Streamline Vendor Negotiations with Pipeline Management in Vendor Negotiations

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foreign ers I'm going to talk to you about negotiating this week and did you ever notice that when you watch negotiation videos on YouTube there's always someone saying this is how you win at a negotiation win win win win I do not subscribe to that philosophy of negotiation I don't think that a negotiation is a win situation because if you're winning that means someone is losing and I don't think that way I think a negotiation and this is not my own personal quote a negotiation is a dance and you need a partner and you both need things out of that dance and you should both walk away feeling good after you've danced that's how I feel about negotiation and I'm gonna talk to you about how to feel good about negotiation let's do it well Sorcerers this is a procurement Channel and I typically don't talk about negotiation too much I've done three or four videos about the topic over the last three years but I felt it was time to dust off the older material and talk about some some new stuff talk about uh talk about it in a different way I know that this is going to sound obvious but the first thing that a person needs to do to have a successful negotiation is to prepare that shouldn't be a surprise but when you are doing procurement and negotiating on behalf of other groups daily sometimes that prep work gets overlooked so if you are struggling if you are feeling frustrated on something that you are currently negotiating and you can apply this to anything it doesn't have to be for procurement people by the way but I am viewing this from a procurement lens and I'm going to say some very procurementy stuff throughout the duration of this video but you have to prepare you have to sit down prior to going in and engaging with the other side what you actually want what does your customer actually want what are the things that you actually want to achieve the most obvious thing when people are talking about preparation for negotiation is price if I'm going to go off and buy a new car I probably want to get the best deal for whatever it is that I'm buying but let's look at the last few years of car buying there's a shortage of cars the CPUs aren't around so they're not making as many cars and all of the cars that are out in the market right now in 2023 they're going for over list price so if you have a negotiation strategy where you are going to get at list or under you may be severely disappointed and disadvantaged so you have to Pivot and think about other things that you may want out of that negotiation for a new car or you may have to go further from where you live to get the price that you want either way you have to have a strategy and you have to be prepared to do things that you may not normally do so let's go back to the procurement scenario let's go back to preparation you have to sit down with your customers and you have to understand what the walk away points are what aspect of this deal is absolutely untenable and that you have to walk away and you also have to prepare to understand who are the competitors what are the alternatives in this thing that you were attempting to buy and attempting to negotiate do you have options especially if these aren't major deals where you're doing rfps you may have a customer that presents you with a service or a solution and they're just like I need to buy this thing and I have a month you don't always have Alternatives price may not be the primary thing that you are always negotiating when you have to back into a solution it could very well be in your preparation that the things that you are most concerned about are contract terms slas liabilities termination Clauses those might be the things that you are really focused on it's not about the dollars all the time so you have to be prepared you have to lay out what you actually need and what you actually want and once you figure out what you need or what your customer needs and what your customer wants sit down and think about what your supplier needs what does your supplier need for them to walk away and feel good about this negotiation you don't want your supplier to be in the poor house you want them to make a healthy profit you don't want to get murdered you don't want to get taken advantage of in a negotiation or if you're in an advantageous situation where you're able to squeeze a supplier at a certain timeline and you get a really really really good price and they're not making money on the deal they're going to start taking shortcuts and then you're going to end up being miserable in the service and in the management of that solution so you have to make sure that A supplier has a healthy profit margin and they are enjoying doing business with you so you can continue to use the service and do business with this provider and not having to Pivot look at the market look at what the supplier is doing did they have a bad quarter did they have a series of bad quarters from a stock or performance perspective do they need this when do they need to make this at a certain timeline right is it about a sale is making a sale with your company going to be a good boost for them you have to think about what the options are for them just because you may be focused on a price or terms that may not be the thing that they're worried about and they're willing to give you the concessions that you need if you can give them a couple of concessions try to figure out and understand what will make your supplier feel good and what will make them feel like this is a successful engagement and again you don't have to give away and you should not give away the house to make the supplier feel good but you should understand those levers and what they need and what that sales rep needs to be successful and to move on speaking of the sales rep when you are engaging with the sales team when you are trying to do a negotiation when you are working with the other company's lawyers it is a wise idea to demonstrate empathy as I mentioned understand where they are coming from try to make the negotiation personal they will likely do the same thing it doesn't have to be combative all of the time or any of the time for that matter but again in a procurement role things will at some point get a little dicey in a negotiation be comfortable with that expect that but it doesn't always have to be that way and when you make it personal and you get to know these people on a personal level you can get past those things because it's not you that's causing the problem it's not you that's being difficult you are representing your company and this is where we get to another Nuance of negotiation in general I'm going to tell you don't waste the sales team the other side's time don't make them run down things that you have absolutely no interest in buying or doing you should be fairly upfront about the things that you want because if they have to run down and clear different aspects through their sales departments and through their illegal departments and then you go back and you're like yeah no that's totally I have no I don't want any of that they're going to get frustrated it's more work for them they're going to get aggravated at you so try to be clear about the things that you or your customers want up front to the best of your abilities but it would not be unwise to ask for a little bit more and this is where it gets a little clergy because you may ask for things more things to get a better idea of pricing and to feel things around and you may use those bigger swings or asking for more to help scale down the pricing later on so you have to walk a very tight line of being judicious about the things that you are asking for creating a little bit of space to negotiate later but not being ridiculous with the things that you are asking for a negotiating technique that you can Leverage is trying to get the supplier to lock in at a certain price for the year or whatever the normal duration of time is then you start to ask them a series of leading questions about duration or quantity so you've locked in at a price and then you could say well what happens if I go from this one year deal to a three year deal or to a five-year deal what happens to the price what happens if I pay you immediately or if I pay you early can I knock off a couple of percentage points you're not changing the tempo right you're giving them more you're either buying more of the product and