"Our valued SaaS customers are passing us over to procurement for our contract renewal negotiation – it’s a nightmare!"
This is something we are hearing more and more from tech and software clients. Customers with which they have had long term, mutually beneficial relationships are passing their Account Managers and Customer Success Managers over to procurement departments with which they have no prior relationship and which have very little understanding of the value of the product and intangible aspects of the relationship. All they seem to care are about is HAMMERING DOWN THE PRICE.
Not fun… but it’s a negotiation challenge which must be dealt with like any other and something which may become more prevalent depending on how the economic outlook develops.
What should your AMs and CSMs be thinking about when developing their negotiation plan to combat this challenge?
People
Isolate each person involved with this negotiation and see the deal from their perspective to better understand how to approach the negotiation yourself
What are their targets, incentives, fears, doubts and concerns?
When going into their annual performance review at work, what would a Procumement Manager be measured on when compared to say a Commercial Director?
Behaviours
If you were working in your customer’s procurement team and you entered a negotiation with your firm and were met with friendly, warm relationship-building behaviours, would you see that as a potential weakness and an opportunity to use tough behaviours to achieve a lower price? Probably.
You need to adapt your behavioural style depending on who you’re dealing with. Bring smiles and glad-handing to a knife fight and you are likely to come off badly. Tough, firm behaviours can be uncomfortable, but sometimes they are appropriate to protect your interests.
Identify their positioning tactics
If their Procurement Manager is telling you they are thinking of discontinuing the contract as it’s not adding sufficient value to their business - DO YOUR DETECTIVE WORK! Is this what you’re seeing with the user base? Is this what your colleagues are hearing in their product training sessions..? If what they are saying does not tally with other pieces of evidence, ask yourself: is this valid or is it most likely deliberate positioning in an attempt to increase their power to get what they want?
What data and info can you collect to validate these messages?
Test their internal alignment
Perhaps your primary contact/senior decision maker is a commercial leader who is (get inside their head) under pressure to meet targets and deliver for the business and has relied heavily on your product as a key tool to achieve their goals. Perhaps there’s a variety of terms in the commercial agreement which support value creation for them and you which have come to fruition through previous collaborative commercial negotiation.
…Perhaps procurement are insisting that the ONLY thing which matters is price and without significant discount, the contract will be terminated.
If you can see that procurement is misaligned with your key decision maker, how could you expose this to your advantage?
What could you communicate to your key contact about what she will lose if procurement’s blunt agenda is pursued...?
How could you call procurement's bluff - "we've been told by your procurement team that they will be halving the number of licenses - is this what you want?"
What internal conversations could you trigger within your customer organisation?
Consider how exposing this misalignment could undermine the strategy of their procurement negotiator. This all comes back to the identification and analysis of each person’s motivations as well as the customer business’ internal decision-making dynamics.
Remember...
If you allow procurement to run the show, the chances are, they will succeed in their aims. Information is power, gather it and use it to plan and execute a successful negotiation.
Stay in charge of the negotiation process to it's completion.
Choose your behaviours to get the best result, not just what you find comfortable.