Each and every negotiation completed on behalf of your organization sends a message to customers, competitors and sales forces. You can't claim you're the value leader when everyone knows that at the final hour your prices will sink faster than the Titanic. How you negotiate is either a deposit or withdrawal from your brand equity. Giving away value tarnishes brand perception and signals competitors to do the same, triggering irrational competitive behavior that can obliterate everyone's margins.
B2B Street Fighting Blog
The first step in creating value through trading is the pre-work to understand what the ideal trading items are. It is this pre-work, in fact, that actually enhances the value that is being negotiated in a deal versus simply shifting value from one party to another. Creating value for trading is actually good for both sides.
As we report often, detailed and objective analysis of each side’s alternative to reaching agreement (what we call CNA or Consequences of No Agreement) is the central point of business negotiation planning. Regardless of our feelings about whether management or labor did the right thing here, we can learn a lot from their respective negotiation strategies.
A pervasive belief about negotiation is that you can’t plan for it and can’t control it because nothing is predictable; negotiation is all reaction and no amount of proactive preparation will matter. The essence of this problem was poignantly captured in an offhand comment made by the editor of
When you have a deep and broad understanding of your total value proposition and how important that value is to your prospect, you will not be the least bit fazed when he sits back, folds his arms, and announces: “Your competitor will give it to me for 20 percent cheaper.” When he hits you with this zinger, he probably doesn’t know what he’s talking about. It’s up to you to enlighten him...
"The ability to tactically engage others in the face of impending power implosions and redirect potential negative and destructive energies toward a greater positive outcome is the mark of a true leader in today’s workplace," states Dr. Jeffrey Magee. He continues with, "It’s all about egos, competitiveness, saving face, and not being seen as the one having to make a concession that leads to a need to win at any cost! Many times it is this cost of power struggles that, in the final accounting, leads to significant loss of true gains and wins for the greater whole because individuals get caught up in the minutia of petty struggles. And from there, a pattern develops whereby struggles become the norm."
We know that buyers will attempt to commoditize a supplier’s offering in hopes of lowering prices and shifting risk in contract terms and conditions back to the supplier. We also know, however, that establishing value results in price premiums and risk-sharing commensurate with the return the seller expects to receive from the opportunity. For that reason, when we start working with a client we ask the company’s leadership three questions:
I was working with the procurement department at a major insurance company that was sourcing asset management software. At the start of the meeting, they said, "We want a 7% price reduction on our current $12 million spend; that's our goal and strategy."
A Harvard Business School study in 2009 evaluated forty-five companies and determined that the most significant negotiation problem they faced was the internal negotiation between and competing needs of silos, that is, a lack of internal negotiation alignment. Each silo (legal, pricing, marketing, sales, product managers) viewed the negotiation through its own lens rather than viewing it holistically. The study found, for example, that legal departments were simply redlining contracts in an effort to reduce risk to zero without factoring in or weighing the reward, and then adjusting risk profiles accordingly.
“The problem with many sales organizations is they still operate with the same principles and techniques they were using in the 60’s, 70’s and 80’s. While the technology supporting sales process have clearly evolved, the traditional sales strategies proffered by sales gurus 20 or 30 years ago have not kept pace with market needs. They are not nearly as effective as they once were, and…in most cases they are obsolete.” states Mike Myatt in “To Increase Revenue Stop Selling” (Forbes, May 1, 2012).
Think! named to Inc. list of
America's fastest growing private companies
America's fastest growing private companies