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Articles on IT Acquisition and Doing Better Deals

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Vendor Ploys

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The “Solutions” Ploy by Joe Auer

Vendor marketing representatives are highly trained to identify customer’s needs and sell “solutions.”  From an objective standpoint, the customer’s “needs” may not be the most critical factors in the acquisition.  The important point to the vendor’s sales representative is that the customer believes its concerns are the key factors … and the only factors.

For example, the vendor’s marketer says, “Mr. Auer, our equipment can handle your problems in this manner, within these budgetary constraints; we can deliver the entire system, including conversions, within your time frame and the system will provide a more than adequate performance level.  Can we do business?”

If the points mentioned are the main substantive concerns of the customer, more often than not there will be a “yes” response.  The vendor’s representative then provides the vendor’s standard form agreement and says, “Great: sign here and we can have the system shipped.”  The customer signs because its primary concerns at that time are the four or five areas that the vendor has so carefully met.

Unfortunately, the customer often finds out later in the relationship that, in its haste to satisfy its concerns, it overlooked some extremely important points (for example, it paid more than it needed to or it neglected to gain adequate contractual protection).  In essence, the customer finds that it got sidetracked by a bad case of tunnel vision, compliments of a great sales job by the vendor’s marketing representative.

This ruse has a number of variations.  In some situations, the vendor uses a financial concern to convince the customer’s comptroller to sign the contract.  With profits and earnings down, the financial officer is searching for additional sources of income and more effective cost controls.  The vendor’s marketing representative gets wind of this “concern” while trying to sell new equipment to the customer.  The vendor and a third-party leasing firm structure a lease that allows the customer to trade in its existing equipment, acquire the “new and better system,” and – most important to the comptroller – actually improve the customer’s net earnings by several cents per share during the first year of the step-transaction lease.  (This vendor approach is particularly effective during recessions.)

When the vendor uses this ploy, the new equipment may actually be just what the customer needs.  On the other hand, it may not be.  The problem is that the vendor is manipulating the customer to acquire important, expensive equipment on the basis of an inadequate decision-making process.

Ironically, the “I’ve got your solution” approach may not only lead to a bad acquisition, but it may fail to satisfy the very “concern” that caused the customer to jump into the transaction in the first place.  For example, in the scheme mentioned above, the customer’s independent public accountants may step in and refuse to allow the additional net income to be reported on the customer’s financial statements without at least some footnote disclosure of the unusual source.  Given this position, management might have preferred not to have entered into the transaction in the first place.  (This unfortunate result occurred more than once during a previous recession.)

The “solutions” ploy is rather easy to overcome if the customer’s management is willing to follow one basic rule.  The rule is simple, and directly related to basic consumer affairs: “Don’t buy on impulse.”  As any retail merchandiser will readily admit, impulse buying is an important factor in retail consumer sales.  Regardless of whether impulse buying is appropriate justification for purchasing a new tie or a house plant, it has no place in a decision to acquire a multimillion dollar system that is critical to the customer’s operations.

Forming an interdisciplinary team, as outlined in previous “Ploys” articles and discussed in ICN seminars, is critical to collecting and prioritizing a comprehensive set of negotiation objectives for the entire organization.  Documenting these prioritized objectives in a negotiation position paper for all team members is a key step in the process.  Then, and only then, does your team have a realistic set of “concerns” to use as negotiation points.