Scorched Earth Negotiating

We are all used to the tough negotiators. Be they in procurement or some other part of the firm, these guys push, distort the truth, and apparently do anything to get a lower price – even if it puts their own business at risk.

Lately, we have seen an escalation in negotiating tactics, including threats to stop doing business in other areas, stop doing business altogether, and basically threatening to do serious business harm to close the deal at a lower price. We call this "Scorched Earth" negotiating because the business threat is so dramatic.  We believe this tactic has been developed by procurement people to short-circuit seller attempts to manage the negotiations process to a mutually acceptable point and close the deal.

Why does procurement pull the trigger on such a dramatic tactic?

• This tactic creates a large amount of fear.  Now, not only is the Sales person’s business at risk, but the compensation, and maybe even the jobs of peers and others are at risk as well.
• The threat is so large, it often forces the supplier to involve executives in the deal.  Procurement knows Executives have more authority (and sometimes more willingness) to discount at higher levels to win.
• It increases competition and gets alternative supplier’s discount engines revving.  Competitors like nothing better than the whispers of a current supplier being thrown out of an account.

Here is what we've learned over the past few years: it's still poker playing. Poker Players are the people who really want to do business with you, but have learned to bluff about their true agenda to rattle you enough to give a discount. In fact, the bigger the threat, the more likely it is poker playing, and you are the preferred vendor. From commodities to high-value services, Poker Players are upping the stakes to rattle suppliers and get them to lower prices.

Remember that these are tells in a game, and if they're using them, it means you a) have more power than you think, b) have most likely already won the business or are at least the preferred supplier (aka, the Advantaged Player), and c) should continue to bluff right back to get them to fold.  How?

• Tap into your inner pyromania and threaten to scorch all business right back.  That is, counter to stop selling all of your products to this buyer. This takes quite a bit of fortitude, but it will quickly bring global pressure on the procurement person.
• Ensure all on your team are informed and bought into the response.  It only takes one weak moment, an executive, and a golf course to undermine the whole bluff.
• Get used to responding to the tactic.  Don’t kid yourself, this isn’t the type of thing you can do on the fly.  Preparation, role playing, and teamwork will prepare you to hold ground and not flinch.

While your fear may still be present when this tactic is used, your response is in your control.  Prepare and practice your bluff, prepare your team, and you will be able to quickly negate this foolish tactic.