“It’s sooo frustrating, we’ve only got one supplier who produces this product – we have to use it, nobody else can (or will) supply it. We’re forced to pay the premium price that they’re demanding – it’s really annoying”.
This is a comment I heard from a procurement manager of one of the 'really' big pharma brands a while ago. Size, of course is not always a precursor to power.
So, is power always all it’s cracked up to be?
In over 18 years of negotiation training and consultancy I’ve consistently heard salespeople tell me, "The buyer has all the power, they make demands in the end game and if I don’t agree, I’ll lose the order". Conversely, I hear buyers say, "The sellers have all the power – I get wheeled in at the end, get told to take another 10% off the price. At least we don’t lose the supplier and the or the product – I’m going in with one hand tied behind my back!’
In my mind, we’re looking at two different sides of the same coin. People will often underestimate the power they have and overestimate the power on the other side of the table. Even when we have all the power (and we know it), it can still have its disadvantages.
Talking to an executive from a big brand recently (let’s call them Brand X), he lamented that the brand dictated what he could or couldn’t do when he was negotiating. Discounting was never, ever going to happen – it would devalue the brand.
The difficulty was that some of his customers had become 'conditioned' after their commercial dealings with other less premium-brand suppliers. In these relationships all they had to do was 'punch the pockets of the supplier, and money fell out' – great game! Not so when they came across Brand X (kinda reminds me of the story of the three little pigs somehow).
The supplier offered Brand X ‘special terms’ for a discount, but they then became really frustrated when they were told ‘we don’t do discount’.
Now Brand X really wanted to do a deal, but they didn’t need to do a deal. So, there are two different paths that these conversations might take:
The supplier gets ‘tunnel vision’ with the pursuit of the discount. They get frustrated and just lose it – getting more intense, more accusatory, more threatening – "Everyone else gives us a discount!". Brand X meanwhile, just doesn't need the hassle, so the negotiators issue an ultimatum, "That’s the deal – take it or leave it".
Brand X steps in early, they use their emotional intelligence and do the ‘heavy lifting’ for the supplier. They structure expectations from the get-go, making the supplier think more carefully before they act. They suggest time-outs when the supplier starts to become too blinkered in their approach. They explore the supplier’s issues – repackaging money and value within the deal whilst maintaining brand integrity.
What power does give you is choice. We can be lazy and just keep saying "No", however, the best-case scenario is that we get a sub optimal deal with a potentially resentful counterpart. The worst-case scenario is we get no deal at all and a party that maybe doesn’t want to deal with us in the future.
Alternatively, if we’re prepared to work that bit harder taking the time to listen more, explore the issues and make proposals – we might just get an even better deal.
Whoever said that having all the power was easy?
Sam Macbeth, 7th March 2023
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