The price someone is prepared to pay resides in their mind, not in your desk calculator and not in your head. This little story shows how when your mind is free from the angst of winning the business you can often get a better price.

Yesterday I was with some customer-facing staff from one of our clients talking about real-life situations where they had managed to get a customer to pay a little bit more.

One of the women described an enquiry that had come in from a customer she had dealt with in the past. She didn’t like him. He was always brusque with her and whenever he had a technical question he demanded to talk to a man as he assumed that her gender precluded her from understanding the technical products she had been selling for years. You can imagine how annoyed this would make a strong and capable woman like our friend.

His second mistake (the first; being rude to her previously) was the barrage he let fly at her to make her understand how just how urgently he needed the product. Having made his point he put the phone down without so much as a please or thank you.

The enquiry was for a product she knew well and could acquire for him quickly and cheaply. All she had to do was to decide how much he should pay.

She added her usual mark-up and looked at the figure. She remembered how rude he was to her… and she added a bit more… then she remembered how desperate he was… and she added a bit more… then with a smile, she pictured him with steam coming out of his ears when he realised that he had no choice but to buy from her…. and she added a bit more.

After letting him stew for ten minutes or so, she called him back. Putting on her best telephone voice and a knowing smile, she told him that she had managed to track down a supply of the product he needed so desperately and she would pull out all the stops to get it to him the same afternoon… then she told him the price (now about four times as much as she would have normally charged). It was still a relatively small amount in his scheme of things and the value of getting the parts to him the same afternoon was that he could get on and finish the job. He didn’t flinch. He placed the order and for once actually thanked her.

There are several morals to this story:

Firstly, don’t be rude to suppliers’ staff if they have discretion to set prices.

Secondly, for people in a hurry time is money and they will pay to save it.

Thirdly, and most importantly, becuase she really didn’t care whether he bought from her or not, her desire to make the sale was taken out of the equation…. all that was left was his desire to buy. It turned out that his desire to buy could be measured in a price that was four times what she would have charged to a customer whose business she really wanted. This means that you should concentrate on what is in the customer’s head not yours… how is he or she benchmarking your price, what are the circumstances of the purchase, what value will he or she derive from the product (including the service you can give), does he or she know where else to go?

I am not saying that you should price customers based on their attitude, although I have a sneaking admiration for her approach. However what this does show is that a polite customer asking for the same product in the same circumstances would have also probably paid four times more than the normal mark-up. It is only when you are genuinely ambivalent about winning the business do you actually push the envelope on price.

Have you ever priced a customer to go away only to find they didn’t?

The tender is a devilish device designed to cynically negate all the carefully crafted embellishments of the salesperson and all the wonderfully concocted unique propositions of the marketing department. However they are about as much use in choosing a supplier who will give you long term value, as a beauty pageant is as a means of choosing a life partner.

In the eyes of a procurement professional, a tender makes all other things equal so that the suppliers can be focused on sharpening their pricing pencil until it is little more than a well-chewed stub… so short it can barely be clenched twixt finger and thumb.

So how do you win business is in the face of such a soulless adversary?….

The first thing to say about tenders is, that if the first time you hear about one is when the request arrives on your desk, then you should assume that you have already lost (Sorry if this sounds rather like the old joke about the lost tourists who stop to ask a farmer for directions and get the reply ‘If I were you I wouldn’t start from here’)

You need to consider how a tender comes about to understand how to tackle it. In instances where there is already an incumbent supplier, the technical part of the tender document will be written based on the product or service they are already getting. Unless they have a burning desire for change, what in effect they are asking for is ‘more of the same please… but cheaper’.

Because the document assumes there is only one way to provide the product or service, you have no way of registering that yours has an advantage and that they will need to accept some risk or cost of change….Also I have never seen a box in tender documents asking you to put in why they should pay more.

So, turning hindsight into foresight this is how you go about it:

1. Identify all the potential customers that you think could especially benefit from your product or service….regardless of where they are in the tender cycle.
2. Research them like hell and set about building contacts at as many levels as possible. If there is not a tender in the offing they should be more inclined to talk to you.
3. If you are successful in making contact, use your very best discovery skills to understand the world from their point of view…How they make their money, what’s important to them, what makes the individual decision-makers tick, what gets them worked up.
4. Gently and subtly, without being rude, point out what they are missing by using the incumbent supplier and make sure that you are on the next tender list. If they can see that you have invested time in them it would be mean to exclude you.
5. Turn up the volume a tad just before they start to draft the technical section of the next tender. The aim is to have it written it in such a way that only you can fulfill its requirements.
6. Make sure that they see value in doing things differently and expect to pay more for this approach.

A tender is not the time to do your selling, it is a time to remind them of the (very subtle) selling you did months if not, years ago.

If you are going to have to undergo the somewhat degrading spectacle of appearing in a beauty pageant, it probably helps if the judges already know you and you have been out on a few dates together.

I know this doesn’t help you win the tender sat on your desk today, but it should help you win some a couple of years hence.

The Moral of the Story is simple…. be proactive not reactive. Put the first step in place today. If you want a rich seam of business to mine in the future, make it someone’s job to find and engage targets now.

Believe me, you will thank yourself (and possibly me) in 2-3 years time!

…of course we can help, if you need to build this capability.

Do you remember the scene in the movies when the hired assassin opens the brown envelope and takes out a complete dossier on his next target?

Now I am sure that none of you have ever wanted to bump off any of your customers – no matter how difficult they are and no matter how little they pay. However there is something to be said for going into negotiations with all the facts at your fingertips.

A little while ago we completed a project which involved three senior directors going out to the market to present a new pricing system that we have helped them develop. The end result was that ten specific customers would end up paying quite a lot more. Seems they had been underpaying for the service they had been getting for years.

The culmination of our process was a full day and a half of training for the directors in question. We presented them with a complete dossier on each customer drawn from their own data and external sources. Each dossier included:

1.    A copy of the new price list (printed nicely and laminated so it looked like it wasn’t negotiable)

2.    Notes on the way the pricing mechanism works including some calculated examples

3.    A set of notes from the training sessions we had run explaining how to present the prices at this stage and how to answer common objections

4.    A history of the customer’s trading over the last three years showing ratios and trends indicating that their business had cost more to service

5.    A financial model showing how the new charges would affect their costs based on recent months’ activity

6.    A copy of their forecasts for their activity compared with actuals showing how hopeless they were at helping us plan the capacity to service them

7.    Details of the customer’s business with his marketplace – his overall strategy and performance, the price of his products, his approach to market etc.

8.    Details of the current relationship with the customer from the people at the sharp end including their quirks and how they make life difficult

9.    A list of all the little favours that were done for the customer at no charge (including all their cock-ups that we helped brush under the carpet)

10.A set of carefully thought through arguments supported by statistics justifying the cost increase and showing how they could work with us to save costs in the future by changing their behaviour

There was around £4m of profit either way riding on the outcome of these meetings. I can’t remember anyone being more thoroughly prepared.

The moral of the story is: Why would you go into major negotiations that could earn you or cost you millions without doing everything you could to prepare?