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Supplier Negotiation Strategies, Part 4

Purchasing Training - Counter Intelligence
Purchasing Counter Intelligence

This is the last in this series for now – a series about supplier negotiation strategies. It’s all about counter-intelligence, and knowing what suppliers may do, and being able to anticipate, respond, and diffuse such strategies.

Of course I have a multitude of content on such counter-intelligence strategies, but there is only so much I can do in a blog. Consider this an appetizer. The main course can be found in my Award Winning Online Training Solutions.

The topic we’re going to focus on today is a big one. “Value based pricing” is what sales people spend hours, days, months, years, and eventually decades trying to perfect in their careers.

Suppliers know the only way to do this is to appeal to the right hemisphere of your brain. The one that is responsible for emotions.

For instance, when was the last time you saw a soft drink commercial that talked about their product having more bubbles per cubic inch? No way.

They want you to buy their product based on them showing people having the best time ever while consuming their soft drink. It makes no sense at all. But guess what, it works.

In order to sell you something based on its value, then the perception of value has to be built up. This is what salespeople excel at. Marketing and perception management.

Ever compare a supplier glossy brochure to what the product or service actually delivers? Now you know what I mean.

In order to maximize value based pricing, suppliers can’t sell you goods and services, because goods and services can be benchmarked. They will start calling their goods and services “solutions”.

To quote Dilbert creator Scott Adams, “a solution looks suspiciously like a good or service, except it costs a lot more.” Right on the nose, Scott.

There are a few ways to deal with this. And all of it has to do with letting the left hemisphere of your brain take over.

Think of that gum commercial.. “nine out of ten dentists recommend chewing our gum”. That’s data. You need to make decisions with data. Salespeople are masters of manipulating the perception of value, but they can’t argue with facts and data. It’s their kryptonite.

The first strategy is to make sure your supplier selection matrix is performance results and specifications based. Glossy brochures and marketing pitches and fancy suits should not be a part of the consideration model.

Counter glitz with data, and negotiate pricing and total cost based on the documented and measurable performance results you will be receiving.

The second is to take the supplier’s glossy brochures and marketing presentations and tell them “I’m sure you won’t have any problem if I make this an addendum to the contract and make it a material breach of contract if any of these capabilities are not met by your solution, right?”

Don’t say it with attitude, just be matter of fact. What should the supplier be afraid of? Their solution is supposed to do all these wonderful things, right? If they get nervous and start to jumble their word in response, it’s because you caught them.

They are not used to anyone connecting the dots and making their sales pitches a part of the contract. This is your right. They are trying to pitch a powerful solution and they want you to pay for a powerful solution. So what you should receive is a powerful solution, right?

The third way is to bring them down to earth and say something along the lines of “here are the specifications we are measuring. Can you please confirm for us how you are committing your product and service support will perform to these? We’re going to compare suppliers based on price competitiveness to this criteria.”

What you’ve just done with this third strategy is to take them out of solution space and pull them straight into specification space, which is where they don’t want to be. Let that left hemisphere take over.

Take control, and don’t let marketing presentations and fancy hype and glowing testimonials bias your negotiation and decision making process. Put that left hemisphere in high gear and force the supplier to negotiate with you on your terms.

From now on, every time you hear suppliers use the words “solution”, race back and read this blog again.

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Omid G