Reverse Auctions – Strategies for Suppliers

Jeff Cochran


A reverse auction (also called procurement auction, e-auction, sourcing event, e-sourcing or eRA) is a tool used in business-to-business procurement. It is a type of auction in which the role of the buyer and seller are reversed, with the primary objective to drive purchase prices downward. In an ordinary auction (also known as a forward auction), buyers compete to obtain a good or service. In a reverse auction, sellers compete to obtain business.

According to recent research, the number of companies purchasing goods via online auctions is increasing by 5% annually. Large organizations (>$100M U.S. in goods purchased) use the reverse auction more often than smaller companies.

The risks for suppliers are clear – reduced pricing on auctions won, future price reductions in face-to-face negotiations (due to the bad precedent), inability to differentiate on value, a removal of the direct relationship with buyers and constraints on the terms and conditions of the contracts associated with reverse auctions.

There are some benefits to a supplier too. Reverse auctions give you the time to effectively prepare a strong bid. Suppliers can also develop a new channel for excess inventory and reduce the costs of acquiring new customers. Transaction costs are reduced in a reverse auction and suppliers can improve the standards for specifications (creating a more level competitive playing field).

Here are some key strategies to try when participating in a reverse auction:

1. Use Precedents to Your Advantage

If a customer is thinking about using the reverse auction for the first time, you should share the following common complaints about the strategy:

  • It is slower and ultimately more expensive than a face to face transaction. Time spent drawing up the specs, qualifying applicants, identifying bidders, and choosing the winner all contribute to a longer, more drawn out process.
  • Reverse auctions drive out competition. Some suppliers cannot compete on price alone, which, over time, erodes the competitive advantage by consolidating the supplier base. Eventually, bargaining power will shift back to the supplier.
  • Sometimes the winner cannot meet the demands of the buyer at that low price. As a result, the buyer has to start the process all over again.
  • Reverse auctions carry the risk of exposing sensitive information that can be shared among bidders and buyers.

2. Establish a Walkaway

By setting a reserve price (a price at which you will not accept a penny less) and establishing strong, non-negotiable evaluation criteria, suppliers can play the same game as buyers. One example is to set an “exploding deadline.” Set a limit to the amount of time your bid is valid. Do not let the auction end then wait for a “final” decision. Reserve the right to close your bid if a contract is not in place within a reasonable amount of time.

3. Use Pricing Software

Prevent unprofitable bids by investing in pricing software to quickly analyze profitability, especially if you participate in multi-offer reverse auctions where you can see who is winning the business during the auction. Vendavo, MapInfo, Visstar and Zilliant all provide different types of software that can protect your bids from becoming losses.

In the next entry, I will outline some alternatives to reverse auctions that can help both supplier and buyer get the most of what they want from their deal.

Training ROI Starts with Assessment

Jeff Cochran


Many training initiatives are reactive in nature. An influential executive notices a skill gaps or deficiency and prescribes training as the remedy without careful consideration for the long-term benefits. In fact, training alone will rarely, if ever, provide for lasting and productive change in the way people do their jobs. People are able to change only if they have an understanding of the reasons for that change and can recognize a personal benefit if they do change their behavior (Langdon, Whiteside and McKenna, 1999).

Organizations must recognize that training alone is rarely the solution. Training typically impacts individual performance whereas in a business setting, results are typically produced by a team of people acting in concert to achieve an objective. These people may have different incentives and barriers to their individual performance, such as different compensation plans, tools and systems to use in doing their jobs and the types of rewards and recognition that are available. These barriers and incentives must be addressed in order to determine if training is part of the right solution to drive the desired behaviors and results.

To successfully design and implement a training program that delivers positive results for your organization, we recommend the following steps:

1. Assess Your Business Needs

The first step is to determine precisely what gaps exist between desired outcomes and the current state. Determine this gap by:

a) Assessing the existing skill set and level of your employees.

b) Analyzing the organizational practices that drive or impede new ways of doing things.

c) Reviewing existing training curriculum to measure the extent to which it delivers necessary skills, knowledge and attitudes.

