Who s In Control? You or Your Customer? APMP 10 th September Alistair Powell

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1 Who s In Control? You or Your Customer? APMP 10 th September 2012 Alistair Powell

2 Sandler Rules No one can enter your castle without your permission Decide what you want, build a plan and you can bet on the outcome Its not where you fell, but where you slipped that counts

3 Getting what your product is worth is a skill.

4 Setting the scene for the negotiation I am a buyer (boo, hiss) I am in the process of negotiating for a fleet of new commercial jet aircraft You are the suppliers competing with each other 10 typical procurement scenarios, with a choice of responses You score points according to the choice you make The team with the largest number of points will win a prize (and the highest level of esteem from their colleagues) The tea with the lowest number of points will also win a prize (and the sympathy of their colleagues)

5 Choose Your Team Leader The team leader is the person with the OLDEST living relative!

6 Gambit 1 The Flinch What! Are you really serious?

7 Gambit 1 - Response A. Oh, that s just list price. Don t worry, we re competitive. We ll meet or beat our competition. B. So what do you suggest we do next? C. Decide to stay with your current price. Defend your position by providing evidence of previous sales to other airlines which were at a similar price D. Go back to your senior management and work out how you can offer a reduced price, by reducing margins, improving efficiencies and going back to suppliers for better prices 2

8 The tricks that buyers play on you

9 Introducing The Chimp Paradox The mind programme that helped me win my Olympic Golds. Sir Chris Hoy Steve Peters is the most important person in my career. Victoria Pendleton, World and Olympic Cycling Champion

10 The Chimp Paradox In very simple terms, according to Dr Steve Peters, our behaviour comes from three different parts of our brain Frontal Human Limbic Chimp Parietal - Computer

11 Buyers are trained to get our Chimps! Event Interpretation Feelings Impressions Facts Truths Emotional Thinking Logical Thinking Plan of Action Plan of Action

12 Gambit 1 - Your price is too high! How do you remain in control? Bounce it back with a question And keep questioning! Which means If price weren t an issue, who would you lean toward? When people say that to me, I ve found they can mean a couple things. It might mean they don t see the value. It might mean it s more than their budget. It might mean other things. In your case what do you mean?

13 Gambit 2 - Your competition is cheaper! We really like your solution, but you are coming in at 25% more expensive than Airdvark Industries Do you A. Ask for a chance to respond with a revised bid B. Go through your proposal with the customer to make sure you are comparing like for like C. Reduce your price by a figure which is probably somewhere between 10 - and 25% D. Discuss possible options with your team, evaluate your price to win, look for differentiators

14 The Inner Battle! All inputs go to the Chimp first Input Human rejects Chimp makes an offer Human accepts Human now needs to manage upset chimp All okay

15 Managing the Chimp Nurture first Exercise Box Distract

16 Manage the Interaction with the Computer Automatic functioning in a given situation Reference source Contains values and beliefs Some hardwired in at an early age and may need to be contained Some are soft wired and can be removed

17 Gambit 3 - Good Guy/Bad Guy If it was up to me, I would select you now, but my Managing Director has instructed me to tell you that you have to give us the ten year warranty at no extra price. Please help me as I need to find a solution How do you manage this situation? A. Tell him there that you can make this concession but there will be a small increase in price B. Persuade your Customer Support Department that the risks are worth taking as you know you can recover the costs in servicing and upgrades and this is a must win programme C. Understand his position and convince your management to make most of this reduction D. Agree to meet part way

18 Karpman s Triangle Persecutor How do you remain in control? Rescuer Game Victim Nurture Reverse Up Front Contracts Dummy up At all costs - avoid trying to rescue by discounting In Chimp terms its an attack on the tribe

19 Gambit 4 - Hot Potato I ve got some bad news, we ve just had our budget cut by 30% on this project. The government has had to revise its annual spend and has told us we have to negotiate a better deal How do you manage this situation? A. Say I m not sure if we can do this, but if we can meet part way, will you be able to move forward straight away B. Stay with your current price as you think this is just a ploy to get you to reduce your price C. Put the ball back in his court and ask him how he would like to handle it? D. Understand his position and convince your management to make most of this reduction

20 Responses to Hot Potato How do you remain in control? Don t Take the bait Be a chimp! Do Buyers use this move as it often achieves unilateral concessions EG Annual budgets, long term costings, we can go ahead straight away if we use this years underspend, etc

21 Responses to Hot Potato How do you remain in control? Don t Take the bait Be a chimp! Buyers use this move as it often achieves unilateral concessions EG Annual budgets, long term costings, we can go ahead straight away if we use this years underspend, etc Do Toss the hot potato back How should we handle this? Can you reduce the quality? Can you extend the terms? Lease versus buy? The key is to ask your customer how he plans to handle it. Don t give a discount unless you are getting something of equal or greater value in return A player wants to make sure he has wrung everything out of you. The more you resist, in a non confrontational way. The better he will feel.

