A stunning 45% of the time neither suppliers nor their customers realized the anticipated value from the relationship. This according to an IACCM study. Wow. That is almost like flipping a coin! What was wrong?
One reason, the parties focused solely on price, thereby choosing an inferior product with a high Total Cost of Ownership for the buying company
- Focus on price and choosing inferior product with high total cost of ownership
- Overselling a solution
- Change in direction of customer program/initiative
When we focus on price, we develop a “highly adversarial negotiation” situation. That’s right.The fastest way to erode deal value is to engage in a highly adversarial price only negotiation.
All negotiations are about price. Right? But, should it be? I always tell people that buyers want value. But, many buyers and sellers still focus on price. Why? It’s easy to measure and tangible. Price is easy to barter. Price is easy to record in our stats for commissions or bonus.
Value . . ., on the other hand, is hard to measure. It is hard to barter and it is hard to submit in our end of month/year stats to prove to our bosses that we are doing our jobs.
Value is important because at the highest levels in any organization people talk about the value that any given contract brought to the organization. The actual negotiators though, worry about price.
So, if the most senior management cares about value, why don’t the negotiators? Why are the people negotiating contracts not on the same page as those keeping score?
My book Getting to We: Negotiating Agreements for Highly Collaborative Relationships has an entire section on negotiating value. Get a copy of the book for yourself, or if you need to upskill your team to negotiate on value, call me. 206-723-3472.