Use this information to establish a baseline of today’s performance and to identify the proper solutions.

2. Align Your Solution with Corporate Strategy

The solutions you choose must be aligned with the long-term strategic direction of your organization. In the case of a training solution, we recommend that your company:

a) Align training expenditures in direct proportion to corporate goals.

b) Centralize accountability for producing high-impact training.

c) Solicit input from all levels of the organization on alignment and proper solutions.

For a complete version of the white paper “The Direct Path to Training ROI“, please call Shapiro Negotiations Institute at 410 662 4764.

Do More with Less and Prove It: Training ROI

Jeff Cochran


According to the latest annual report by Training Magazine, U.S. organizations spent $58.5 billion for training (including payroll and training budgets) with $16.3 billion spent on external learning products and services. While growth in the training industry tailed off (6% growth versus 7% in 2006), staffing and training budgets increased by 4.8%. Breaking it down further, the average spend per learner in 2007 was roughly $1,202 which is about the same as the $1,276 spent in 2006. These are significant numbers in troubled economic times since companies are making tough budgeting decisions for 2008 as you read this and all signs point to an extended period of recession.

Top Priorities

1. Increase the Effectiveness of Training

Forty-four (44%) percent of companies responding to the annual Training survey listed increasing the effectiveness of training as a top priority in 2007, and I predict that figure will increase when the 2008 survey results are published. Companies are focusing more attention on implementing programs that maximize learning transfer to the job and that have a direct impact on the bottom line. Gone are the days of 3-day “flavor of the month” in-house workshops with extended role playing. Today’s training provider has to deliver the goods in a short, memorable program and follow through with easy-to-use job aids.

2. Reduce Training Costs

“Increased effectiveness” is often code for “better training for less money.” This is understandable when training directors and business-line leaders are making decisions on headcount, technology and other key business drivers and trying to justify training expenditures at the same time. Twenty-nine (29%) percent of respondents to the Training survey reported that vigilance over training expense is their #1 priority in 2007. This will undoubtedly increase as the economy continues to stumble.

3. Measure Training Impact

At SNI, we have experienced a significant increase in the number of clients expressing a desire to carefully analyze the effectiveness of our training programs. More and more companies are looking for partners who are willing and able to assess learning transfer and its impact on the bottom line. While many companies continue to struggle with the measurement process, most are willing to spend the time and money needed to more closely assess bottom line impact. According to Bersin & Associates, most companies will choose one or two programs that are closely aligned with results for which there is readily available data for the measurement effort.


This blog will explore the emerging trends and outcomes of the “new training economy” to identify the best survival tactics for today’s training professional. The first step in forming a strategy for success is knowing precisely what the training buyers and participants need from us. The good news is that while increased effectiveness, reduced costs and accurate impact measurement all seem to be incongruent (“Do more with less and prove it”)it creates the perfect storm of opportunity for us. Plato (apparently?) said “Necessity (which) is the mother of invention.” Perhaps this is our opportunity to take all of the tools, technology and training we have and use it to meet these emerging needs in our customers.

How to Deal with Difficult People: Fight, Flight or Focus?

Jeff Cochran


Common sense dictates that if we can control our emotions when confronted with a difficult situation, we will achieve better results. We have all seen how police officers are trained to remain calm in the face of angry, belligerent suspects. We admire the basketball player who coolly sinks the winning free throws while the student section does its best to distract him. We can’t help but be impressed by the courage of our military in the face of life-threatening danger. When considering the pressure and danger associated with these examples, it seems silly as a sales professional to feel fear when confronted with a difficult customer.

Fight or Flight?

We are all hard-wired to flee from danger. Our “flight” response automatically kicks in when we are faced with life-threatening danger. A less dramatic (yet debilitating) flight response is also common when faced with uncertainty or adversity in business. Many of our clients report that flight is a viable option when we face lesser threats such as rejection. This has been hammered into our psyche as salespeople when we are reminded that it takes several “no’s” before we gain a “yes” and that it is better to live to come back another day than to push the battle too far today. Unfortunately, every time we exercise the flight option, we leave the door open for the “real” threat – competition – to walk in and make our situation worse.

