Negotiating for Value

Learning the total cost of ownership process can place you in a better position to negotiate for value. Here are 8 lessons from the medical device industry


Start by determining what information should be disclosed to the supplier. Not revealing certain facts could work against you and lead to unintentional deadlock. With sensitive information that could weaken your position, prepare plausible answers that are sufficiently vague so they don't cause suspicion or reveal anything proprietary.

Be prepared to disclose non-sensitive facts, which may help you get what you want. Any information that may lower or minimize the other party's expectations gives your side power and should be revealed early on, even if it's not requested. If the supplier is reluctant to share information, be prepared to trade information you want for what he or she wants.

In one case that illustrates the benefits of early disclosure of information, a supplier sent pricing information to the procurement specialist prior to the first meeting, saying that prices were negotiable. The pleasantly surprised buyer told the supplier that it helped him understand the pricing structure. When the buyer pushed on price, the supplier revealed other negotiable variables. As a result, they closed the deal in short order. The supplier got his price and the procurement specialist got five items of value from the supplier — and told his internal customer that he had "won."

6. Negotiate More Favorable Terms

The TCO approach provides you and the supplier with more flexibility in negotiating terms and fees. For example, if the length of the service contract for the blood analysis machine is more important to you, then the supplier can offer higher value — helping its overall standing and helping you get what you want.

If leasing the equipment is a possibility, then this would have a high relative value with the total cost of ownership process. And if the total leased price for contract length, though less expensive on the surface, is offset by extension costs or equipment replacement costs, this may be outweighed by the cost of purchasing something seemingly more expensive on the surface.

7. Overcome Suppliers Who Say They've Been "Stripped to the Bone"

If you've been dealing with a supplier for a long time, through multiple rounds of negotiations against commodities or services that have remained constant over time, their margins may be nearing a limit — "stripped to the bone." You may have already gotten the best price on a particular stent, screw or other components. Still, they may have manuals, training, online tutorials or onsite help that could add value to your physicians, clinicians or others in the lab that may be worth more than another price cut. In this case, use provocative questions like, "Under what circumstances would you (the supplier) provide what I am asking for?"

When you believe the supplier has more power (discovered in the power balance analysis), enter the negotiation armed with a series of proposals. Then drive the process by putting proposals on the table without spending unnecessary time in dialogue. Be ready to ask what needs to be done to a proposal that's first rejected to make it acceptable. This will keep you on the offensive and stick to the agenda.

For example, if a pacemaker supplier has allowed prices to erode to preserve market share, you could agree on the value scale categories. Then, by allowing the supplier to maintain or even increase the price, you can demonstrate that, with other attributes, the total cost of ownership is less than with other suppliers and you're improving existing or original terms.

8. Conclusion: Keep Searching for Value

Effective negotiations require much more than just the art of persuasion — which will take you only so far. Especially in today's tough economy, always look for value in buying and selling. It can help you partner more closely with suppliers to meet your monetary goals. At the same time, you'll be able to meet others' needs, such as quality-of-life goals for your scientists, administrators and other health professionals.

Learn the total cost of ownership process to place you and your firm in a better position to negotiate for value and maximize results. Plus, you'll always be able to defend your decision not to purchase the least expensive component, monitor, stent or assay machine. You'll be able to explain how negotiating for value paid off.

About the Author: Marty Finkle, CPT, is the CEO of Scotwork, NA, Inc. a negotiation consulting, and training company based in Glasgow, Scotland, and Parsippany, N.J. More information at www.scotworkusa.com.

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