Delegates were asked to estimate the population of Kazakhstan. Higher or lower than 49 million? ©123RF
Delegates were asked to estimate the population of Kazakhstan. Higher or lower than 49 million? ©123RF

How to stay in control of your negotiations

Are you getting the best prices? Not unless you prepare for negotiations early on, says trainer Stephen Lovatt – and that rarely happens.

Lovatt asked delegates at the CIPS South Yorkshire branch to estimate the population of Kazakhstan. By giving an anchor – higher or lower than 49m – and showing a large map of the country, he took control and preconditioned their answers.

In a traditional procurement process model, the buyer issues an invitation for the supplier to set the market price, which then establishes an anchor price around which negotiations take place. So, asks Lovatt, are we in a bad habit of framing and conditioning anchor points without thinking ahead to the negotiations stage and considering the potential impact on the bids?

This can lead to a self-conditioning marketplace that rejects a fair market value. Purchasing managers sometimes even eliminate a competitive bid because they see it as ‘too low’.

Where do the prices we get from suppliers come from? Why are they all in a similar ballpark – is it the market price or have we created it?

Lovatt used the example of a tender that was won even though the company had charged three times the rate it was worth. Another  contained so many details that it appeared much more complex than it was, and so was priced higher.

Negotiations is an ongoing process, he says. Start six months before the contract is up, and think about the pre-preparations rather than the negotiations itself.

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