Negotiating successfully takes skill and practice and should result in a win-win situation for both the buyer and the seller.
- Do their homework
- Clearly understand their requirements and objectives
- Develop strategies
- Never lose sight of their goals
- Know where they can afford to compromise and where they cannot
- Make sure their negotiating teams have whatever expertise (technical, financial, legal) is needed to increase the chances for a successful settlement
- Make an effort to anticipate the vendor’s strategy and to determine what the vendor hopes to gain from the negotiation process.
Buyers should negotiate when:
- The Purchase involves a significant amount of money or represents and on-going effort.
- The number of vendors available are too few to competitively bid the purchase (the buyer can’t be sure of getting a fair price)
- New technologies or processes are involved for which selling prices haven’t been determined yet
- The vendor must make a substantial financial investment in equipment, technology or other resources
- Not enough time is available to competitively bid the purchase.
Whenever possible, the buyers should:
- Negotiate on their own “turf” The physical environment should be pleasant, well ventilated and lighted
- Prepare an agenda and brief the members of the negotiating team beforehand so that their strategy isn’t compromised
- Never lose sight of the target what should be gained form the negotiation
- Have confidence in their facts and figures. Never use information that could be questioned or proven inaccurate
- Negotiate only with vendor representatives who are empowered to make concessions
- Leave plenty of room to manoeuvre. The greater the initial demands the greater the probability for success.
- Not be afraid to be silent. Silence can be an effective negotiating tool. If the vendor fears he is losing the business, he may talk himself/ herself into offering more and better concessions than expected
- Call a recess or coffee break if negotiations break down.
- Always withhold something for concession in return for a point the vendor is willing to concede.
- Always be fair. The vendor is entitled to a reasonable profit. One that allows him to stay in business for the long run
Negotiation Strategies to Avoid
- Shouldn’t reveal their strategies to early into the negotiation process
- Should avoid getting so bogged down in details that the overall objectives are lost
- Should never try to prove the vendor wrong. Leave the vendor room to retreat gracefully form a stated position.
- Should avoid displays of temper, frustration and anger that can handicap the negotiation process and logical thinking
- Should not communicate anything to the vendor that reduces bargaining power for example. “Your our only source” We have €20k budgeted for this purchase, “I have to have it now” Etc, Be intelligent and cautious