Negotiation Tactics of Buyers & Sellers
– and How to Defend!
Twelve Key Buyer Negotiation Tactics – and How a Good Seller Should Defend
What the buyer does:
Sales people often complain that the purchasing buyer is only interested in price and doesn’t seem to care much for value, ROI, and savings. Remember, that the buyer has usually selected the supplier before the negotiations begin, so all that is left is to maximize value on a few key terms and conditions such as payment terms and price. For many buyers, the remaining step is to focus solely on negotiating the very best price.
This creates a “price is all that matters” mentality that is very frustrating for the supplier.
How the seller defends:
The critical issue at stake is whether you are a rabbit or the preferred supplier. If you are a true contender, the negotiation will focus on the overall package value, as well as the price. If you are a rabbit, the buyer will show little interest in your value proposition or solution – they focus much more on price. It is critical throughout the sales process the seller discover whether they are a rabbit, a contender, or the preferred supplier through a series of probative questions and the use of “back door selling”.
If you have discovered that you are the selected supplier, the power shifts in your direction and you can easily defend the buyer’s price only tactics. Knowing this ahead of time gives the seller immense bargaining power and confidence. If you are unsure of your status, a well-timed “walk-away” tactic can help clarify your position.
What the buyer does:
Quotations are analyzed and targets are established on the critical supplier selection criteria. These targets may be “cherry picked” from a matrix of quotation results. Aggressive targets may also be set. The buyer will talk in terms of the “competition” and what they have offered. See example.
How the seller defends:
Recognize from the start this is simply a tactic and that the targets are often unreasonable and unachievable. Also, recognize that the set of targets are cherry picked from multiple offers and do not represent a legitimate offer from any one specific supplier. Ask the buyer these questions, “Where did these targets come from?” “How were these targets developed?” “What happens if I cannot meet these targets?”
Do not succumb to the feeling that a target must be met. Keep your own target and bottom line in mind and make small concessions while asking for something in return for every concession you make.
What the buyer does:
During price discussions either before or during the negotiations, the buyer might respond with “your proposal exceeds the budget”. They are trying to say that the proposal price is higher than what they are authorized to spend.
How the Seller Defends:
This may simply be a tactic in an attempt to get a lower price or it may be legitimate. In either case, consider one of the following responses: “OK then, how much is the budget?” or “No problem, we can work together to reduce the scope of the proposal to match the budget”.
What the buyer does:
Competition is the buyer’s number one weapon in the arsenal of tactics. Having choices, or the appearance of choices, gives the buyer tremendous confidence in the negotiation and also gives the buyer a “BATNA” (best alternative to a negotiated agreement or alternative choice) in the event negotiations with the preferred supplier fail for any reason. Competition is used to play one supplier off another to extract concessions and maximize value.
How the seller defends:
Sellers need to know the competition as well as the buyer does. Remember, as a seller you spend all of your time focused on a specific market or product line. There is no excuse for letting a buyer bluff you and/or exaggerate when it comes to what your competition can and cannot do. Do not be afraid to challenge the buyer’s claims about the competition.
What the buyer does:
A powerful buyer tactic is to focus on previous supplier failures or service breakdowns when negotiating with a supplier that has previous supply experience. Opening the negotiation with these past failures lowers the suppliers’ expectations. Further, the buyer is trying to create a “how can I make it up to you” feeling on the part of the supplier, opening the door for further concessions.
How the seller defends:
The simplest way to disarm this tactic is to recognize it for what it is…a dirty trick designed to make you feel bad and lower your expectations. Once recognized, the seller can separate any past service failures from the current or upcoming negotiation. Furthermore, know the agenda before the meeting starts to minimize surprises, and make sure as a seller you are up to speed on customer service issues.
What the buyer does:
Another tactic used by buyers to lower the suppliers’ expectations is to denigrate or criticize the supplier’s product or service. For example, the supplier may not offer the very latest technology or additional features offered by competitors. While this technology or feature may not be that important to the buyer, showing a high level of false interest lowers the suppliers’ expectations. Frequently, a supplier will offer to make up for this shortcoming by offering a reduced price on a similar product or make other concessions. Denigration is similar to the tactic of leveraging the past.
