Separating Substance from Relationships
This article is adapted from The Oxford Handbook of Pricing Management, published by Oxford University Press, June 2012.
Sellers on the front lines of negotiation can become confused about the role of "the relationship"—a charged term if ever there was one. In the midst of difficult negotiations, and under pressure to close the sale, many salespeople misconstrue the role of being customer-focused and allow "the relationship" to become a lever that the buyer can use to extract an unjustified concession: "Come on, it's only $22,000. Can't you do it for free, for the good of the relationship?" Such a request signals something is wrong: Two starkly different perceptions of a "good" relationship are at play. Conceding without a reciprocal commitment—effectively trying to buy one's way into a relationship—puts the seller's interests at risk and signals the buyer's true perspective. Such strategies simply establish bad precedents that may escalate into requests for larger concessions in the future.
Good relationships matter more than ever
So can there ever be a good relationship with a customer—one in which there is openness and honesty about the value of the relationship to each side? And does a good relationship really matter anyway? The answers are "yes" and "yes." It matters because, by definition, a good relationship means efficient interactions and consistent, repeated wins for both sides. When transactions were the order of the day and total costs were not well understood, relationships mattered less. But today, three factors make relationships more important:
Shrinking supplier rosters. More customers have been anxious to pare their supplier rosters to reduce their operating costs. As the focus has shifted to working with fewer suppliers, it has become more important to forge long-lasting relationships with them—in effect, to treat more suppliers as preferred suppliers.
Outsourced business processes. The trend to outsource business processes deemed to be noncore—third-party logistics or payroll processing, for instance—has required deeper relationships. Many companies now characterize and even define some of those relationships as "partnerships."
More businesses that have long made tangible products now sell services as well. A classic example is jet engine maker Rolls Royce, which now derives a substantial portion of its revenues and much of its growth from servicing those engines. Selling services, of course, is much less transaction-oriented than selling products.
Getting a good deal—and a good working relationship
In fact, there are now more and more situations in which the ability to build and maintain relationships can be a winning element in a competitive bid. Whereas buyers wield the relationship as a bargaining chip, skilled sales negotiators work to separate the substance from the relationship, and they deal with each on its merits. The challenge for sales negotiators is to devise a strategy that results in both a good deal and a good working relationship. Such a strategy requires understanding the relationship that exists today, and working with "value champions" on the buyer's team to build a better relationship going forward.
Understanding the current relationship. To build the kind of relationship the seller wants, one must first understand the kind of relationship that exists. If the seller feels that the buyer is confusing substance with relationship, it is time to evaluate how the parties communicate and deal with their differences. This should allow the seller to determine the nature of the relationship—whether it leans toward a true partnership or toward a "master/servant" link, in which the customer acts as the dominant partner. For example, does the other party show a willingness to work with you and have the appropriate budget or resources allocated for the proposed work?
If the customer has proven to be committed to the current relationship, the relationship will probably continue to prosper. However, even if the results of these efforts reveal that the buyer really is not particularly interested in mutuality, the seller can take steps to try to salvage a relationship.
Identifying and engaging with value champions. In business-to-business environments, the seller-buyer relationship is not limited to one individual from each side; the buyer's team may include evaluators, technical buyers, procurement professionals, key influencers, business customers, and others. It is important to identify and build a special relationship with the value champion on the buying team—the person who has some ownership of the outcome, who understands the business needs and the value that the seller's offer can add.
Because the value champion supports the project in principle and is well placed to get others to agree to the value that the project will deliver, it is crucial to find and engage that person and to deeply understand his or her perspective. However, the seller should clarify, early on, that the value champion is in fact an influencer and ideally a powerful one for the deal at hand—just because that person was the value champion for other work does not mean that person is right for all subsequent work.
Finally, once the right champion has been identified, the next step is to figure out the best way to work with him or her. Value champions may fall into one of several categories. Each category has its strengths and weaknesses: the assertive but potentially less-experienced person who wants to ignore the details and get started right away; the fearful person who contends that the new proposition won't work but who can be very useful once he or she is persuaded of the proposition's value; and the skeptical person who argues that the proposition didn't "fly" before, so it won't work now. Paradoxically, this last category of skeptics can yield some of the best value champions because they weigh the risks and take the time to research, analyze, and understand, which can lead to their fully supporting the work at hand.
Tom Jacobson is a managing director and Tiffany Gilbert is a principal in the Accenture Sales & Customer Services practice. Both are contributors to The Oxford Handbook of Pricing Management, published by Oxford University Press, June 2012.
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