Procurement 21 April 2016

Ten top tips for negotiating with suppliers

negotiating with suppliers
For the best outcome, hide any emotion that reveals just how much you might want the end result

Whether you’re negotiating software licenses or trying to get the best quote from a manufacturer, Red Sheet’s Jonathan O’Brien outlined the most important things to keep at the back of your mind.

(1) Decide what you need beforehand

Knowing what you want from a negotiation before you start is imperative. Sometimes it is very clear, sometimes there could be several possible outcomes. But without an end goal, we risk putting ourselves in a “decide on the spot” situation, finding we have been talked into things in the heat of the moment.

(2) Do your homework

Doing your homework about the industry, what you are trying to secure, the people involved and culture you are dealing with will enable you to understand where you may be able to leverage a better deal.

(3) List your “negotiables”

We may be negotiating different aspects of value within the overall deal at the same time and working towards a final deal across all negotiables simultaneously. Negotiables might include: price, options, finance, delivery date or anything else that is important to you or the seller. For each, decide what your “most desirable outcome (MDO)” is and also the “least desirable outcome (LDO)” – in other words the point that you will not go beyond. Write these down and don’t lose sight of them during the negotiation.

(4) Have an alternative

Without an alternative we can become desperate to make the deal and a well-trained negotiator could easily spot that. If we go into a negotiation armed with an alternative we will be braver, more confident and determined. There is always an alternative – going elsewhere, holding off until another day, even walking away. Crucially, you must totally believe in your alternative if it is to impact how you negotiate.

(5) Build rapport

If we feel the other person likes us we will feel more inclined to make a deal. Most people who negotiate for a living, such as estate agents, make themselves super-likeable, and if we do the same it can help our position. Buyers frequently make the mistake of trying to remain aloof and cold. Instead smile, be warm and friendly, take time to be interested in them. You might be surprised how well this works.

(6) Hide tell-tale emotion

When we like something our body language can give it away; our expressions might become more interested or we might seem more animated or excited. But for the best outcome, hide any emotion that reveals just how much you might want the end result.

(7) Beware of sneaky tactics

“What budget are you working to?” seems like a reasonable question that would help a negotiator focus on helping you, but these questions are designed to get you to reveal your position early on. Swerve the question and instead talk about the end result you want. Let the negotiator start discussions around price and what might be possible. “If we can agree on this today I can do x” sounds like an imperative to close, but don’t be hasty unless you are happy with what is being proposed. Chances are good that the same deal will be there tomorrow. Finally, “I will need to ask my superior” is a very common tactic. If “the boss” isn’t giving a favourable response, then ask to speak to them directly. Don’t be fooled.

(8) Do the dance

Negotiation is a dance with each party dancing around their positions to reach an outcome. Somewhere amongst all of this is a great result; we just need to find it. It is like we are dividing a pie, and with each benefit we secure, the seller gets less. So the seller will be focusing on maximising their position whilst making us feel that we have won a great deal – even when we have not. Hold the negotiables firmly in mind, maintain a position close to the MDOs and if you concede in one area, always ask for something in return elsewhere.

(9) Nearly there

The person you are negotiating with will usually want to close the deal early. It is you who should decide when you are ready to close and only when you believe you have secured the best result. Use hypothetical questions such as “If I agree to this then could you agree to that?” which test the ground without making an agreement. Then know when to stop. A common mistake is to negotiate beyond the point when the best deal is there. When it feels like you’ve secured everything you can, close.

(10) One last thing: don’t forget Columbo

It might seem that the scruffy American cop from the 1970s TV series has no place in negotiation, but he gives us a very powerful final tactic. At the end of each episode he would say: “Oh, there’s just one more thing…” and then would ask the vital question that would incriminate the bad guys. You can use “one more thing” in negotiation – when you are about to sign the deal. The seller doesn’t want to risk losing the deal, so ask for one final, small concession that they can easily provide.

Jonathan O’Brien is CEO of procurement consultancy Positive Purchasing and negotiation training company Red Sheet.

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