The power of negotiation

1 May 2013
It never fails to amaze me in business the number of people and organisations that accept the initial offer a vendor has put forward to them. Are people scared of negotiating? Is it seen as a faux pas or a dirty habit? Don’t get me wrong I am not saying you should act like you are negotiating on a rug in an Istanbul market but you should at least open up a discussion. I have heard several times you cannot negotiate with suppliers as it doesn’t meet probity requirements, this is not the case at all. As long as you treat all the negotiations in the same professional manner and keep good records as to what was discussed and what was agreed this is perfectly acceptable. Another good way to drive costs down while ensuring probity is to run an e-auction, this way all the suppliers will be treated in the same manner as they compete against each other to reduce costs. If you are not restricted by public sector probity then the world of negotiation is your oyster. Here is an easy step-by-step guide to negotiating:
  1. What type of negotiation is this? There are three types, a one-off negotiation, a negotiation that will be repeated in the future and a negotiation where you are looking to form a long-term relationship. Each should be treated in a different way – you can afford to be more assertive with a one-off negotiation.
  2. The meaning of the negotiation. There are two reasons why we would want to enter into a negotiation. The first is a necessity to, and the second is to seek out an opportunity. Is there an agreement needed? Remember the power to walk away from a deal is a very strong tool to have. Don’t get carried away with the emotion of buying a new car for instance, it will be there tomorrow, maybe another retailer will offer you a lower price.
  3. Have the facts with you. Do some benchmarking, shop around a little, find out what market rates are for this good or service. Who else can you buy this from, what is happening to prices – are they rising or falling?
  4. Do not give a range. If you tell the salesperson you will be happy to accept between 5-10 per cent, then he knows he only has to offer you the 5 per cent.
  5. Do not lie, if you get caught you will lose all credibility.
  6. Be prepared to make strategic concessions. You may have to lose a battle to win the war. For instance can you give away some lead-time to get the price you want?
  7. Read the other person’s body language. You do not have to have a PhD in body language to see how comfortable the other person is with your requests. But remember ‘the flinch’, a good salesperson will be trained to flinch when you put a proposal forward, don’t let this put you on the back foot and make you think you are asking for too much. Remember, you have done your research, you know the facts!
  8.  Last but not least, remember this is not personal, it is just business. Negotiation is part and parcel of business life.
James Williams is a partner at Optimus Business Solutions
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