What "Negotiate That" is all about...

I’m Faye, a business student in the UK with a passion for negotiation.
Iv read the books, practiced and hopefully learned a lot about negotiation, so much so, that Id like to share my experiences and passion for negotiating with the world to help people get better deals for themselves!
Before I read my first negotiating book I had very little idea of how to negotiate and was under the impression you were born either great at it or rubbish... and felt I probably fell into the rubbish category.
However, after reading the first book (which I stumbled upon in a second hand book store in South Africa) I automatically felt more confident and wanted to try out these new skills Id learned... and found actually they worked!
The first few times I tried I chickened out, then I started getting somewhere and once I got my first negotiated deal my confidence rocketed, and now I’m always asking for deals.
Remember if you don't ask, you won't get!
So this website is a way for me to communicate my research and work to all interested parties,
Faye x

TOTW: Negotiate the market

Research and reap the rewards!

Im sure this is a very simple consept but over and over again people jump into negotiations without the correct knowledge needed to get the best deal for themselves. First thing to realise is everything is relative... meaning a great deal is only a great deal when taking into account any other possible deals.

When I first went to South Africa I visited a local market and gained a first hand experience of how over-excitement at the possibility of a discount can effect your negotiations through lack of knowledge. I was trying to buy two wooden carved statues and get the seller down to a more comfortable price. After seeing the same statues at the stall before hand for more expensive than this sellers initial price I decided to bargain with the seller and felt overwelmed with confidence and delight when I did manage to get a reduction. After money had been exchanged and all was ready and packed I went into the next store to see the exact statues were for sale for even lower than my bargined price! I couldnt believe it, I felt cheeted somehow. When infact it was my lack of research (as in looking around the whole market before I approached a seller) that let me down. To me the bargained price relative to the first and more expensive price led me to over confidence and feel I had a real bargain, then the bargained price relative to the cheaper price knocked abit of reality into me.

To have knowledge of the market, the product, or anything else of relevance when negotiating means you have greater power. Knowledge is power! To know that the next shop along sells something for slightly cheaper, or that in a month the price of something will drop means you can make an educated decision.

The Buying Process

B2B buying often has different characteristics to B2C including high value transactions, ongoing relationship and commitment and many stakeholders which is why a process is often drawn up to facilitate a professional buyers job to ensure consistency and accountability.
Whilst working as a buyer for the automotive industry a similar process was followed to the one stated by Robinson et al (1967)which I will use as my base and add any relevant info from my experiences.

Firstly Robinson et al (1967) felt that there are 3 different 'classes' of buys: new task in which a first-time buyer collects information for a large number of stakeholders, modified rebuy in which specifications change resulting in a replacement purchase of an existing product/service, and a straight rebuy which is a routine reorder. There are 8'buyphases' that a buyer passes through with different critical phases for the 3 buy classes.

1. Need Recognition:

This need is potentially generated by any member of the 'buying centre' these include: initiators, buyers, influencers, decision makers, users and gatekeepers(Webster and Wind, 1972). They may come from different departments, I have bought for marketing, PR, engineering... they all have different needs and it will be after an identification of a problem that needs addressing these stakeholders will then make contact with purchasing.

2. Need definition:

This need has to be communicated to the buyer so that it can be a planned tender in their schedule and to ensure that the stakeholder's expectations are realistic, such as timings. Pre-specifications being drawn up the stakeholders may decide it appropriate to approach a number of companies to establish what specifications/products, if any, would solve their need. This may refine the stakeholder's need and influence the specifications.

A word of warning here, if unaware of the buying process stakeholders may only approach 1 company and could be swayed towards their ideas limiting the amount of suppliers able to quote due to differences in technologies and products etc. The stakeholder could also give away important information or could skip a few steps ahead and try to close the deal without any help from a buyer. Make sure that stakeholders are accountable for their actions by educating them on the practices, on their roll and on the buyers roll and if necessary ensure that a buyer accompanies a stakeholder on all supplier meetings.

