more detail – before selling them anything.
Get reviews and feedback from your previous customers and publish on LinkedIn and other marketing channels. It’s one of the 11 touch-points for a prospect about how you provide excellent service to customers with similar requirements.
Anchor Early and Demonstrate Value
Negotiation 101 is about anchoring. Your first commercial offer to your prospects has to be realistic, at the top-end of market expectations, and be linked to the value/ROI you create. Without this, you’re open to trained negotiators taking you apart.
Flex Your Finance
If you need a helping hand when trying to get a deal over the line, be flexible with the payment terms that you can offer. Many suppliers request that payments be made within 14 days on invoice. However, knowing how far you go, in exchange for something else in the negotiations that are valuable to you is critical.
Be Empathetic
You have to understand the customer’s negotiation context. You have to be able to empathise with them, and build a bridge towards them.
Empathy doesn’t mean weakness or yielding in the negotiation. It shows that you understand them and want the best deal for them and you.
Demonstrate Your Credibility
Don’t be afraid to showcase what you’ve done for other clients (anonymised if need be). It’s important to make customers aware of your credibility and how well your company has delivered consistently over time.
Start Winning More Procurement Deals
Have a solid negotiation strategy in place to deliver more balanced deals with procurement. Follow these principles and tactics to negotiate better deals, every time, especially when you meet tough procurement negotiators.
In a nutshell, the primary role of a procurement professional is to purchase goods and services for their business in a way that creates the most value at the lowest risk. This involves establishing the needs of the organisation, understanding the supply market, running RFPs, sourcing and vetting providers, negotiating contracts and pricing and measuring/reviewing KPIs during delivery.
So, now you know — broadly — what they do, you need to understand the typical traits of people who do this job and what motivates them. Whether you’re considering a career in procurement, or want to know more about the procurement process as a seller, this article will tell you everything you need to know about the process from a procurement perspective.
By the end of this article, you’ll have a deeper understanding of the skills and traits required to be a procurement buyer, the role and responsibilities, as well as the role of procurement during a typical sales process.
Here at Piscari, we have extensive experience in both buying and selling, across a wide range of enterprise companies. We’ve refined these insights over hundreds of deals negotiated worth over £400m, with experience on both sides of the table.
Who Are Procurement Professionals?
Procurement is a department, just like finance, sales or marketing. Inside procurement departments, there are different roles that require different skills and experience.
Here are some of the common roles in a procurement department:
CPO: Chief Procurement Officer. This is the head of the department, and often reports to the CFO, COO or occasionally the CEO
Category Leads: These people run big categories of spend, for example, IT, Marketing, HR, etc
Sourcing Specialists/Buyers: They often focus on categories and sub-categories where they have specialist market knowledge. These are the people that analyse spend data, build requirements and specifications, run RFPs and negotiate with suppliers.
Contract Administration (usually only found in very large organisations): They ensure that all contracts are loaded onto the supplier management system, manage the renewals calendar and administer contract variations.
Procurement Administration: Often look after purchase orders, matching issues and supplier queries.
You’ll also often hear the following terms used interchangeably: procurement professional, buyer, strategic sourcing, category lead. Although there are distinct differences (see above), every business is different and will have its own set of specific duties for each role.
Responsibilities of Procurement Buyers
The buying role differs from industry to industry but usually includes:
Reviewing the quality, reliability and spend-trends of existing suppliers
Making recommendations and decisions on new product/service suppliers
Business needs analysis
Stakeholder management
Market monitoring, testing and insights
Category planning
SLA reviews
Ad-hoc RFPs and tendering
Sourcing suppliers
Negotiating with suppliers
Contract negotiation
Managing supplier relationships
Building and managing the cost-savings’ pipeline
Proposing savings ideas to finance and budget holders
Savings delivery and reporting
Attendance at industry events
The Two Types of Procurement Professional
There are, broadly speaking, two types of procurement professional:
Those that focus on direct goods and services. They buy everything between Revenue and Gross Profit on the P&L. They almost always have deep category expertise. And they have a direct impact on profitability, so tend to be extremely well-trained and savvy negotiators. Every penny counts, after all. For example, in a retailer, they’d be buying fruit, vegetables, meat, etc
Those that focus on indirect goods and services (also called Goods Not For Resale or GNFR). They buy everything between Gross Profit and Net Profit on the P&L. They tend to be spread quite thin across multiple categories (unless it’s a global corporate), so they may not have in-depth category expertise. For example, categories typically include IT, Marketing, Professional Services, etc.
