Negotiation Tips and Tricks for Procurement Leaders

Posted by Alyssa Jones | Mar 26, 2020 8:35:04 AM

When people think of "negotiation," they often assume that all it involves is parties figuring out specific terms and conditions of a potential agreement. However, negotiation involves much more in the conduct of business, and it starts right from the moment a procurement leader communicates with an internal stakeholder or a vendor. While there is no one correct way to do business, there are established methods that procurement leaders can employ to make securing the optimal deal easier. Here are some of those methods:

Make the first proposal

Convention often dictates that the seller should be the one to draft and send out an initial proposal; however, in some cases, the opposite may be necessary. Being the first one to make a proposal allows you to create conditions close to what the market offers and provides you with an opportunity to improve the conditions for aspects that are valuable to the company you represent. Our previous article '3 Steps to Fact-Based Presentations' highlights that when presenting a proposal, it's best to use relevant facts to support your proposal's purpose and let the seller see clearly what's in it for them.

Research the actual costs

To be in the best position when negotiating a price, you have to know how much it costs the seller to make their goods. Such knowledge gives you an idea of how much wiggle room you have when it comes to negotiating prices and puts you in a better light in the eyes of the supplier. Once the supplier realizes you know just how much money and effort it takes for them to produce what they bring to the table, it will foster trust and credibility.

Profile your counterpart

Concessions, opportunities, and deals are all made and signed by people. This is the reason why, Jan Potgieter emphasizes in her article on Supply Management, that it’s more important to learn about the people you do business with than your own category, product, service, or solution set. Initial negotiations can be utilized as an opportunity to learn more about the interests of the person you are dealing with and build a stronger connection. It's also good to encourage your counterpart to talk as much as possible while showing genuine interest in what they are talking about.

 

Look for areas of mutual gain

While it is true that getting a low price is important, it isn’t the only consideration that comes into play during negotiations. More often than not, suppliers who will not budge on the price will surely move on other points far more important to them. That being said, it is imperative that you find areas of mutual gain. For instance, discuss reducing the down payment, discounts for bulk purchases, early payment, terms of the warranty, or any other factors you think may pique their interest.

Make good impressions

One of the best ways to ensure negotiations work in your favor is by making a good impression. A good impression encompasses various aspects such as respecting their time, being courteous, and being aware of how you present yourself. In fact, it even comes down to where you decide to meet for negotiations. Industrious explains how beautiful, professional spaces ensure that you impress even the toughest partners, clients, and investors, and how professional and productive environments have great effects on one’s psyche. This is why coworking spaces have become very popular for those who don’t have a regular office. They provide the perfect work setting to make a deal.

Learn the industry jargon

Every industry has its own culture and language, and that entails a unique set of jargon. To better delight and impress your counterpart, take the time to learn the industry lingo and basics. If you aren’t able to easily grasp the industry jargon, at least show some enthusiasm and openness to learn. When sellers see that you are eager to learn about their industry, they tend to appreciate you more. You'll also avoid getting fooled because the seller will realize that you do know what you’re talking about.

Have set objectives

When going into a negotiation, it’s good practice to have a list of the factors that are most important to you. Then, on your list, decide what you are and aren’t prepared to compromise on. An article by Info Entrepreneurs points out that the key to getting a good deal is by establishing your preferred outcome while remaining realistic.


Don’t default to a single strategy

Usually, when procurement leaders find a strategy that works on a couple of sellers, they tend to stick to that strategy and use it as default. But every vendor is unique, and they are more likely to extend their best offers and deals to procurement leaders who they like and can collaborate with. Additionally, if you consistently stick to using a competitive approach, according to an article by Supply Chain Digest, sellers will wise up soon enough and hedge their bets accordingly. So, make sure to always change things up and use strategies tailored to the person you are negotiating with.

Negotiating is one of the most important responsibilities of a procurement professional, and it takes a lot of skills and effort to master. To learn more about how to become a better procurement leader, check out what else CMKG has to offer.

Written by Alyssa Jones

Alyssa Jones is an aspiring writer who currently works as a community manager for an environmental non-profit. In her free time, she enjoys reading graphic novels and watching TED Talks.