Negotiating in Life February 28, 2013

How Sellers Benefit from Long Term Relationships Part Two

My advice to those who sell is to break into a new account, even if you have to suffer initial loss. The buyer will be reluctant to let you go if you do a reasonably good job and maintain warm rapport. Salespeople who go one step beyond by befriending the end-users of their product or service, such as the engineering or manufacturing people, will build an almost impregnable barrier against losing the account.

The idea of “buying-in” to gain a customer seems risky, but it usually isn’t. In my experience, buyers take good care of vendors who have been with them for a long time. They are willing to pay higher prices to suppliers who give them no trouble.

One more factor that works for the seller is that the specifications for most products or services change over time. These revisions always benefit the current supplier more than their competitors. Changes serve to increase the seller’s profit margin. A marketing executive I know used to say, “Changes are profits in escrow.” He understood that a losing job can quickly become a profitable one as the specification or scope of work changes.

What can buyers do to offset the seller’s advantages? The seven strategies which follow can help turn things around in favor of an alert buyer:

ONE: Don’t be lazy. Search for competition. Keep the sellers on their toes.

TWO: Don’t be passive about settling for a gradual reduction of services or performance. Be alert and assertive. Face the problem early or you will soon get less for your money.

THREE: Rotate buyers. There is nothing like a new buyer to stimulate a seller’s lagging interest in an old account.

FOUR: Dual-source your requirements whenever possible, even if you have to pay a premium to start with. Competition works wonders.

FIVE: Try to learn as much about the seller’s business as they know about yours. Find out what their costs are, how they make the product, and how badly they need your business.

SIX: Negotiate cost not price. Buyers do better when the basis of discussion is cost. Get breakdowns and negotiate each element of cost.

SEVEN: Work closely with the seller to find better arrangements for both parties. Creative changes for mutual benefit are sure to follow if you look for them.

Long-term relationships are a fact of business life. The main danger for the buyer is complacency. The buyer who learns to treat each negotiation with an old supplier as a new test of the market will keep the seller from exploiting the relationship. In the long run, this will make for a healthier, more durable association that benefits both buyer and seller.