With hyper-relevant spend data and internal analysis at hand, being prepared for negotiations becomes much simpler. Benchmarking market pricing and understanding category or supplier cost drivers can provide invaluable arguments against your opponents.
Large parties risk garnering a poor reputation if they blatantly point out their weak leverage or offer up excellent Plan Bs – particularly if they value the relationship with smaller counterparts. Therefore, adopting an indirect approach may prove more fruitful.
1. Identify Your Goals
Establishing your negotiation goals is an essential first step. Experienced negotiators know this and take measures such as setting objectives, outlining roles and planning out tactics ahead of time.
Utilizing leverage wisely is key to obtaining what you desire. For instance, showing them the negative outcomes if negotiations break down (their plan B), may prove more successful than threats.
Your preferred outcome should also guide your strategy, helping to decide whether compromise is needed or not. Knowing your minimum satisfactory result will assist in making informed decisions when it comes to compromise or making concessions.
Before going into negotiations, it’s essential that you conduct research on both parties involved and their company. This should include studying competitors’ pricing structures, market intelligence, spend trends and supplier hierarchy structures so you know whom you should approach; otherwise you risk wasting time approaching an unauthorized representative who cannot sign contracts; this information is usually easily available online. Furthermore, benchmark your market prices against internal costs for competitive advantage during negotiations and to substantiate claims made during discussions.
2. Identify Your Values
Business leaders engage in negotiations every day. From leasing office space, hiring staff, creating partnerships or signing contracts to raising finance – each negotiation situation presents unique challenges that require careful decision-making to produce long-lasting, beneficial relationships between parties involved.
Effective negotiators know their values and prioritize delivering what the other party needs from them during negotiations. Acquiring detailed information to support interests, desired objectives, arguments and claims is crucial when preparing for negotiations; spend analysis and supplier performance data are great sources for such data that helps prepare you.
Negotiators understand their leverage by recognizing who will be involved, their exact influences, and desired outcomes of negotiations. Provide your counterparty with their best alternative to negotiated agreement (BATNA) to increase the chances of reaching an acceptable agreement.
Negotiators today strive to be “principled,” meaning avoiding having an ultimatum as part of negotiations and instead viewing problems as something both parties need to solve together and finding an outcome which benefits both.
3. Identify Your Leverage
Negotiation leverage refers to any power or advantage a party holds over another in negotiations that they can use to influence the results in their favor. It includes factors like information, resources, alternatives and relationships.
Conducting thorough research can be one of the best ways to identify leverage points and anticipate another party’s tactics. Knowing their motivation, interests, constraints and bargaining power are crucial when assessing bargaining power; additionally it is beneficial to gain an insight into their negotiation behavior history, reputation and decision-making processes.
As part of your negotiation strategy, it’s also crucial that you understand your own negotiating leverage, particularly in terms of the value you place on the relationship with the other party. Blatantly discussing how little you need the deal or openly asserting that strong alternatives exist may reduce your negotiating strength – an indirect approach may prove more successful such as informing them that you may walk away if there is no agreement reached during negotiations.
4. Identify Your Alternatives
Spending time collecting procurement-relevant data, market research and competitor intelligence can strengthen your leverage during negotiations. Gaining an idea of the other party’s BATNA (Best Alternative To Negotiated Agreement) or reservation value, which represents their worst deal they are willing to accept should negotiations fail is also beneficial.
Understanding that both parties have attractive alternatives if negotiations fail can open the door for agreement on a zone of possible agreement, or ZONA. By doing this, negotiators can limit their own BATNAs while potentially improving those of the other party as well.
5. Identify Your Perceptions and Expectations
Once you understand your own issues and interests and negotiating leverage, it’s time to assess the other side. Gather more information on their previous negotiations as well as any styles they tend to employ during negotiations.
Careful consideration of their interests is of vital importance as this will determine their negotiating position and what issues are of primary importance to them. By understanding their interests, you can plan out your strategy effectively and prioritize issues of greatest concern to you both parties involved.
As part of your BATNA (best alternative to negotiated agreement), it is also wise to plan what will happen if negotiations between yourself and your counterpart don’t reach an agreement. Establishing this plan early so you can prepare accordingly. Negotiators who use their BATNA can move seamlessly from point A to B without undermining its outcome – more likely to reach successful agreements than negotiators unwilling or unable to follow this strategy.
