Negotiating: The Procurement Effect
Brand designer Ted Leonhardt offers tips on holding firm when dealing with purchasing and procurement departments.
by Ted Leonhardt
Fin led the team that designed the packaging for the client’s most successful hair care brand, “Z.” It resulted in sales of a billion dollars a year. But here he was, three years later, responding to an RFP from the same company, the same team, even the same individuals.
“What’s with these people? Don’t they remember the success we had with the Z launch? We knocked it out of the park with our holistic approach, and now they throw us into a competitive situation with an RFP.”
The answer is procurement, and an amped up focus on negotiating every purchase from machine tools to office supplies. Creative services are no exception. Fin’s client now requires bids from three qualified suppliers for any purchase over $100k U.S. Fin was lucky that he wasn’t required to respond to a Request for Qualification (RFQ) in addition to the RFP.
The Walmart Effect
Some call this the “Walmart effect,” because of their relentless pursuit of the lowest cost suppliers, but it was the 2008 bursting of the housing bubble, which really accelerated it. Consumers stopped buying, and corporations tightened their belts. Today, purchasing agents and procurement departments have more influence than ever. And it works! Employment is still off, but corporate profits are high, largely due to cost control.
Mr. Procurement exists for one reason only: to get the most while paying the least. So, here we are, filling out RFPs. Our direct clients hate it, too, but they don’t like to challenge Mr. P. Hence, the RFPs are sliced, diced, compared and contrasted. Spreadsheets are created and arguments prepared for the meeting where demands for a lower price are made.
Fin recalls that meeting: “I was responding to Mr. Procurement’s challenge to every line in our proposal, with my heart pounding, my chest tight and two competitors standing in the wings.”
I reminded them of the success of the Z launch and Mr. P said, “With all due respect I must remind you that there were many other factors in that success.” A classic intimidation technique meant to undermine Fin’s confidence—Mr. P is a trained negotiator, and has many such techniques at the ready.
But Fin wasn’t intimidated. “Of course there were other factors, but please tell me why you would choose anyone else for this, your most critical launch into ‘healthy living’ when we clearly have the insights you need to win?
“And, why would you cut the budget? Don’t you know that those cuts will reduce the potential for success? Do you want us to do less discovery or less strategy? Should we cut the research? Limit the creative time? Cut the rapid prototyping?”
“On the shelf, on the site, and in the ads your market will see only one thing—the look we create. Are you prepared to risk it all on someone who’s not a proven winner? You represent a multibillion-dollar corporation. This new launch has the potential to drop hundreds of millions to your bottom line. Are you prepared to risk that for a few hundred thousand dollars in fees?”
The client team asked for fifteen minutes alone. When they reassembled Mr. Purchasing compromised, and Fin compromised, a little.
Later, Fin’s client said that Mr. Purchasing was impressed with Fin, and that his comments had made sense—this was not a project to risk. Fin had asked for and received the respect he deserved. He did so by asking questions that reinforced his beauty expertise, and by explaining the consequences of cost cutting.
Fin was frustrated, but not angry, and not intimidated. He used his high emotion to make his case, not break it. Mr. P was protecting his company, and Fin was protecting his ability to meet that company’s needs. Fin was the right choice. Mr. P’s parting words, “Award him the contract, and see that he stays within budget.”
About the Author: Ted Leonhardt, who cofounded the brand design firm The Leonhardt Group (TLG) in 1985, with his wife and partner Carolyn Leonhardt, sold the company in 1999, when it had reached $10 million in annual sales. Clients included Microsoft, Nissan, Charles Schwab, Nordstrom, Washington Mutual, Electronic Arts, Apple, XO Communications, Boeing and Weyerhaeuser. TLG became part of Cordiant Communications Group, in 2000. Ted and Carolyn moved to Europe where Ted served Cordiant’s design and branding group –Fitch:Worldwide– as Chief Creative Officer/Global in 2001 and 2002. In 2003 Ted joined Schawk, Inc., as President, Anthem Worldwide, through early 2005, a brand packaging consultancy with eight offices in the US, UK, Canada and Singapore. The Anthem assignment included building a management team and acquisitions in the US and UK, which saw revenues grow more than 20% in 2004 and nearly double in 2005. www.tedleonhardt.com