Are You Smarter Than the People Selling To You?

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Supply Chain Management Counter Intelligence

 

Supply Chain Management Counter Intelligence

Counter Intelligence

I think I’ve mentioned to you before that I’ve stopped reading purchasing books.

At the risk of sounding arrogant, I don’t learn anything from them anymore, and haven’t in a long while. Heck, that’s why I started writing my own.

So what I do now, actually what I’ve been doing for a while, is attending sales seminars and reading sales books.

Why? Well, it’s counter intelligence. Could you ever imagine the US going into a war without counter intelligence? (Ok, I know what you want to say – just tell me what the answer should be).

The point is, simply developing your strategy without counter intelligence is a pretty bad move. There are two types of sales counter intelligence. One is generic to the sales community, and the other is specific to the company you are buying from, and the person or persons who are selling to you.

I’m going to focus on the generic side, because that is where the vast majority of the focus is by the sales community, and all the books and seminars are focused on this angle as well, by design.

Here’s some of what I’ve learned:

Sales people want to focus on VALUE, and use that to charge higher prices. This is the whole concept behind pharmaceuticals and software, both of which have a marginal cost of almost zero.

  • Your response: Shift the focus to cost structure and market competitiveness, and if there is no salient difference between their products/services and that of their competitors, tell them that “my customer does not perceive a difference”. Nobody can argue with perception.

Sales people want to sell you SOLUTIONS. A solution looks suspiciously like a good or service, but it costs a lot more.

  • Your response: “I like solutions. But if I’m going to pay for a solution, then we’re going to need to contract for performance results, and I’m going to deliver progress payments that will be tied to the measurable delivery of performance results over time, not to the delivery of items to my dock.”

Sales people will want to negotiate at their facility under the auspices of “we need you to see our facility to really see how we do things.” Then they gain psychological and logistical leverage in negotiations, as well as control of time. If this fails, they are taught to secure a neutral location for negotiations.

  • Your response: “We only do negotiations at our facilities, and we don’t deviate from that practice. If we need to see your facilities, let’s schedule a separate trip and agenda to do that, but it won’t include negotiations.”

Sales people will want to ask you a lot of questions that force you to bring out painful aspects of how you do business now, and also do “shaping”, whereby they ask questions that force you to paint yourself in a corner such that you are basically telling them that the big weakness in your business model today is that you are not buying the seller’s product or service.

  • Your response: Publish an agenda before every supplier meeting (not just negotiations) beforehand and own strict control of the meeting. If questions or comments arise that are outside of this scope, indicate so and get back on track. If the question is of value, write it down and tell them you’ll get back to them after the meeting. YOU dictate the flow and content of meetings, and drive them to your TCO objectives.

These are just a few, I could write a book on this. Heck, I might just do that, not a bad idea!

But the point is, sales people are not dumb. Don’t forget, sales is a revenue generating department. What does that mean you ask? It means they have FAT budgets for training and for wining and dining your customer.

It also means they have much more refined and sophisticated tools and processes than purchasing, who is typically underfunded because they are not viewed as a revenue generator. What we should be viewed as is a value added center of profit, but that’s a different blog – or maybe a different book, ha!

The other point is that purchasing often engages in inbreeding of thought and strategy. If you sit and strategize, alone or with a team, on how to negotiate with a supplier, you are still engaging in inbreeding of thought.

You need to know how the other side operates. You need counter intelligence. This needs to be both generic (sales side in general) and specific to the company you are working with.

The last point is that 99.9% of purchasing negotiation courses focus on behavioral/psychological techniques to achieve negotiation success. It’s the same for suppliers. This is a damn shame. For us anyways. 2/3 of your negotiation strategy should be cost based, not behavioral or psychological.

In fact, the behavioral piece will nearly cease to exist in a supply chain management model where all the links are to partner together as one entity that make decisions for the good of the chain.

Take control of the power you harness in negotiations, take control of supplier discussions and negotiations, and most of all, take control of information on both sides of the table.

See you next week.

P.S. THANK YOU so much for the overwhelming global response to the 4 Day Sale I had on the Power Purchasing Pro Membership. I am so lucky to work with people like you, in the BEST profession in the world!

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