The other option that is commonly considered in the face of adversity is to fight. If we choose to “stand and fight” for our business with a difficult customer, we go into battle mode. We take strong positions, become defensive and generally escalate the bad situation instead of neutralizing it. The fight response is very difficult to control because it is so reflexive. Your ego and self-esteem have been challenged, and many of us struggle mightily to suppress the natural urge to defend ourselves, our product and our company.

If we know we will get better results with a calm response in the face of adversity, why is it so difficult to control our emotions when we are fearful in a business setting? Composure is hard to attain and maintain in the face of pressure to win deals, the stress of meeting quotas and the anxiety of maintaining enough margin to drive profits. It is even harder when these feelings are amplified by an angry, unpleasant and intimidating customer.

When you feel the strain of a difficult situation, you make two quick judgments. First, you must feel personally threatened by the situation, and you have some doubt that your capabilities and resources are sufficient to meet the threat. This sense of threat is rarely physical. It may, for example, involve perceived threats to your social or professional standing, to other people’s opinions of you, to your career prospects or to your own deeply held values. In any event, none of these are life-threatening (they just feel that way in the moment.) Just as with real threats to our survival, these perceived threats trigger the hormonal fight-or-flight response, with all of its negative consequences.


The third option is to focus. Many sales professionals approach their most difficult customers with gritted teeth and a firm resolve to “win.” They go into the negotiation fully prepared to have a miserable, drawn out experience. To effectively neutralize your emotions, you have to consciously focus on the issues on the table. Have a well planned strategy. Define in advance what you want to achieve, and then stick to it and refuse to be sucked into distractions. Focus on what you can control, and adjust your psychology to overcome the emotional responses that are trying to break out and derail your sales effort. You can control your psychology by preparing yourself with positive empowering beliefs ahead of time.

Instead of going into negotiations with a sense of dread, prepare by focusing on positive, empowering affirmations well in advance of the actual conversation. Examples of positive beliefs include:

  • When you are worried about the quality of your presentation: “I am a well-trained professional with a lot of experience. I have prepared well to grow this account and I have rehearsed thoroughly. I am well prepared to give an excellent presentation.”
  • When there are distractions and issues outside your control: “I have thought through everything that might reasonably happen and have planned how I can handle all likely contingencies. I am well placed to react flexibly to events.”
  • When you are concerned about a reaction to your offer: “Fair customers will react well to a fair proposalgood performance. I will rise above any unfair criticism in a mature and professional way.”
  • When you uncovered problems during preparation: “I have experimented with strategies and learned from my preparation. I am ready to ask the right questions to create a level playing field.”

Probing Pitfalls in Negotiations

Jeff Cochran


This is an excerpt from the book The Power of NICE by Ron Shapiro, Mark Jankowski and Jim Dale.

Here are three warnings – don’ts – to keep in mind when you are digging for information during a negotiation:

1. Don’t Mind-Read

Don’t assume you know what the other side is thinking and simply proceed on that premise. If you base your proposals on assumptions, you run a high risk of being wrong. You may assume your position is stronger than it is and make an aggressive but naive offer. You could also assume your position is weaker than it actually is and back yourself into a bad deal.

It is natural to make assumptions. It is even acceptable if you don’t act on those assumptions. Test them first – during the probing phase. Ask questions, explore, find out if your assumption is valid, close or off the mark.

2. Don’t Offend – Interview, Don’t Interrogate

Unless you are a prosecuting attorney – the other side is not compelled or obligated to cooperate and answer your questions. If you go after the other side with an aggressive attack, expect them to shut down. On the other hand, if you approach the probing process like an interview, there is almost no limit to what you can learn.

