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What is power?

Power can be described as one party having the ability to force another party to do something that they would not choose to do if left on their own.

In commercial relationships this can often happen when the other party has no choice but to agree. Examples can include a monopoly supplier raising its prices or a customer demanding a price reduction to help their own financial situation.

Power used in this way leaves a lasting memory of what is felt as abuse and the danger is that if the situation is reversed at some time in the future then the initial ‘wronged’ party takes revenge on the initial user of the power.

Customers often think that they have power simply because they have money to spend and are making a choice between alternative suppliers.

That power is transitory however since any power the customer has while making the choice is completely lost when they decide to award the contract to one supplier.

The supplier now has power in that they can decide whether they are going to live up to all of the promises they made, especially if they felt they were forced into making unrealistic agreements during the negotiations, to win the order.

In the business world there is always the possibility that a supplier will say yes to a customer in public but in practice give their extra efforts to another customer and there will be no real way in which the customer who was second in the response queue will know this or be able to prove it.

The challenge in business therefore is for customers to become so attractive to their important suppliers that the supplier always gives them priority where they can choose.

For this to happen a customer cannot afford to behave as if they have power. The reality is that all they can do is try to influence the other party that it is in the other party’s interest to support that customer when they ask for it.

Customers therefore need to consider how they can become the customer of choice. We will be looking at relationship portfolios in greater detail later on in the week.

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This article is from the free online course:

Contract Management: Building Relationships in Business

University of Southampton