Business Negotiation March 14, 2013

Partnerships Will Change Selling Part Two

These seller-customer partnerships reached prominence in Japan in the past four decades. Now they are on the rise in the United States. This trend toward partnerships continues to accelerate and is profoundly affecting American business.

The time of “high-stakes shoot-outs” has arrived. In their search to be competitive in the world market, giant corporations strive to cut costs on everything they buy. For example, instead of each corporation division purchasing its own packaging products, the corporation with thirty divisions now prefers to buy packaging from one or two suppliers rather than thirty.

Each of these thirty suppliers once bid on million dollar orders from their local division customers. Now, world class packaging companies bid on $100 million contracts. They bid to satisfy the needs of all a corporation’s divisions in the United States as a single contract. Procurement contracts are not for one year as most used to be. Now they bind the parties for three to five years.

Negotiations in the world of partnering are different. They are concerned not only with price and service but also with the ability of the seller to do research, finance factories with special needs, design a wide variety of packaging, and reduce costs, improve quality, and enhance appearance over the contract period.

The result is predictable. Only five to ten firms are large enough to participate in this high-stakes, winner-take-all game. Local and regional firms cannot break in. To survive they must downsize to service small market niches or sell out to large corporations.

The “high-stakes shoot-out” is probably the most difficult selling problem now facing local and regional suppliers still in the marketplace. The cost of making a winning proposal has risen dramatically. The ability to meet the customer’s stringent partnership and volume needs has narrowed the field. Once an order is lost it will be lost for five years, perhaps forever.

Partnerships are changing the way sellers must sell. They are also changing the individual job description of the salesperson and the corporate buyer to whom they sell. Both will suddenly find themselves far more involved in the world of contract management and in the administration of continuous contract changes. Both will need to learn new and difficult skills.

Yet, with all its difficulties, partnering is worth the effort. When it is well done the payoff to seller and buyer is enormous.