How the seller defends:
Similar to the tactic called leveraging the past, the simplest way to disarm this tactic is to recognize it for what it is…a dirty trick designed to make you feel bad and lower your expectations. Once recognized, the seller should probe further to understand if the buyer’s request is a legitimate need or simply a tactic. Do not fall for this dirty trick by “offering to make it up to the buyer”.
What the buyer does:
As the negotiation moves forward, the buyer will use the higher level of authority tactic as follows: “I have reviewed the situation with our sourcing committee and they are prepared to offer $xxxx if we can get an agreement signed today”. Another example might be, “I have reviewed your proposal with my Director and he says if we can agree on a price of $xxxx then we have a deal”. The higher authority adds an air of legitimacy to the buyer’s offer and gives the appearance that going back to the authority a second time is not wise, will take time, or is very difficult.
How the seller defends:
One simple defense is to request a meeting with the “committee” or the “boss”. Challenge the buyer’s apparent lack of authority and ask to negotiate directly with those that have the authority. However, do not expect the buyer to grant this request. Better yet, recognize your position — this action makes it clear that you are the preferred supplier and the buyer is trying to squeeze the price. Remember, a final offer is never made to a rabbit. This knowledge should give you the courage to fight back and say no to the requested price.
Alternatively, try pushing back with your own higher level of authority tactic and say to the buyer “I doubt that this price will be accepted by my executive committee or my boss”; or “this will take some time to sort out”.
Lastly, just try saying “no” or saying “no” with a modest concession. Do not fall victim to desperation and say “yes” without first trying to make the deal better.
What the buyer does:
At the end of the negotiation, when the deal is done or nearly done, the buyer says the following: “If you can agree to just one more thing I think we have a deal.” Or, just as the buyer is about the sign the documents, with pen in hand, the buyer says: “You know I am having second thoughts, I can not sign the agreement unless you can give me _________”. The buyer is trying to extract one final concession at the very last moment. Sellers, who are desperate to get the deal, almost always make the concession if they are empowered to do so.
How the seller defends:
There are several ways to defend the nibble tactic. First, simply nibble back. Remember the rule to never give something without getting something in return. So when the buyer makes this last minute request, agree to it, but make a conditional request in return.
Second, consider just saying “no”. Remember the buyer has put just as much effort into making this deal as you have. Do you really believe the buyer will walk away from the deal if you do not grant the nibble? Since an offer is being made, you are obviously the selected supplier.
Third, you can threaten that the nibble request will cause the entire negotiation to be re-opened. Say the following: “I thought we had a deal, however your request indicates that we did not. Looks to me like the negotiations need to be re-opened; I will have to review this situation with my people and get back to you.”
What the buyer does:
Every price offering put forward by the supplier generates the following response from the buyer, “You have to do better”, or “You are far from the target of X and you need to come up with a better price”. This is a powerful tactic and can be used repeatedly to squeeze the supplier without the buyer ever making a counter offer. This tactic can be used in conjunction with the “target” tactic or the “secret hand” tactic. Notice that buyer is not making any type of counter offer, just “do better”.
How the seller defends:
Many suppliers are intimidated by this tactic. The knee jerk reaction is to reduce the price or worse, ask the buyer, “where do I need to be?” Defending this tactic is simple; ask the question, “Why do I need to do better?” This may flush out reasons such as a lack of budget or the competition. Also, remember your target and your bottom line. Continue to sell value. Offer small, conditional concessions. If a price concession is made, remember to require a significant concession in return. Lastly, consider saying to the buyer, “this feels like a one-sided negotiation…I gave you a price and I expect specific feedback.”
What the buyer does:
Many buyers swear by a tactic of never opening with a price or never giving a price counter-offer throughout the entire negotiation. These buyers will simply continue to reinforce the target and continue to use the vise tactic above. The goal is to continue to push the supplier’s price offers down towards their bottom line. Some buyers feel that it is too risky to make a counter-offer that will be accepted by the supplier and subsequently will leave money on the table.
