When doing business, we are not given option as to whether or not we negotiate. The only option we have is how well we negotiate.

We can base a procurement negotiation on seven strategies and I have briefly explained below as to why and how these strategies are used. These proven strategies are:

1. Sell The Benefits

2. Speculate

3. Solve

4. Use Logic

5. Use Emotion

6. Compromise

7. Use Threats

1. Sell The Benefits

This strategy should be used when the supplier has some degree of reluctance to do business with you. You need to persuade them why agreeing to do business with you is in their best interests.

2. Speculate

This strategy is used when you are pursuing a new market or opportunity with the possibility – but not guaranteed – for significant growth. You try to convince the supplier that earning your business now may pay huge dividends in the future if your company achieves its anticipated growth in this new market or opportunity.

3. Solve Problems

If you know a little bit about the supplier’s business, you may be aware of certain problems they are having. These problems may include having too much inventory, being financially unstable, or failing to reach their growth targets in a new market. You can position doing business with you as a way to completely or partially solve their problems.

4. Use Logic

In some situations, you can use logic or hard data to persuade suppliers. This is particularly true when it is easy to find sales prices of the same or similar commodities. This can also be the case when costs are known. A supplier may bid a $90,000 per year fixed price for a window washing job. You know facts such as these: your office building has 600 windows; each window will need to be washed 10 times per year; in one man-hour, the supplier can wash an average of four windows; and the supplier’s hourly rate is $50 per man-hour. You can use logic that the supplier will only need to dedicate 1,500 man-hours per year to this job and 1,500 man-hours x $50 per man-hour equates to $75,000 per year.

5. Use Emotion

Most people have sensitivity to people’s problems. Few people like to see others in pain. By presenting the supplier’s position as one that causes you pain, you may be able to prey upon their natural sympathetic tendencies and earn concessions. Employ this strategy with caution. Only a few situations will permit this strategy to be successful and then only when you do a good job at conveying emotion.

6. Compromise

This strategy should be used when two parties are far apart in their positions and one is willing to back off from their position in exchange for the other party backing off on their position. Compromising can be related to a single issue, where the parties seek to agree to a price that is somewhere in between their starting offers. Compromising can also be related to multiple issues where a buyer will back off of its position on one issue and the supplier will back off of its position on a different issue.

7. Use Threats

If you’ve determined in the first step of preparation that you have significant leverage over your supplier, you can use threats. This is a risky strategy. It makes a negotiation adversarial and may harm your relationship with your supplier – a relationship you may need desperately at some future point. An example of a threat would be to permanently discontinue all business with a supplier unless they meet your demands. In addition, if you make a threat and the supplier calls your bluff, you suddenly lose leverage and none of your future threats will ever be taken seriously.

Bonus Tip:

Finally, when you have achieved your desired outcome in any deal, never ever do the dance of joy in public by turning to your counterparts and hinting them you would have been happy for less discounts, fulfillment time etc. This will only drive your counterpart to extract the difference from you sometime in the future.

Keep it Simple! and don't forget to carry your "Poker Face" when negotiating.

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If you liked this post then you might also like my previous post - Supply Chain Optimization Plan for Startups and Growing Firms.



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About Adeel

Adeel Hassan Imrani is a respected strategic sourcing and procurement professional based out of Dubai, UAE and Karachi, Pakistan.

He creates competitive advantage through innovative sourcing strategies that focus on holistic value creation. Adeel’s ability to drive leading edge strategies has a proven track record of tangible bottom-line value and top-line growth.