In your company, purchasing professionals, sales persons, and many other employees will be dealing with suppliers and customers to negotiate prices, delivery dates, contracts, and many other areas. The negotiation of an order price, or delivery date is important to the profitability of your company. If every time a deal was being negotiated and your employees let the supplier or customers get everything they wanted as part of the negotiation then your company would fail. It is important that your employees have the skills needed to negotiate successfully.
When you enter negotiations with a vendor or customer, you will have a list of requirements that you want. This can be the price of an item, the length of the contract, the delivery schedule, warranty terms, the payment schedule, and any number of areas that you want to be in your favor. However, the vendor or customer service will also be going into the negotiation with their list of must-haves, so there has to be some negotiation, which means that both sides will have to give something in order for the negotiations to be successful.
An effective negotiation will play out that both sides have gained some of their must-haves. A win-win negotiation will be achieved if the solution agreed to, is acceptable to both sides. In this successful outcome, both sides will be happy so that future business will be forthcoming and both sides will know that a successful outcome of negotiations will be forthcoming.
Preparing for Negotiations
Before any meeting to negotiate a contract, your employees must prepare so that they know what the ultimate goal of the negotiation is, what can be traded as part of the negotiation, and the consequences of winning or losing the negotiation.
- Goals for the Negotiation - You have to enter the negotiation with a clear idea of what the goals are that you wish to achieve. It is also a good idea to prioritize these so you know what is the goal that you cannot live without, and what goals can be given up. It is also prudent to try to put yourself in the other side's shoes to figure out what their major goal is.
- Trades - When you have a list of goals, you should identify those which can be traded away. These are not must-have goals, but nice to have, so it won't be a deal breaker if these are not achieved.
- Relationships - If the negotiation is with a customer or vendor that you do a lot of business with then you may not want to be as stubborn with your demands as you would be with a customer who you have little business with. In addition, if you are negotiating with a new customer who can offer a lot of business in the future, you may want to negotiate in a more open manner. For example, if you are negotiating with a new customer who wants to purchase 100,000 items, you may be less rigid on price than if you were negotiating with a customer who wants to order 1000 items.
- Consequences of the Negotiation - Before you start a negotiation, it is important to look at the outcome if you fail to negotiate a deal or if your opponent negotiates a bad deal. The consequences of the negotiation are as important as the final contract itself. If you fail to negotiate a deal and there is no contact, how will that affect your business? Is your company depending on this deal to fund further manufacturing? How will the other company deal with a poorly negotiated deal from their side? If the other company negotiates a bad deal, they may not be able to perform to the clauses in the contract, or even worse, go out of business. So negotiating a good deal has to be a win-win for both sides.