How the seller defends:
Defending against the secret hand is nearly the same as defending the vise. The knee jerk reaction is to reduce the price or worse, ask the buyer, “where do I need to be?” Defending this tactic is simple; remember your target and your bottom line. Continue to sell value. Offer small, conditional concessions. If a price concession is made, remember to require a significant concession in return. Lastly, consider saying to the buyer, “this feels like a one-sided negotiation…I gave you a price and I expect specific feedback.”
What the buyer does:
As the negotiations are winding down and the buyer feels that the supplier’s bottom line price is within reach, the buyer can produce a completed contract, purchase order or agreement, and present this to the supplier while stating the following: “Here is a signed purchase order with a price of $xxxx”. This is a presumptive close on the part of the buyer. Buyers know that sellers have a hard time walking away from such an offer since their number one priority is to get the business, not necessarily to get the very best deal possible.
How the seller defends:
As a seller, your responsibility is to get the best deal possible, not just close the deal. Take note of the fact that this action makes it clear that you are the preferred supplier and the buyer is simply trying to squeeze the price. Buyers do not make offers to rabbits. Have courage and do not be afraid to push back.
You might consider agreeing with the buyer’s request only if the buyer will concede something of high value to you. Alternatively, offer to lower your price below your last offer, but higher than what is on the piece of paper. Make this offer conditional, again making a request for something of value in return. Do not fall victim to desperation and say “yes” without first trying to make the deal better.
What the buyer does:
Many buyers will not agree on a price until they have forced the supplier to walk away or nearly walk away from the negotiation. These buyers believe it is only by causing the supplier to walk away can the supplier’s bottom line price can truly be discovered. Causing a walk away can be very troublesome and harm the relationship, so buyers tend to use this tactic cautiously. Skillful buyers will push and watch for signs that the supplier is approaching their walk away point.
How the seller defends:
Remember your targets and your bottom line. Take charge of how you intend to approach your bottom line. When making price concessions, make your biggest concession first. Then make each succeeding succession smaller than the one before as you approach your target or bottom line. Prepare a concession plan ahead of time – prior to the negotiation. Most importantly, make every concession conditional – get something of value in return for each concession you make. As a final reminder, do not enter into an unprofitable relationship. Considering walking away, or posturing to walk away, as a way of clarifying your position with the buyer.
Thirteen Key Sales Negotiation Tactics – and How a Good Buyer Should Defend
What the seller does:
Sellers are trained to drill deep and wide into their customer’s organization. This includes developing relationships that reach far beyond the purchasing department, in many cases with parties that at first glance appear innocuous, but ultimately prove to be “the leak” (accounts payable, plant floor, quality…). Furthermore, when talking about highly engineered products, the relationship with the engineering department often proves to be the final straw. Sellers learn early to influence the specification, get your part numbers “spec’d in” and listen for “stupid comments” about selection, preferences, competition…
How the buyer should try to defend:
When possible, buyers need to educate all outward facing employees on the importance of not sharing too much information with suppliers, regardless of how innocent it may seem. Furthermore, whenever possible, critical information should be kept to a limited number of employees on a “need to know” basis. Lastly, suppliers should be required to “check in” with purchasing and keep purchasing informed of ALL meetings…even if only on a cursory basis.
What the seller does:
The most powerful tool a seller has is the ability to determine if they’ve already been selected. If they know they’ve been selected, they can quickly shift the balance of power to their side of the table. How? By walking away, or at least pretending to walk. If they’re selected, the buyer can NOT let them walk.
How the buyer should try to defend:
The buyer must protect the final selection decision, and leave the seller always feeling like multiple buying options exist. The buyer’s first defense to the “walk away” tactic is to threaten the seller; “if you walk, you’ll never be considered again”, or something similar. From there, the buyer must also intimate that they too, are walking. Unfortunately this tactic leads to the old saying, “he who blinks first loses”.
What the seller does:
Sellers try to get the purchasing buyer to react quickly by threatening a “coming price increase”. They’ll say things like; “next month the price may go up”, or “we always get price increases around this time of year”. Along with this looming price increase, they’ll also claim to have no knowledge of any real facts around “if and when” it’s really coming.