does that change the quantity does that change the unit cost you're changing the duration so they can book revenue for longer but the caveat to that one is you better make sure that you have an understanding of what your termination Clauses are because if you're locking in for five years you want to understand what your outs are because things can change in five years so you're doing a dance and the dance is not always easy it can be somewhat difficult and you don't want to step on your partner's toes you don't want to over share ever you don't want to over share with your suppliers but you also don't want to be so buttoned up that you're not actually giving them anything to work with you on you have to get into a rhythm with these sales teams to figure out the best angles and the best options and you have levers to play duration payment quantity those are all the basics in many cases in my world the products are new they are Boutique there are not incumbents it's something that's totally like net new it's a net service it's a net new platform it's not always about the price so in order for me to negotiate a deal I'm less worried about the dollars and I'm more worried about what happens if the company has a breach or if they go Belly Up what happens to my customers data so those are the things that I'm mostly focused on negotiation making sure that they have the right Protections in place for my customers and making sure that if something bad happens because we live in a world where bad data things happen all the time it's not always about dollars and you have to understand that during your preparation of what the major triggers are for you and for your company and for your customers another aspect of negotiation that people don't always understand you have to be comfortable as a negotiator with Silence with pregnant pauses with very direct statements if a supplier if things are not following the right tempos and you're trying to figure out pricing they may come up and say well this is our offer you can just say that's not going to work for me don't fill the error with more words and information let the silence marinate let everyone bathe in it let them come back and say something else start asking the follow-up questions don't give that information away especially in a situation like that if you guys are so wildly off course that you're just like that's not going to work for us don't feed the conversation let them ask the questions control the conversation and the narrative be comfortable with silence be comfortable with short direct statements don't over share I'm gonna give a shout out to one of my colleagues Ben for that particular tip slash trick this is something we've been talking a lot about lately so I wanted to make sure that I throw that into this conversation as procurement professionals as professional negotiators you have to understand your role in a negotiation you are negotiating on behalf of someone you are advocating for someone so you have to understand your role because you may have a situation where you have to play the bad guy your customer has to have a relationship with the supplier once that contract is signed they have to continue to consume the services and use the services so if there is a situation where someone has to be more forceful I'm sorry procurement folks you should probably play the bad cop in a negotiation your customer should be kept innocent so they can continue to have the relationship with the supplier but here's the thing you need to talk to your customer you need to make sure that they understand their role in this situation and that they're not going behind your back and negotiating with the supplier because the supplier is Whispering and their their ears saying well we're never going to get this deal done we're never going to be able to give you this price and then they go off and they cut a deal and they make an agreement behind your back so you have to work with your customers constantly communicating constantly educating them and you it's just it's like a it's like a movie it's like it's like a TV show you should be following a script together and you're both playing your roles in this narrative but here's something you should never do don't make idle threats to A supplier that you're negotiating with especially if they are an incumbent especially if you're doing a renewal if you're in a situation where you're like I'm just gonna walk away I'm not going to buy your services and you have no ability to Pivot don't ever say that sometimes people get a little cocky they get a little aggravated they get a little stressed out on calls and they're like well we're just gonna walk away we're not going to do business and they're going to know their competition better than you do they're going to know what your options are they're going to know what your timelines are so if you have to do a renewal and it's going to take you a year to get off of their services and you know you have four or five months left in the contract you have a problem which by the way you should not do that so you should always be checking to see when your contracts are expiring and give yourselves plenty of ramp to move or to Pivot and to migrate so if you tell a supplier oh well we're just going to walk away from you but you need to sign like a one-year extension or a six month extension they're gonna kill you so don't make an idle threat of a supplier unless you absolutely know you have an alternative and an option and you can move to it relatively quickly and my final bit of advice is even after you've signed a contract with a supplier and your everything seems to be going fine check with their competitors check what your options are keep them honest or you may have signed a deal something may have changed from a market perspective and you know a year or two into that engagement you're like this isn't working and you need to be able to go back to them intelligently and say this is why this isn't working or this is why your price doesn't work anymore you have competitors I've mentioned in previous negotiation videos that I've done that the RFP is like the Ultimate Weapon for a negotiation it creates all this beautiful leverage all this additional information from other suppliers about pricing they know that they're alphabid so it creates a little bit of a stress for them to keep the business it creates a good situation for procurement people but I've also mentioned that if you have a really good relationship with a supplier and you are on point and you understand what your pricing is and that that pricing is viable and you don't feel like you're being taken advantage of you don't necessarily have to go out to bid all the time you should understand what your pricing is and if you really like the supplier and you let them know hey this pricing we're noticing that your competitors are doing a lot better or we found out that another company that maybe an executive left one company and went to another now they came in and they saw the pricing and the pricing is not as competitive as what they had before when those things start to Bubble Up give the supplier an opportunity to make it right so you can call them out on it you can if you have a bit of information and they they know that you've done your homework give them an opportunity to do the right thing and if they dig in and they don't want to do the right thing that should also indicate to you that it's a good time to go to an RFP and to look at the market for other options okay I think we've covered a good bit of information about how to approach a negotiation again in my world for my style I don't think that a negotiation should be when it all costs it's a dance everybody should walk away feeling pretty good that should be the goal and if you follow the right Cadence if you prepare if you have thoughtful empathetic Communications with your sales teams with their sales teams understand what their goals are and then also not waste people's time you will have a better negotiation experience but none of this is absolutes people are still people companies behave in certain ways and at the end of the day if you feel like you are not being treated well try to move on thank you for watching this video if you have questions if you have comments if you have suggestions please leave it in the comment section below thank you for watching again have a great day we'll be back with another video in two weeks foreign 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