Bob is the EVP of pricing at a global services firm. Like many people in his position, he gets involved in structuring the prices for deals with large global customers. But Bob is different, he has been trained in and actually has Backbone. Because of that, he often takes the lead in customer negotiations. Why? Because he knows that if is left solely to sales team, they will fall prey to procurement tactics and give discounts when they actually aren’t needed.
This happened recently with an RFQ that came from their largest customer. The prior contracted deal, which was written two years ago, was horrible for Bob’s company. It had low/unprofitable prices and terrible payment terms. When the RFQ came out this year, Bob decided to take the helm and make the account profitable again. He knew several things about the account:
- First, there were only a few global competitors that could even try to service the customer and they couldn’t do it as well as his company and they were pretty smart pricers.
- Second, he knew he was going to have to force through a large price increase (20% !!!) and that would make the procurement people very angry.
- Third, he had to be willing to risk the loss of the business in order to get the increase. No, he didn’t want to lose it but he knew that procurement would make all sorts of threats…including taking away the business. He knew he had to be strong and confident through that process.
- Finally, Bob had a lot of credibility with the CEO and when he went to him with his approach, the CEO gave his unconditional support. That support came from dramatically increasing profits….to a record level his pricing people achieved last year.
What happened? As expected, procurement got angry and threatened to take the business away. They even went so far as to call individual countries and tell them to stop purchasing Bob’s services. But in Bob’s words “The noise was deafening? However, using (Negotiating with) Backbone as a guide, all that did was make me more confident that they didn’t want to switch. Even though another supplier was qualified, most of the local customer regions refused to switch. In the regions where they were told repeatedly, the business was going to a competitor, revenue is up 44% and they paid the 20% price increase. In the territory where the procurement people actually awarded the business to a competitor, revenue is up 5% along with paying the price increase.
Kudo’s to Bob, his CEO and team in doing the right thing.
The names of the participants and companies have been changed to protect the Brave. But Bob did receive his very own Negotiating with Backbone coffee cup.