How the buyer should try to defend:
First, buyers must recognize this as a tactic. Second they must uncover the truth and expose any fiction by asking the appropriate questions: “Tell me when the increase is coming, or let me speak to someone who can.” If still left in the dark, the next response should be something along these lines…. “I’m surprised you don’t know your own company as well as I think you should. If you can NOT honor these prices for the next X days, then perhaps I should be talking to your competitor more often.”
What the seller does:
Weaker sellers are often trying much too hard to close the deal, while the stronger seller is trying hard to determine if they’re selected. If a seller determines they’ve been selected, a simple change of pace can really close the deal. By merely saying something like, “I realize you still haven’t finalized your decision. We understand and would like to encourage you to take your time. In the mean time, we’re going to be using (resources, time, manpower….) elsewhere, but look forward to seeing how everything unfolds.” This tactic may quickly flush out a buyer’s true intention. A reaction such as, “no problem” could mean trouble. A reaction such as “wait a minute or hold on a second” could signify that you’re close to a deal and there really isn’t a need to negotiate much more.
How the Buyer should try to defend:
The skilled buyer will first try to determine if the seller has “back-door” knowledge that is convincing them that they are indeed selected. If so, they are forced to bluff with a strong “OK, we’ll call you when we’re ready and hopefully you’ll be able to meet the requirement”. If the buyer feels the seller is invoking this tactic with NO knowledge of where they are in the selection process, the same reply still holds true. However, if the buyer is convinced the seller realizes they’ve been selected and are merely trying to force the buyer into making the decision “now” rather than later, the buyer must “change the pace” back. This can be accomplished by making unusual and unexpected requests of the seller, such as; a new RFQ, a new scope requirement, a new set of meetings, etc … in order to keep the seller engaged at a level where they are expending resources while chasing the order.
What the seller does:
Based upon age old supply and demand economics, seller’s often limit supply in order to cause fear. Buyer’s loath single or sole source situations and have genuine internal demands. By creating the illusion that a key product or material (including manpower) is in limited supply, sellers may cause a buyer to panic and either provide too much information or in some instances make a rash purchase decision.
How the buyer should try to defend:
Buyers should have a strong understanding of their supplier’s capabilities, including knowledge of the competitive landscape. This can be determined through RFIs and RFPs. Additionally, buyer’s need to protect “leaks” around true demand (see “back-door selling” and “walk away”)
What the seller does:
Sellers provide buyers with “either this – or that” choices, appearing to be providing concessions, while at the same time also appearing flexible. What buyers often forget is that the seller has already constructed the choices to their benefit, and that either selection is acceptable and hence a “good” choice for the seller to agree to.
How the buyer should try to defend:
Buyers need to first recognize this as a tactic, and quickly realize that often the mere presentation of an “either-or” choice by the seller is an indication that something more is available beyond the choices on the table. The quickest way to disarm this tactic is to respond with a “neither, what else can you do?”
What the seller does:
This tactic, though easy to understand, is not always easily recognized. A seller will confirm a piece, or pieces, of an order with a buyer in very subtle ways (i.e. “we’ll start Tuesday, unless Wednesday is better”), until the buyer is in a position where extricating themselves is difficult, if not impossible. Usually, little requests are granted such as a meeting with legal, a quality engineering review, a pre-production certification review….until the buyer is clearly moving down the road with the selected vendor. At that point, making the claim that “you might not win” is clearly absurd and both parties know it. The old tale about boiling frogs comes to mind. Once asked “how do you boil a frog”, the old timer replied, “slowly”. In fact, if a frog is placed in boiling water, he’ll jump out quickly, to safety. Yet, if a frog is covered in water and then a flame is turned on, slowly rising the water temperature to boiling, the frog will never notice – he’s been boiled. How do you boil a purchasing agent? Slowly.
How the Buyer should try to defend:
As with many seller tactics, recognition is critical. Once recognized the quick defense is to say “no”, often, while keeping the seller guessing as to whether they’ve been selected.
