"What would you do?" he asked me.

The voice on the other end of the phone was my senior outside salesman. He had just left an account where he introduced a product that brought the customer significant value, including a decent cost savings. After he had done his value-added presentation, the buyer gleefully told him that, to "reward" him for his efforts, she would place our company on a vendor list in an upcoming reverse auction for that particular product. After leaving the customer, he phoned me, explained the situation, and in frustration and disbelief asked me, "What would you do?"

Reverse auctions … the procedure where competing suppliers go online in real time, and, for a specific product or product group, cut their prices until at the end of a predetermined period of time, the lowest bidder wins. Wins?

I think the only winners in reverse auctions are the companies that sponsor the auction, not the customers or suppliers participating. A healthy customer-supplier relationship is like a healthy marriage — each party must be willing to compromise for the good of the relationship. This is done through constant valuation and communication. A reverse auction doesn't build a healthy relationship — it destroys it.

My first encounter with an auction sponsor was a few years ago. They called and explained that one of my best customers was taking the product group that I sold them and placing it on a reverse auction. I called my customer contact and told him what I thought of the idea, finishing with, "I can't believe that you would disregard what I have brought to this relationship, and that you wouldn't value my honesty, my integrity, and my commitment to your company. I refuse to participate in this auction. You should be ashamed of yourself!" He withdrew my product group from the auction, and remains one of my best customers to this day.

The customer sincerely believed that a reverse auction was a legitimate tool he could use to reduce cost. I understand his feelings because, on the surface, it looks this way. But as I explained what we had brought to the table, and some of the intangible costs we had eliminated, he understood the big picture and realized his misjudgment.

The real question isn't about reverse auctions, it's about sophistication. Do you know what you believe, and why you believe it, and can you verbalize those beliefs? And when you do, is your customer sophisticated enough to understand you? These are the issues we need to address, because, like it or not, reverse auctions are here to stay.

Here to stay…where does that leave you? Are you going to let yourself become, or continue to be, a victim, or are you going to fight back? If you choose to fight, be sure to identify the real enemy — it is not your customer! You will lose some battles, but you'll win most, depending on the buyer you are dealing with.

So be ready. One day, one of your salespeople will call you, tell you about the meeting they just left, and then ask, "What would you do?"