Go-to-Market vs Direct Negotiation Strategies

When it comes to maximising procurement outcomes, the choice between market engagement and direct negotiation is pivotal. Procurement professionals and business leaders must carefully weigh these strategies to determine which approach aligns best with their objectives, timelines, and market dynamics. Both methods come with unique benefits and challenges that can significantly impact value delivery and supplier relationships.

This blog explores the nuances of these two approaches, highlights when each is most effective, and explains why external expertise can sometimes unlock greater value, particularly for high-value, complex procurements.

Understanding Go-to-Market

Go-to-market involves an open process to evaluate multiple suppliers. It typically takes the form of structured procurement activities such as Requests for Proposals (RFP), Expressions of Interest (EOI), or Requests for Quotation (RFQ).

When to Choose Go-to-Market

Go-to-market engagement is most effective in scenarios where competition and transparency are vital. Here are the key instances to leverage this approach:

• Competitive Markets: When several vendors can deliver similar solutions, market engagement enables competition and ensures the best pricing or service offering.

• Significant Changes: If evolving requirements mandate a new approach to scope, specifications, or service levels, testing the market ensures access to innovative and relevant options.

• Discovering Innovation: Use this approach to identify suppliers offering unique services, value-added solutions, or innovation that could future-proof your organisation.

• New Categories or Markets: When entering uncharted territories, market testing validates supplier capabilities and helps benchmark costs.

• Regulatory or Probity Requirements: For public or highly regulated organisations, an open process ensures fairness, compliance, and auditability.

One of the greatest benefits of market engagement is expanded visibility across suppliers. By evaluating a wider pool, organisations can discover creative commercial offerings and optimal solutions that drive long-term value.

CIPS (Chartered Institute of Procurement & Supply) highlights that a well-executed competitive tender can reduce procurement costs by up to 20% compared to poorly structured direct awards.

Drawbacks of Market Engagement

However, a full market engagement isn’t without its challenges. It can be time-consuming, costly, and resource intensive, which can be less practical for small-scale or low-value procurements. To maximise outcomes, the process requires clear goals, structure, and expertise that many internal teams may struggle to provide.

When Direct Negotiation Works Best

Direct negotiation allows organisations to bypass the complexities of a full market process and work directly with a select supplier. While it might not deliver the competitive tension of an RFP, this approach offers undeniable benefits in certain circumstances.

Scenarios Ideal for Direct Negotiation

• Limited Suppliers: When dealing with proprietary technology or a market with only a handful of viable vendors, direct negotiation becomes the pragmatic choice.

• Time-Sensitive Procurements: For critical decisions with short timeframes, initiating a full market engagement may delay outcomes unnecessarily.

• Strong Incumbent Relationship: If the incumbent supplier consistently performs and delivers value, extending or renegotiating the agreement avoids disruption.

• Low-Value Procurements: When dealing with low-dollar-value agreements, the cost of a full tender process outweighs its potential benefits.

• Highly Specific Expertise: Direct negotiation is ideal when only one supplier possesses the technical capability or qualifications to deliver.

Strengthening Direct Negotiation

While faster and less complex, direct negotiation shouldn’t compromise sound procurement principles. It’s critical to apply a clear commercial strategy and conduct thorough value assessments, ensuring the agreed outcome aligns with organisational goals and delivers measurable ROI. Direct negotiations must still be meticulous and data-driven.

Limitations of Direct Negotiation

Direct negotiation can limit competition, making pricing and innovation benchmarks harder to determine. Without external market validation, businesses risk overpaying or overlooking novel solutions. Using it as a default can hinder organisational growth, which is why its application should be tactical.

The Case for External Expertise in Complex Procurements

For high-value or complex procurement categories, engaging external procurement specialists brings a wealth of expertise and ensures both market engagement and negotiations are approached with methodical precision.

Why External Expertise Creates Better Outcomes

• Market Insights: Experienced consultants bring invaluable industry insights and access to datasets that help benchmark supplier capabilities, pricing, and innovation.

• Optimised Strategy: External support develops tailored strategies, ensuring every stage of the procurement process aligns with your objectives while mitigating risks.

• Enhanced Negotiation Power: Consultants are skilled in creating competitive tension and structuring negotiations to favour their clients’ goals.

External research supports these claims. According to a study by the consulting firm Deloitte, organisations that engaged external experts for strategic sourcing processes experienced an average cost reduction of 12% compared to in-house-led procurement efforts.

Partnering with the Right Resource

Choosing the right consultant ensures that even the most complex categories are handled with diligence. Their expertise accelerates timelines and extracts the best possible value while safeguarding compliance and quality.

Go-to-market vs Direct Negotiation Strategy