Although there are no generic traits for procurement people, there are some themes. They tend to be rationalists, very analytical and almost always highly trained negotiators. They are tough-minded and come across as emotionally detached.
The Priorities of a Procurement Professional
Deloitte’s Global 2021 Chief Procurement Officer Survey is conducted annually to understand the needs and priorities of procurement functions. The ranking of the priorities below changes, but the patterns are always very similar:
Savings/cost-reduction/operational-efficiency
Innovation
Risk management and governance
Sustainability, diversity, inclusion
Digital transformation/enablement including data analytics
Supplier collaboration, partnering and supply chain integration
What is a Procurement Process?
Just like sales have a sales process, procurement have procurement processes (yes, more than one!).
As a general rule, procurement people tend to be data-driven, rational and process-oriented. They tend to like spreadsheets, processes, assessment criteria and scoring mechanisms.
Although there are many sales processes we could mention, we’ll stick to the major ones:
Source-to-Pay (S2P). This is the key, big-picture process, that defines the major activities undertaken by a procurement department, typically in a big company. This process involves everything from broad requirements definition and stakeholder engagement, running RFPs, supplier selection and negotiations to contracting, purchase orders (PO), invoicing, goods and services receipt-matching and payment.
The 7-Step-Strategic-Sourcing-Process. This describes how procurement (sourcing professionals) review the performance and spending of their existing supply base, document specifications, decide on the best way of getting the right suppliers in place, conduct the supplier selection and negotiation process, prepare supplier transition and onboarding plans and measure performance.
Savings-Delivery-Process. Just like sales have a sales pipeline, procurement has a savings’ pipeline. This is the golden source of all the savings opportunities that procurement has identified, and where each savings opportunity is in the pipeline. Spend analysis is linked to this process — this is where procurement reviews who they spend money with, how much and how often. A book that we’d recommend on this is Spend Analysis by Pandit and Marmanis.
The Future of Procurement
The procurement process has been undergoing a period of transformation over the last 10 years — there is pressure now to leverage technology to make the process more strategic and user-centric.
Gartner’s Top Trends for the Future of IT Procurement predicted that, by 2021, 55% of technology procurement staff will require additional business, digital, and analytical skills to realise business innovation and growth.
In the past, tech procurement leaders were focused on minimising costs and mitigating risks. But with the rise of cloud services and the digitisation of business, the procurement professional’s job description has expanded somewhat, to include generating revenue, driving innovation and retaining customers.
In Conclusion
Procurement professionals are strong negotiators: analytical and more rational than emotional. A successful procurement professional is business-minded, data-driven and process-oriented. They are focused on:
Increasingsavings. There are very specific definitions of savings from a procurement and finance perspective.
Maximising ROI. They are tasked with getting the best outcome at the optimal price.
Environment, social and governance (ESG): Ensuring the buying organisation is acting responsibly and inclusively.
Supply chain innovation. Identifying high quality, innovative supply chain partners
Quality. They need to ensure the supply base can deliver the quality and reliability of service required by the business.
Mitigatingrisks. Reputational, operational, financial, etc.
Are there any other key traits or responsibilities of procurement professionals you’d include here? Let us know in the comments 👇
Are you a seller looking for tips on engaging with procurement professionals? Then you might enjoy this guide on selling to procurement.
About the Author: Mike Lander
Mike Lander is a successful entrepreneur and expert negotiator, with a proven track record of buying, growing, and selling businesses for seven-figure sums.
