In many procurement processes, negotiation is restricted or entirely prohibited. John Clements, a Senior Consultant at The Gap Partnership, a globally renowned negotiation training firm, provides insights into this challenging scenario.
A former colleague who worked extensively in the public sector once remarked to Clements, “We don’t need to negotiate, we simply utilize the framework at hand.” While this approach may initially seem efficient, sparing organizations considerable time and effort typically expended in supplier negotiations, Clements’ negotiation training expertise has revealed that a lack of, or restricted negotiation – especially within intricate, complex agreements – can trigger a series of unforeseen consequences:
- One or both parties feel dissatisfied with the deal/contract outcome, as evidenced by a survey where 68% of buyers and 79% of suppliers expressed dissatisfaction with outcomes when negotiation was limited.
- An inevitable focus on cost/price, since all other terms are predetermined, leading to suboptimal value creation. Research shows that deals with limited negotiation capture only 60% of the potential value compared to fully negotiated deals (Source: Harvard Business Review, 2019).
- A lack of understanding of the deal/contract terms by one or both parties, resulting in costly misinterpretations and disputes. 47% of contract disputes stem from a lack of understanding of the agreed terms (Source: International Association for Contract & Commercial Management, 2021).
- An increased chance of failure during implementation due to misaligned expectations and a lack of buy-in from both parties.
Despite these consequences, many buying organizations still employ rigid procurement processes that severely limit or prohibit negotiation. This presents a challenge for supplier companies selling to organizations (private or public) that use these rigid processes, where a non-transparent scoring system often selects a “winner.”
According to Clements, although traditional bargaining may be restricted, companies should leverage the science of influence and persuasion, as researched by Professor Robert Cialdini in his seminal work, Influence: The Psychology of Persuasion.
While negotiation and influence are not mutually exclusive, influence focuses on the ability to affect someone’s development or behavior, rather than reaching an agreement through discussion.
Cialdini identified six principles of influence, which Clements suggests suppliers can apply within rigid procurement processes:
- Reciprocity: People are obligated to give back to others in response to a favor or concession. Suppliers could offer a small concession upfront to establish a reciprocal relationship.
- Commitment and Consistency: People strive to act consistently with their past commitments and values. Suppliers can highlight how their proposal aligns with the buyer’s stated goals and priorities.
- Social Proof: People are influenced by the actions of others, especially peers. Suppliers can provide case studies and testimonials from similar organizations.
- Authority: People defer to legitimate authorities and experts. Suppliers should establish their expertise and credibility in the relevant domain.
- Liking: People prefer to say yes to those they like. Suppliers should aim to build rapport and positive relationships with key decision-makers.
- Scarcity: People value scarce or limited resources more. Suppliers can emphasize the unique value proposition or limited availability of their offering.
In situations where sellers cannot meet buyers face-to-face, such as in e-procurement processes, Clements advises suppliers to carefully evaluate whether they should participate, especially for high-value, complex offerings.
While objective scoring criteria may seem impervious to influence tactics, Clements argues that human evaluators can still be influenced, as people inherently want to work with those they like and trust.
Ultimately, these principles of influence can provide a competitive edge, but only if the supplier’s price, scope, and terms are competitive. By leveraging persuasive tactics ethically and strategically, suppliers can improve their chances of success in rigid procurement environments that restrict negotiation.
