Big Customer Negotiating: Dancing with a Gorilla

Posted by Reed Holden on May 23, 2018 1:21:49 PM
Reed Holden

Big or small, almost all B2B companies have to sell to large, powerful companies because they believe that the "big win" keeps the plant running or resources at capacity. Those negotiations are often tough and focus on price. “Tough” isn't quite the right word – how about brutal? Those big companies, or gorillas, control a lot of revenue, and like it or not, we have to sell to them. As a result of those brutal negotiations, the oftentimes smaller seller will lose money or barely break even. 

Is there a way to better control the dance? Yes, there is.

Let’s take a look at how GE evolved to a sole-supplier partnership with Boeing. Under Jack Welch, GE developed the GE90 engine which had the greatest thrust of any engine in the world. It was a $2B development program where GE competed with Pratt and Whitney to supply the Boeing 777 aircraft. GE won the deal and became sole supplier of engines for three versions of the 777. Word is that Welch had to buckle a bit on price to start the process, but the partnership has been a windfall for both companies. GE has continued to evolve the engine, investing over $500M to develop the GE9X which gives Boeing aircraft an 8-9% cost advantage, allowing them to move past Airbus in both performance and sales of twin engine aircraft.

Unfortunately, this kind of partnership success story is too rare. The truth is that we see large and small sellers often give too much during hard, price-oriented negotiations with big customers. The scenario often plays out like this, regardless of seller size: an account team prepares for a high visibility negotiation with a gorilla customer. They understand their position at the table, the value they deliver, and they develop a price based on that position and value. They are on track! Then, a senior executive on the seller’s side gets nervous when the customer employs brutal negotiation tactics and steps in, only to fold like a cheap suit to ensure the win.

Anytime a seller feels as though they have to close a deal, they will be a LOUSY negotiator and shouldn't even be at the table.

Sellers need enough confidence and willingness to lose the business to get a profitable deal. If they don't, we're all better off just going out for a beer because they'll blow it each and every time.

If you're dancing with a gorilla, here are four simple rules:

    1. Understand your value and strategy relative to the competition
    2. Understand the true Buyer Type and your relationship with the decision maker
    3. Engage early, validate value delivery throughout the contract term, and understand new needs to build an offer even King Kong can’t commoditize
    4. Ensure alignment in negotiation strategy across the team and executives
    5. Know when to hold 'em, know when to fold 'em, know when to walk away, and know when to run

Michael, who runs a very small company that sells to large government contractors, recently shared with me his success. His company is growing profitably under his strong leadership, after adopting Backbone principles like those listed above. Michael expressed that initially it was challenging, as he had to gain enough confidence that the new tactics were going to work. He had to build his successes and prove to himself and the company that they were not going to lose the business. These proof points took some time, but within a year, both revenue and profits were growing dramatically.  

So, if you feel like you’re dancing with a gorilla, change the music. You'll worry less, have more fun, and improve your customer mix. 

 

Topics: Newsletter