He has a uniquely valuable perspective on negotiating commercial deals, having worked on both sides of the table as a Procurement Director and an entrepreneur.
He now uses his specialist knowledge and experience negotiating hundreds of deals worth £400m+ to empower leaders and sales teams to negotiate more profitable deals with procurement.
Download our FREE guide to negotiating with procurement professionals
Negotiating with Procurement: What You Need to Know
If you’re an entrepreneurial company selling to bigger companies, you need to understand how negotiating with procurement professionals really works. It’s vital that you understand their unique needs and how they are different from other stakeholders.
In this guide, I’ll break down the most common pitfalls of negotiating with procurement, the tactics to watch out for, the mistakes that are too often made, how you can prepare, and secure more profitable deals for your business. Every time.
To improve your deal conversion rate and get better outcomes, these are the key things you and your sales teams need to understand:
Procurement have different objectives to your main decision-maker, so you must treat the negotiation differently.
They are another important stakeholder to engage in the “business unit buyer” map. Have a look at this video with Ray Makela for further insights selling to procurement.
Ideally, engage with them 12-24 months before you bid for a big piece of work.
Negotiation is a trainable skill, not a genetic trait. It’s seriously worth investing in high-quality training.
80% of your success in a negotiation will come from the quality of your preparation.
If you apply the tactics and lessons in this article, you’ll make better deals immediately and win more opportunities. I’ve refined these insights over hundreds of deals negotiated worth over £400m, with experience on both sides of the table.
Why should you read this guide?
Think back to a time when you were working on a big sales opportunity.
Does this scenario look familiar?
You’re close to agreeing on the terms at a price you can work with.
Just as you’re about to close the deal, your contact emails you: “By the way, “you’ll just need to get this past Procurement”.
Your heart sinks! The last time this happened the deal collapsed and six months of sales effort went down the drain.
Hence, negotiating with procurement professionals is different. They are different personality types to your typical decision-maker. They have different objectives and very different ways of working. If you want to succeed at winning deals with bigger companies, you need to develop new strategies for dealing with Procurement stakeholders. It must become a standard part of your sales management process and sales training. If in doubt, find a sales coach to act as a sounding board.
I wrote this guide to help you understand the complexities of negotiating with Procurement professionals during a sales cycle. You can use it as a practical tool to re-frame your discussions with Procurement and get the outcome you want.
Download our FREE guide to negotiating with procurement professionals
Problems faced by entrepreneurs, sales professionals and SMEs when negotiating with procurement
When you first meet -procurement professionals during a sales cycle, you will come across new challenges to getting a deal done. If you go in unprepared, you’ll quickly see the deal collapse. Or, you’ll walk out with a bad deal for you and, ultimately, the client.
What’s the problem? Procurement teams have a different agenda to the main person you are selling to. You need to see the world from their perspective in order to know how to deal with them.
Have you faced any of these problems when trying to get a deal through procurement during your sales negotiation?
Procurement seem to be creating unnecessary barriers to getting the deal done
The RFP process is crazily bureaucratic
You feel like you are being used as a price bench-marking tool as opposed to a real contender
It can take months to fill in the RFP and go through the process only to find out you didn’t really stand a chance in the first place
You can’t see the criteria they are using to select the supplier
The contractual terms they send you are outrageous and 30 pages long
The T&Cs say “these terms are non-negotiable… If you are successful in bidding, these T&Cs are legally binding on your appointment”
“What does success look like from the perspective of a Procurement Professional”?
The reality is: when a Procurement professional is negotiating a deal, they’re managing a number of complex variables – they’re not just being difficult for the sake of it.
The relative importance of each variable is different on every deal they negotiate.
Procurement’s objectives are to:
Increase savings on a deal.
Maximise ROI for the business.
Access innovative solution providers.
Improve the quality of service delivery, or as a minimum, maintain it.
Improve/maintain the reliability of service delivery.
Review the sustainability aspects of what they buy.
Reduce risk to the organisation (i.e. reputational damage, operational disruption, financial distress, etc).