Show an interest in their side. Soften your inquiries with lead-ins such as “Tell me more about that…” and “Let me understand where you are coming from…” It is also important to let them answer when you ask a question – try hard not to interrupt. If they ask you a question, don’t evade it – embrace it and explore it by saying something along the lines of “I’m glad you asked that, because it makes me think about…”

3. Don’t Get Off Track

The other side may try to rush you through the (probing) process. They do not have the same agenda as you do. Make sure that you get the answers you need before moving into a proposal. Don’t hesitate to slow the process down by saying something like “Let’s hold off on that for a moment…” or “Can we go back to something you just said…”

Equally important is to stay disciplined and not let yourself rush through the process. Sometimes we can become impatient with the pace and try to take a short cut before we have all of the information we need. Impose the same “slow-down” techniques on yourself.

Negotiating the “Indirect” Sale Part III

Jeff Cochran


Let’s explore the art and science of preparing for the pharmaceutical sale at the Individual level. We believe that the clearest path from the waiting room to changing the prescribing habits of a physician (or physician’s assistant or nurse practitioner) is to:

1. Build credibility – in short, you have to know your stuff. Most physicians see upwards of 12 pharmaceutical reps a day, and those who do not know their product, the correct indications, the side effects, how the product interacts with others and the clinical data that supports all of these components…do not maintain access with a busy physician.

That being obvious, there are other aspects of credibility that relate to the character of the rep. These include:

  • delivering the message clearly and concisely;
  • admitting when you do not know an answer and following up with the right information;
  • adhering to the pharma guidelines;
  • being on the same page as your sales counterparts (in a team selling situation).

You can prepare for each of these – and thus, increase your credibility.

2. Build relationships – the long and short of selling is that people are much more likely to listen to, be influenced by and ultimately buy (or prescribe) from people they like. We do not suggest that physicians will not write a product that has clear clinical advantages simply because they dislike a rep, but that rep has a much bigger hurdle to clear in order to have their message heard in the first place.

From our research, physicians report that reps successfully build relationships by:

  • Respecting the front office personnel and patients
  • “Reading” the environment and adjusting their visit goal accordingly
  • Adhering to the practice protocol on rep visits
  • Acting professionally and mirroring the style of the physician

Some physicians like “educating” the reps while others expect to be educated. Seasoned reps figure this out pretty quickly and respond in kind – by asking questions of the “educators” and delivering precise messages to those who need information. All physicians report being more influenced by the reps who follow the rules, and who understand that when the waiting room is packed – there is no time to detail. Also, more and more offices are limiting the number of reps they will see by “closing the office” to reps on certain days or times. Doctors notice when pharmaceutical reps bend or break their rules.

When “preparing” to build a relationship with a physician, try to plan for multiple scenarios – who needs what and when is the best time to attempt to deliver it?

3. Build Value – Last but certainly not least – you have to bring something to the practice that differentiates your product and personal value. Pharmaceutical reps have always brought value to the physicians and practices on their target lists – luncheons, samples, honoraria for speaking, educational programs, branded office supplies, medical supplies and reference materials, etc… The challenge is that as of January 1, 2009, the pharma guidelines that regulate the marketing activities of pharmaceutical reps will tighten again, and many of these traditional “value” adds will be unavailable (for more information and reactions – see

So what will be left is terms of value that can be delivered? Many physiciams believe that this will separate the very best pharmaceutical reps from the masses….and preparing for this change will be the key! Some reps are already lining up their 2009 speaking programs, preparing memos to educate their physicians about the changes, and figuring out what non-branded (but memorable) marketing they will be allowed to use within the new guidelines.


If you can establish a high level of credibility, a strong respectful relationship across the practice and deliver enough value to outweigh the risk of switching to your product, then you are on the road to successfully influencing your physicians. The risk of switching can be daunting to a physician – no one wants the phone to start ringing after a prescription is filled…many doctors are feeling the “pain” of products prescribed and pulled, or of the ever increasing propensity of the evening news to highlight yet another side effect of a popular drug. Doctors don’t like phone calls, especially from unhappy patients (or their attorneys!) You can overcome this risk by being upfront about the benefits and risks of your product and consistently offering the suggestions and recommendations of your brand marketing team.

