Home > Vendor Domination by Dependency
The goal of the organization implementing this strategy is to position their company in such a way that the customer feels they have no other alternative or wouldn’t consider another alternative.
This tactic involves the vendor promoting a partnering and teaming approach to a company. The idea is to control the customer by building a high level of rapport between the vendor’s sales and management team and the customer’s staff.
This approach is appealing because it is promoted to the customer as a way to provide the highest level of customer service and reduce their work load.
More and more, companies are looking for ways to reduce their costs. Outsourcing is just one strategy that is being utilized. Large vendors are offering customers I.T. and other managed services. This puts their representatives in front of the customer’s key people on a daily basis and provides them a great deal of access to company information.
If the opportunity is big enough, the vendor might offer to place a representative, on site, at the customer’s location.
In extreme examples the vendor positions itself so well that the customer becomes a “name of the vendor” shop – meaning that the customer is completely devoted to the vendor. They consider their company as partnered with the vendor company.
At this point, the customer is in a perilous position because they’ve lost almost all of their bargaining power, so there is little chance that the customer will receive the vendor’s best pricing and terms.
Let’s not forget that the vendor’s and customer’s goals clash. The vendor’s goals are to maximize profits and minimize risk. The customer’s goals are to minimize costs and maximize vendor performance. So, the idea of any partnering between the two parties seems counterproductive.
Form a negotiation team with clearly defined roles and responsibilities:
With this organization your company is less vulnerable to vendor influence. If every member of the team focuses on his or her responsibilities, there’s not one individual who can be swayed into a making a bad deal.
Have all vendors sign in every time they enter your premise:
You don’t want to allow your vendors free access to your facility. Make your vendor representatives accountable; making them sign in and out sends a clear message that they are being monitored.
Execute confidentiality and non disclosure agreements:
This is another method to reduce your vendor’s access to, and use of, your company’s private information. It provides your company more control over what’s said about your company and prevents your vendors from circulating potentially sensitive company information.
Cut off uncontrolled information flow:
Coach staff members on what information can and can’t be shared with your vendors. A slip of the tongue by a staff member or an executive could cost you. Make sure vendor representatives are monitored when their on premise and kept away from sensitive company information.
Deal with the highest level of authority:
Don’t waste time negotiating with a marketing representative; they have limited authority to negotiate. By dealing exclusively with higher end people in your vendor’s organization, you’re making your company less susceptible to vendor influence. Your vendor’s “higher ups” aren’t going to have the time to interact with your people, to build rapport and influence, like their marketing people and they have the power to negotiate.