There is no simple, single answer to the question “What does success look like from the perspective of a Procurement Professional”? Like any other sales process, you need a clear value proposition when negotiating with procurement.
Later in the guide, you’ll learn how to work out what is really going on, and some insights about what you can do about it.
Common myths about negotiating with Procurement professionals
Perception They only care about beating me up on price.
Perception They don’t care about innovation and creativity.
Perception The RFP is only used to beat up the incumbent supplier, we are never going to win.
Perception The T&Cs sent by Procurement are non-negotiable.
Reality This is untrue. It’s about how much they paid last year, how much is in their budget and how they can maximise ROI to the business.
Reality This is untrue. Innovation and creativity have been on the top 10 list of Procurement challenges for the last decade.
Reality This is untrue. There are easier ways to do this than run an RFP Process.
Reality This is untrue. There’s a secret no-one tells you… the schedules at the back of the Ts&Cs usually override the Master Agreement, so put your variations in there.
So, next time you are frustrated with Procurement, take a breath and look at it from their point of view. The underlying issues are much more complex than it appears on the surface.
What are Procurement Levers and why are they important to you?
Whenever I negotiate a large deal, I always think about which levers I am going to use to get the deal done. These are the kinds of levers, or negotiation tactics that I think about for every deal:
Consolidating spend across several suppliers and vendors?
Offering longer-term commitments in exchange for better prices?
Completely transforming the services we are buying?
Tightening/de-scoping specifications
Reducing demand (also called Demand Management)?
Getting some more competitive tension going in the process?
Changing the commercial model of the supplier?
In-sourcing or out-sourcing different parts of the value chain?
What are Procurement looking for and what is on their mind when negotiating?
Imagine you’re down to the last two suppliers shortlisted for a piece of work. When you’re preparing to negotiate with procurement, these are some of the things to consider before engaging in the next round of discussions:
Where are the savings going to come from?
What contractual clauses are important?
How are you going to measure that you are delivering a high-quality service and what happens if you don’t?
How are you going to govern (control) this contract and what are the remedies and rewards for under/over delivery?
Does price change as the volumes go up/down?
Are there any rebates baked into the deal?
How will Service Credits work?
What are the termination clauses?
What is the contract duration?
Payment terms?
Who owns what IP?
How will you demonstrate the business ROI?
When preparing for your negotiation, have answers to all these questions in advance. If you have just received an RFP and not sure what to do, you can also use our Consultancy Support.
When is a saving not a saving?
It would seem obvious that if you offer a reduction in your price, or you give the customer something for free, then it’s a saving, right? Unfortunately, this isn’t true. It’s certainly of value to your client’s Decision Maker, but it may not help Procurement deliver their objectives.
Here’s a simple example of different types of savings and what they really mean:
Cost-Saving
Cost Avoidance
Value Proposition
Is this a contract renewal or re-negotiation with downwards price movement based upon like for like volumes?
Does the saving include a discount against a list price or standard rate card?
Does the negotiation include free additional licences?
Is this a contract termination with services delivered in a new way or service no longer required?
If we have no experience of buying this service (i.e. no baseline cost), then any savings will be “cost avoidance”
Are we being offered something that we didn’t have before for free?
Have we got a comparable, actual set of prices and volumes based on invoices?
Are we expecting a price increase from an existing supplier on an existing service and a reduction in the increase is achieved? If yes, this is “cost avoidance”
Are we being offered “free implementation support?”
Why do your clients train their Procurement negotiators?
There’s a wealth of evidence that points to a direct improvement in business performance if negotiators are professionally trained. This chart is one of the most compelling indicators that “Organisations with high negotiation maturity post significant increases in net income”.
That’s why your clients train their negotiators, and that’s why you should too! If you want more information, have a look at our Negotiation Training Programmes.
