Competition is intense in most industries. Salespeople meet with rejection every day. They lose orders to others who bid less or offer more than they do. For those who sell in the face of intense competition, the question is, “What limits a buyer’s power to use the seller’s competitors?” The seller who understands the buyer’s limits will find they are in a better position to make more profitable agreements.
As a procurement executive with considerable experience in large companies, I can tell you first hand of a buyer’s limits in using competition, even when suppliers are fighting for the business. Here are 5 constraints that lessened our ability to make a better deal.
1) Some sellers fell by the wayside because my engineer or manufacturing head didn’t like them.
2) Some fell because I didn’t like them for failing to make a critical delivery in the past, making me and the company look bad.
3) Some were too small to deal with. Too much risk was involved. Maybe they couldn’t do the job.
4) Some were producing Cadillacs when all I needed was a Honda and
5) Some offered marvelous features which raised the price for those who needed them. I didn’t need them.
It is often said that the buyer is “king.” As you can see, there are many times when I, as a buyer, didn’t feel that way. Yet the sellers usually thought I was. They made concessions I never dreamed possible. Often, all I had to do was act like there was lots of competition. I told many sellers that all that mattered was price since all of them were offering essentially the same package of goods and services. It was never quite the case, but most chose to accept it anyway.
An understanding of the buyer’s limits in using all the competition that exists is important. For those who sell, I means that the salesperson who is more aware of the buyer’s limits will be in a stronger position than those they compete with. Because of this, they may not have to agree to a larger discount or feel coerced into offering costly added services at no additional charge.