Like in many parts of the world, we are seeing some very good companies go out of business or need major injections of cash just to keep their doors open. There are many reasons for their demise, but one disturbing trend is: critical suppliers are negotiating bad deals on price with professional procurement teams.
We recently consulted on a major negotiation with a key customer who was negotiating a 5 year deal with their No. 1 account. What was enlightening was that the procurement team wanted to break the old cycle of “force the cheapest price from suppliers and hope for the best” to “creating a focus on joint gains”.
I was impressed that my client was presenting creative ideas for both parties to negotiate over creating joint gains. I was even more impressed that their No. 1 account looked at the value of the ideas, not the price. Briefly, the market that my client plays in is in one of the most competitive markets in the globe. That means that price was pushed hard, but value was a stronger point for discussions.
Recently in Australia we have seen the collapse of Autodom, a car parts manufacturer. Autodom was a key supplier to major players like Ford and Holden. Early indications would show that too many of their negotiations focused on the lowest price, not on value nor joint gains.
Thinking creatively will increase your success. Try new things and expand your skills. If you reach a deadlock there’s usually a way around it. Can you ‘trade off’ another part of the deal? Cut costs elsewhere? Throw in an added benefit like being able to take your recently developed software on supply management to your client as an added value?
CREATE OPTIONS: Always try for at least three different ways of getting a better result. For example, one way may be to agree on delivery to one central location, not many locations; another way is to agree to develop new products and share the IP creation; another way is to change payment terms.
TIME: One of the most common keys to unlocking a deadlock is time. Can you agree to try a different way for a short time and then review it to see how well it works? Can you do something in one long session or several short sessions? Can you change your delivery to just once a month? Can you change your scheduled maintenance during the school holidays? If you work on a JIT system of delivery, have you leveraged the value of this for you and your account?
TRADING: What activities do your top accounts value and what activities are no longer valuable to them? Trade what you both see as measurable, so that it is tangible. Use the words, “If you…then I will…” For example, “If you help me work through the JIT issue, then I can put a proposal to management on how to avoid future costs for both of us?” This does not affect your margin, as a cost reduction is good for both businesses.
QUESTIONS: Before your meeting, prepare good questions. For example, ask “Under what circumstances would you agree to….?” or ask, “What are your reasons for that?” (After asking questions don’t interrupt, listen to their answer—it may contain clues to help you persuade them). Remember always look for a creative approach that will lead to your key customers saying yes to one of your options.
For further ideas about being creative as a negotiator, follow the link below to the Holst Group, they have some of the best blogs from Dr Edward De Bono on how to be more creative in business. Review our previous blogs on this web site on how to solve impossible problems.
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