This concludes our short series on preparing to negotiate the “indirect sale” as it applies to the pharmaceutical industry. For more information and resources on negotiations, please visit

Negotiating the “Indirect” Sale: Part II

Jeff Cochran


Preparing to Influence at the Practice Level

When getting ready to sell to a physician, the pharmaceutical sales professional has to take many things into account. Every rep knows what the physician is writing, what their share of the market is in whatever class of drug they are selling, and where they stand in regard to their sales goal. Most reps have this information at their fingertips thanks to todays technology.

More seasoned reps also think about who the players are in the practice, and they work to build credibility, value and relationships beyond the prescribing physician. We call this the Total Office Call approach, and it requires a more systematic and thorough approach to preparation.

Practice-Level Preparation

A standard S.W.O.T. analysis will help you develop a strategy for selling more effectively at the practice level. Understanding your strengths, such as your access, relationships and product’s clinical advantages, will give you more confidence in your message. Identifying your weaknesses (perhaps your product is not on formulary, or your competition is offering a generic) will prepare you for the most common objections. This is pretty fundamental stuff. The key to effective preparation at the practice level is to find your opportunities to grow your business and to identify the threats to your market share early enough to minimize the impact.


Based on our interviews with dozens of physicians over the years, we have learned that opportunities often emerge from objections. Physicians often see upwards of 15 pharma reps a day, and they have been conditioned over the years to politely listen to the clinical message and to move on with their day. When a physician is listening well enough to come up with an objection, the professional sales rep will recognize this as an opportunity to build credibility and start down the road to influencing the doctor. One example from a recent ride-along – The physician expressed a concern about the aftertaste side effect of a new drug. Instead of pitching possible solutions – such as using mouthwash, putting the pill in a dab of peanut butter, etc..- the rep had prepared for this objection and answered the physician’s objection with a question. The rep asked “That’s interesting. What else have your patients told you about my product?” The physician looked up from whatever he was reading, and said “Well, that it works.” Instead of “overcoming an objection” this rep was prepared with a question that put the focus back on the clinical advantages of their product. Of course, you cannot simply “duck” the concern, and the rep followed up by maximizing the opportunity. “I need to understand this patient’s situation better before I can recommend a solution – can you tell me more about this patient’s feedback?” A relatively long (for a pharma rep!) conversation ensued and the rep gained a lot of information that created the “bridge” to the next meeting with this doctor.


In an ever changing competitive and regulatory landscape, today’s pharmaceutical sales representative faces a broad array of threats to their market share. Ranging from FDA reviews, unfavorable study results, stricter ethical guidelines for marketing pharmaceuticals and increasing competition from generics – it can seem as though the pharmaceutical rep is fighting an uphill battle every day. Preparing for these threats at the practice level – such as knowing how you will position your product in the face of competitive threats or an unfavorable study that your competition is waving around – is an important influencing skill. Physicians report that how a rep responds in the face of a threat either increases or decreases the rep’s credibility for the long-term.

One rep that I know well had a popular product pulled from the shelves by her company several years ago when adverse side effects were discovered in a study. Her approach was to turn the threat into an opportunity – “I am proud of my company for pulling the product. We are in the business of helping people get well, so I hope that you see our commitment to that goal and will continue to support our other products.” Using that positive message (as opposed to a warning that other drugs in that class would have the same side effects or an apology for promoting a drug that was pulled) – this rep did not lose access or credibility with a single physician.

In the next post, we will explore a systematic way to prepare when influencing individuals within the practice – by examining barriers, credibility, relationship and most importantly – the value you deliver.

Negotiating the “Indirect” Sale: Part I

Jeff Cochran


We are often asked to work with companies and organizations that do not negotiate in the traditional sense of bartering over price (or terms). Some sales representatives do not have any control over pricing or terms due to organizational norms or the commoditization of their products or services. Other companies, such as pharmaceutical firms, are even more limited in their ability to negotiate due to regulations. For example, pharmaceutical sales representatives cannot “trade” services, samples or “extras” for prescriptions.

We struggled at first to apply the usual negotiating lessons and techniques to the “indirect sale” until we realized that a tactical approach to sales would be less effective than a strategic influencing approach.