22 Gambit 5 - Best and Final Offer You ve made the short list, but we are now asking everyone for their best and final offers BAFO. We need to achieve a further reduction before the approval board can sign this off How do you manage this situation? A. Tell him there that you can make this reduction but you will have to find something to take out of the proposal B. Ask them, if price was not an issue, who would you select? C. Understand his position and convince your management to make most of this reduction D. Put in a final BAFO with 10% price reduction

23 Prepare to negotiate Value Ranking My Concession 1 Additional Training 2 Upgraded Support 3 Free spare parts 4 Additional Warranty Don t give without getting something in return Buyers Concession Cost Ranking More Product 1 Agree to levels for follow on years Bundle more services 3 Testimonials 4 Use as a reference site 5 2

24 Gambit 6 - Stonewalling The buyer has stopped communicating. Your price is on the table, along with the competitors. You have had several conversations and s, and the buyers has been responsive, if a little official with their responses. Its now all gone quiet. He is not answering any calls How do you manage this situation? A. Offer an unsolicited price reduction, as you feel you now have nothing to lose B. Keep your own silence and patience C. Keep trying to contact through s and phone calls D. Escalate it to a higher level in the procurement organisation and ask for a response

25 Gambit 7 - Jam Tomorrow The buyer says, we are going to do a lot of business with you. This is just a small starter, and if it goes well, there is a ton more to come, so we are looking for your investment on this one How do you manage this situation? A. Tell the buyer you are really keen to work with them and would be prepared to offer a very competitive price if it will lead to more work B. Tell the buyer that you appreciate the possibility of more work, but the current project is the one you want to focus on first to make sure you get it right C. Make sure you get a written commitment to the larger deal, before you agree to any discount D. Agree to apply the discount to the second piece of work

26 Sources of Leverage Source Beliefs Need Emotion Time Relationships Understanding Ownership Skill Description You add value vs. you need to discount to get the deal Unique vs. commodity buy Playing on your individual investment. Stay third party If time is against you, you will feel pressurised to respond Right people, right time, be wanted Taking time to understand all points of view. Win Win Make your customer own it let it become their baby Respond, don t react

27 Leverage How do you remain in control? Source of Leverage Reduce Vulnerability Increase Your Leverage Belief Need Emotion Time Relationships Understanding Ownership Skill

28 Gambit 8 - Nibbling Continuous chipping away at your proposal over time. The buyer asks for some concessions very early on. You think it is a good idea as you want to build a good relationship How do you manage this situation? A. You see this as a good buying sign, and decide to go ahead, as it is only a small thing he is asking for B. You say no, you have to go back to your management for approval, and you can only do so once you know the whole picture C. You use your pre-planned get-give negotiation list and make a suggestion to the customer that you can make this concession providing he agrees to your change D. You set expectations early on that you are not a company that uses discounting as a way of obtaining business

29 Gambit 9 Changing the rules You have just been told your main point of contact has now changed. He has been assigned to something else. There is a new team now on this procurement Why is this ploy sometimes adopted A. To confuse you and cause extra stress as you do not know this person B. The new person wants to make his mark and uses the old persons point as the new starting point C. Because the procurement director felt that the relationship was not right between your companies D. Because your previous contact was taken off to start another programme

30 Gambit 10 The Silence You are in a meeting and the buyer stops talking. He has just asked you to consider an amendment to the specification. You have said no. There is a long pause.and everyone starts to get uncomfortable How do you manage this situation? A. Ask the buyer, is there a problem B. Review with buyer all the main features of your proposal C. Make some hint that there is a possibility that you would be prepared to consider the amendment D. Keep quiet

31 The Silence why it works He is going for your chimp! Fight, flight or freeze We feel the need to fill a silence Buyer You

32 In Summary, the Savvy Buyer Uses professional buyers whose job is to achieve the best deal Leaves their A column bidder negotiation to last Pre-negotiates and renegotiates Separates you from the users They act rushed and push you for a commitment Work on your emotions, get you to react rather than respond

33 A few tips. Manage the Chimp! Respond, rather than react When squeezed do not drip Be a player, not a donor Plan, prepare, anticipate Determine your levers Ensure you achieve a return for every reduction in price or specification do not give it away Start early Build strong relationships Understand the real reasons for buying, and reverse back to these points Do not be afraid to say no