Three negotiation tips that will help cut your budget

posted by Jan Potgieter
11 November 2019

Significant value frequently escapes from the supply chain because procurement professionals view negotiation as an event rather than a process.

Modern day functional discrimination in the workplace has brought with it an incorrect understanding of what it means to negotiate. Simply put, to negotiate is to do business. It is not just what happens when you’re finally getting down to the specific terms and conditions of a potential agreement.

No, your negotiations start the moment you first contact internal stakeholders or vendors. Here are three strategies that you can implement to make sure that you’re not trapped in the ‘negotiation as an event’ quicksand.

1. Decide who should make the first offer

Convention dictates that the seller usually makes the first offer. You shouldn’t just default to calling for proposals where vendors will list their prices. There are at least two instances where it will make a lot of sense for you to make the first offer in terms of setting out a ‘target price’ or budget.

When it is clear to you that the vendor believes that they have more power than you it can really aid your cause to anchor their expectations around your budget aspirations. This will ensure that they don’t unnecessarily inflate their pricing or restrict the level of their discounting.

When you’re not 100% sure about the power balance or when you believe there is parity in power it can make a lot of sense for you to put out the first offer in the shape of a target price or budget so as to anchor your counterpart’s expectations around your aspirations rather than theirs.

2. Don’t default to a single negotiation strategy

Too often professional buyers default to a competitive negotiation strategy. Just because you are the customer doesn’t mean that you can or should demand the best deal through using competitive approaches. Vendors, like all humans, are more likely to extend their best offers and deals to those whom they like, and those they feel cooperate with them. Vendors soon wise up to competitive approaches and hedge their bets accordingly.

3. Remember that negotiation is a people game

At the end of the day, negotiation is a people game. Concessions are made by people; opportunities are created by people. Problems are created and solved by people. Great deals are signed off by people. Learn more about people than you do your category, product, service or solution set and you’ll be unusually successful.

☛ Jan Potgieter is the managing director of Imperium Global Negotiation Solutions.

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