Negotiation – More Than Just the Price by Nathalie Ringstad
There are so many written tips and tricks. And yes, it is all about doing your homework, but is it really that simple? Before becoming a sourcing specialist, I honestly thought that negotiation was only what you found on a market or a bazaar. I hated it, maybe mostly because I felt cheated. I felt I never got a fair price. Therefore, back in 2015 when I chose to become a sourcing leader, my biggest fear was negotiation. Why? I thought I was bad at it. Today I have around 6-7 years behind me in sourcing and I would like to share some tips and experiences when it comes to negotiation.
Step 1. Price - What is the right price?
Honestly this is a bit hard to answer; in business it’s very hard to compare what you have to others. You will never know what is behind that price and that will affect what you pay. Things that can affect the price are among many things:
a) Volume (the bigger the volume – the lower the price)
b) Risk (the higher the risk the higher the price)
c) Commitment (the longer the commitment the lower the price)
d) Payment schedule (the longer the payment date the higher the price, also the bigger amount you can pay upfront also affects the price) – Time is money
e) Warranties – for how long can you promise your product works? (Depends on how old the product is in its lifecycle)
f) Competition (the difference between demand and supply)
Step 2. The product/service
What are you selling/buying? Sometimes we get very focused on what we sell, may it be a product or a service. But can it be anything more? If it is a product, what more related to the product can we sell, could it be additional products or services?
Step 3. The first price is never the final price
As a buyer, never accept the first price. As a seller, never give the price you really want. Raise the stakes, but don’t be unrealistic. And if you get what you want to easy, then your counterpart probably had more to give. In that case, don’t think you did bad, just take it as a lesson learned for next time.
Step 4. Forecast
Know the future – I know it can be challenging but look at your strategy. Don’t just focus on today, you might miss out on opportunities ahead.
Step 5. BATNA (1)
Your Best Alternative To a Negotiated Agreement – Maybe what you first thought isn’t the best end result?
a) List your alternatives – what alternatives do you have?
b) Evaluate your alternatives – what value do they have?
c) Establish your BATNA – what alternatives and actions will give you the best value?
d) Calculate the lowest valued deal you are willing to accept.
I hope you found my article interesting and I would be happy to connect with you if you have any thoughts or questions.
Footnote (1) Program on Negotiation, Harvard Law School
BATNA Basics: Boost Your Power at the Bargaining Table p.2