Characteristics of any negotiation
In any negotiation, be it a business deal, buying a car or your relationships, there are common traits to the negotiation itself:
More than one party is involved
There are multiple agendas that are rational, emotional and political
People are staking out their positions and interests
Negotiation personalities need to be understood, i.e. collaborative, adversarial, partnership, amiable
Is it a transactional or strategic negotiation?
You need a framework to think through the negotiation and optimise success for all parties. This is particularly important in procurement negotiations as you are dealing with highly trained buyers.
Common negotiating mistakes and why we fail to reach agreement
Given all the negotiations I’ve been involved in, I’ve made some mistakes and learnt from them. These are some of the lessons learned:
Believing that what we bring to the table is more valuable to our counter-party than it actually is
Personalities getting in the way of a good deal (i.e. inability to separate the people from the problem)
Lack of preparation. Virtually every professional buyer will have a Procurement negotiation process. You need a way of thinking through the three key stages of your negotiation
Not reading the personality type of your counter-party
Lack of empathy, i.e. failure to understand the other party’s perspective
Making the scope too narrow or too broad
Lack of objective criteria on which to base agreements
Winning the economic case and losing the relationship/trust
Not understanding the difference between interests and positions
Sequential negotiation strategies in complex situations – it can be seen as “chipping away” at value. It’s often better to put multiple variables on the table at once and negotiate what’s important to both parties
Believing you have to make a decision in the room
What are the traits of a successful negotiation?
This is by no means a comprehensive list. However, this, combined with “avoiding the common negotiating mistakes” is a good place to start planning your next negotiation:
Start with the end in mind and tack towards the prize or end-goal
Usually, making the “first offer” anchors the counter-party to your reference point (this has been well researched internationally)
Asking open questions, seeking the views of your counter-party and active listening all promote collaborative negotiations and win-win outcomes with the best overall value. Balance this with knowing when to close the deal
Test your (and their) BATNA (Best Alternative to a Negotiated Agreement) thoroughly with colleagues throughout the negotiation process. The power shifts continuously as the negotiation progresses
Identify what it is that you have, that costs you very little, but means a lot to your counter-party
Examples of buyer procurement negotiation tactics
When you’re at the negotiating table, you need to be aware of some common negotiation tactics used by trained professionals.
late-night DJ voice” Source: Chris Voss.
“The ultimate rationalist” – Mr Spock.
“The table thumper” (I thought they were long-gone, but recent evidence tells me they are still alive and well).
“The Columbo negotiator – there’s just one more thing”! Also called the “Chipper”.
“These are our corporate terms, we can’t change them”.
“The FUD factor”.
“Do you have full authority to negotiate any deal with me”.
“Your services aren’t worth [£X], you’re over-estimating the value you bring to the table.”
Conclusions
To recap, here are five essential steps you should take as part of the procurement negotiation process.
Five Steps For Successfully Negotiating with Procurement
Start with the end in mind
What does a perfect deal look like for you and your company?
Understand what motivates procurement professionals
This will help you understand how they operate.
Prepare thoroughly
80% of your success will depend on your preparation. Define your negotiation strategy.
Work collaboratively with your counter-party
Ask open questions, listen actively, and work proactively to create win-win solutions.
Close the deal and agree the service level agreements
This is important as they define what you will be measured against.
If you’re new to dealing with Procurement professionals, take on board the principles and ideas in this guide. It will demystify what Procurement really want and reduce any anxiety you may have about them.
Ultimately, understand your audience, know what they want and prepare before you engage in a meaningful negotiation with them.
I hope this guide has proved useful and debunked some of the myths about professional Procurement buyers. We are, after all, only human!
About the Author: Mike Lander
Mike Lander is a successful entrepreneur and expert negotiator, with a proven track record of buying, growing, and selling businesses for seven-figure sums.
He has a uniquely valuable perspective on negotiating commercial deals, having worked on both sides of the table as a Procurement Director and an entrepreneur.
He now uses his specialist knowledge and experience negotiating hundreds of deals worth £400m+ to empower leaders and sales teams to negotiate more profitable deals with procurement.
Download our FREE guide to negotiating with procurement professionals