What the seller does:
A classic seller tactic is to offer to write all of the documents, saving the buyer precious time, while in effect “dropping an anchor” on their own position. Buyers, typically swamped with demands often agree. Therein lays the danger. What a savvy seller will do is load up the document with many unreasonable demands that they in fact know will NOT be granted. When the buyer asks that these demands be removed the seller quickly agrees, but then tries to use this as leverage in order to gain something in return. “I’ll agree to remove that clause if…” Or at the least, the seller will make sure the buyer knows they’ve made the concession, while trying to garner sympathy and lower the expectation on the buyer’s part.
How the buyer should try to defend:
Buyers need to recognize this tactic as an effective way of “dropping an anchor”, and thus need to author their own deal docs. If a buyer is caught with seller’s docs, they should quickly eliminate all “unreasonable items” categorically, offering no explanation or concession, but instead merely stating, “That’s unreasonable and will not be considered”.
What the Seller Does:
All sellers know their own capabilities (or lack there of) better than the buyer. Sellers also know what they can and cannot do vis-à-vis their competitors. Because of this, a seller can offer to accept penalties that will never arise, creating a chance for twice the return. For example: If the seller is secure in their ability to meet a delivery date, while at the same time they are confident their competitor cannot, they can offer “guaranteed delivery or a penalty of X”. Not only will this tactic appear as a concession to the buyer, but it will also lower the buyer’s expectation of the competitor.
How the buyer should try to defend:
Overall this can prove to be a difficult tactic to defend. First, the buyer must recognize that it is their job to confirm if the competition can “keep up”, and secondly, more importantly, the buyer must realize that a good seller will NEVER make such a concession unless it is indeed “risk free”. In which case, the buyer should react by saying, “I’d expect nothing less from a valued supplier”, disarming the tactic.
What the seller does:
All negotiators know that people tend to make their largest concessions at the deadline. What most people forget is that “both sides have deadlines”. Skilled sellers will place deadlines on their offers in order to place pressure on the buyer. Similar to limiting supply, or looming price increases, they are in effect limiting the supply of “time”.
How the buyer should try to defend:
The unskilled buyer may react to the deadline pressure and offer information, or worse yet accept the deal due to the perceived pressure. The skilled buyer will simply ask for an extension. Some buyers often ignore deadlines, thinking, “I have the money and if they want the money they’ll change the deadline”. Keep in mind that though this is often effective, it’s also risky if the seller holds their ground.
What the seller does:
Skilled sellers will try hard to access an organization through the executive suite. After all, who’s going to go against the bosses, bosses, boss? In fact several organizations are famous for this approach (SAP, IBM). Once a “C-level” executive is on board, it’s often smooth sailing.
How the buyer should try to defend:
This tactic can prove very difficult to defend because the boss is the boss, and he’s not used to hearing “no”. What a skilled buyer needs to do is understand the C-level executive buys for two reasons; relationship and share holder value. Ultimately, share holder value should outweigh all other factors. If a C-level executive presents “the solution”, your job would be to press the seller for the “proof of return”, then at least you can make a case if you feel you need too.
What the seller does:
As the buyer begins to negotiate with the seller, a shrewd seller can merely de-scope the project or package, while continuously stating, “we can to that, if…” The buyer, if not careful, will feel as if they are gaining concessions, when in fact they are left with a mere shell of the original offer.
How the buyer should try to defend:
Negotiate back. If the seller offers a concession, but ties it back to a reduction in scope, the buyer needs to push back equally as hard, saying something such as; “Sorry, but I can’t accept that new offer, what I can accept is X and Y if I do Z.”
What the seller does:
If the seller has an idea of where the budget lies, they can present a bid that is two-tiered and that brackets the budget. For example: The budget appears to be set at $100. The seller offers, “package A for $75”, with many missing features and subsequent benefits, or “package B for $125”, with upgraded features and benefits. This now forces the buyer to either negotiate up from “package A”, securing the entire budget for the seller, or negotiate down from “package B”, also allowing the seller to clear the table.
How the buyer should try to defend:
Buyers need to first write tight specifications for bid packages, and then insist that the seller quotes only what’s being requested.
Our friends at Harvard give you 10 negotiating tactics, we tell you how to defend as well.
Learn how to put all these tactics, and more, into play with a negotiation course by TableForce.