Let’s use the pharmaceutical sale as the example. A pharmaceutical sales representative spends their day detailing physicians about their products in a very limited amount of time, perhaps as little as 30 seconds while the doctor signs for their samples. Some busy physicians see as many as 15 different sales reps in a day. Most pharmaceutical reps see upwards of 10 physicians a day (often with a variety of products in their “bag”). The message has to be clear and concise and yet the “call to action” has to be more subtle than a direct sale – “Will you try Product X on patients who present the following indications…?” is about as direct as you can be within the pharma guidelines. The best “close” a pharmaceutical rep can hope for is a promise that the physician is willing to try the product at some point in the future.

The pharmaceutical sales rep has no direct control over the “sale”. The physician makes the prescribing decision on their own in the examination room after the sales representative has left the office. The doctor has built a prescribing habit over time and it is very dfficult to change the habits of a highly trained, intelligent and busy physician.

We believe that the key to successfully changing a physician’s prescribing habits is based a sales representative’s ability to develop three critical components of INFLUENCE:

1. The Credibility of the sales representative when educating the doctor about their products;

2. The Relationship that the physician enjoys with the sales representative; and

3. The Value that the sales rep delivers to the practice.

If the sales rep can build enough credibility, and the relationship with the practice and the value delivered to the physician outweigh the RISK of switching the prescription (the efficacy, safety and patient economic impact of the new product), the sales representative has started to influence the physician successfully.

In the next post, I will show you how the systematic approach to negotiating can be applied to influence physicians more successfully.

John Buelow

John is the Chief Learning Officer at Shapiro Negotiations Institute (SNI), a training and consulting firm based in Baltimore MD. SNI has trained over 300,000 professionals around the world since 1995 helping people to close more deals, faster at higher margins.

Welcome to the SNI DealCoach Daily!

Jeff Cochran


Hello and welcome to The SNI DealCoach Daily – a community of experienced negotiators, sales consultants and everyday dealmakers who want to maximize your results in today’s turbulent times.

As the economy tightens, effective negotiation skills become more important than ever. It is imperative to commit yourself and your organization to achieving “win-win” deals. Though overused and often misused “win-win” simply means: “the best way to get what you want, is to help them get what they want.” The simplicity of this phrase, however, is belied by the difficulty many people have in executing on it, particularly in challenging economic times.

To survive in the short term, it may be tempting to take advantage of the other guy. You may convince yourself that tough times call for tough tactics, and that the end justifies the means, but how will you feel when your ‘partner’ can’t or won’t fulfill their end of the bargain? One-sided agreements are often broken because players will either find a better deal or will be unable to keep their own doors open.

Using an upper hand to strike an unfair deal might seem like a good idea initially, but this approach fails to take into account the enormous cost associated with replacing a ‘partner’ or ‘vendor’ that is no longer able to perform. Not only do costs increase, but the problems can impact your own clients or customers…missed deadlines and reduced quality. Ultimately these “win-lose” deals impact on profits due to higher costs, or the increased concessions and higher discounts you must offer your customers in order to retain them.

One aspect that many people tend to overlook is that relationships built during challenging economic times are the ones that tend to last a lifetime (and beyond). One famous example is McDonalds and Coca-Cola. The story has oft been told of a struggling Ray Kroc trying to obtain a soft drink vendor. Kroc did not have the money to pay for the equipment as he quickly expanded the hamburger chain. Coca-Cola saw an opportunity and struck a deal that deferred equipment payments. Other soft drink vendors had the opportunity to make this deal, but they were unwilling to take the risk. Coca-Cola saw the opportunity and forged a partnership that has lasted decades

You must start by completely understanding what your customer is trying to accomplish and then deliver your service or product in a way that will help them accomplish that goal. Recently we consulted with a software company that was trying to negotiate a deal with a chain of bookstores. We asked them: “What is your goal?” It was a simple question, but we received 12 different responses, ranging from: “close the deal” to “get all of their budget” to “prevent our competitor from bidding”. No one in the group provided the answer we were looking for, i.e. that their goal was to find a way that they could help this bookstore chain sell more books! If they find a way to do this, all of those other goals will fall into place.

For more information on negotiations, sales optimization or influencing, please visit