3. Solution Specification:

A Scope Of Work or Specification needs to be drawn up by the stakeholder as they should know exactly what it is they want. It should be as detailed as possible to ensure that if the supplier is unable to quote that it is not because the specifications did not make it clear what the tender was for! (This has happened to me.) To ensure that the buyer is aware of what they are buying a discussion with the stakeholder is a good way to quickly get an understanding, ask any questions and make suggestions as to more/less detail and confirm certain things such as key dates.

4. Supplier identification:

A 'Bid list' should be drawn up of possible suppliers to approach. This can be done by keeping record of previous suppliers asked, discuss with other areas of the business and from researching the market. The stakeholder should be aware of some to approach as the 'technical specialist' on the product/service. To ensure competition and the best price at least 3 should be identified. References could be gained now and Request for Information could be sent to the potential suppliers to establish interest.

5. Proposal Solicitation:

A RFQ 'Request For Quote' will need to be sent out, via email or mail. This should include such items as a general cover letter to say what the mail is, i.e I am asking you to tender for... the specifications should be sent, as well as any terms and conditions that you wish to be agreed to. Key information such as dates will need to be highlighted and a follow up email/phone call will be able to confirm that the mail reached them ok, that they will be quoting and that they have all the information needed.
On the quote submission date their timing of submission may suggest something about their company. If they are on time then great, if not think if this reflects their delivery of the product/service quoting for.

6. Proposal evaluation and vendor selection:

The first step when all the quotes are in (some may need chasing or just never turn up) is to forward them onto the stakeholders for them to confirm that the suppliers have quoted for everything and in the manner in which they were expecting. Often 2 out of 3 quotes would be similar in appearance but 1 may have missed something off or offered something slightly different so to be fair and compare like for like before negotiating the supplier should have the opportunity to requote with the clarification of what was missing etc.

Once they are all apples for apples further clarification may be required by the stakeholder with the buyer accompanying, i.e a face to face PR pitch or a technical discussion over the phone for a product. Once the stakeholder feels confident in the quotes submitted technically then they can pass the 'technical evaluation' stage and move from the stakeholder's evaluation to the commercial evaluation with the buyers.

A comparison chart will be drawn up to analyse what value is being offered for the price. A total cost approach is appropriate here taking into account not just the product/service cost but also the transport cost, tooling, exchange rates and looking at other factors such as risks and depending on your companies CSR stance possibly environmentally friendly factors of evaluation.

Once the true cost has been established the negotiations can begin. Target setting based on expected costs, budgets, the lowest costs or other could be set to all suppliers still in the running to see if these can be achieved. If they are not achieved the counter offer could be accepted or if it is out of your price range do not be afraid to walk away. At this stage escalation of commitment may make you feel that you have no other choice but to accept the offer.

7. Order routine selection:

Once the negotiations have concluded a formal process may be required internally to ensure compliance with auditing such as correctly filing in folders and an approval process such as a meeting with the stakeholders and superiors to confirm the outcome of the negotiation is agreeable. After this is given the heads up the final contract signing should take place and Purchase Orders released.

8. Performance review:

Regular reviews should be encouraged and could be linked to performance related pay/bonus, though this would be agreed in phase 6 or before. Stakeholders will have the majority of interaction with the supplier here on but I think the buyer should keep in contact with the stakeholder and suppliers to ensure performance is in line with expectations and so that in 1/3/5 years time when the tender is under review the relationships do not have to be developed all over again.

My personal experience with this process is that it is useful to have a guide and to ensure that everyone knows what roles and responsibilities they have but discretionary flexibility and freedom should be given to the buying professional to bend the process to fit the varying needs of the stakeholders and the different products/services. It is not 1 size fits all, instead intelligent buyers are needed to adapt to best serve the business.

Thanks
Faye

TOTW: Holiday season tip.

Just a quick Tip I typed up years ago and didn't publish, with the economic climate it still is applicable now...
We are in the holiday season now so I thought id just do a quick post to say this is a great time to try out some negotiating techniques you know. Why not try seeing if you can get a discount on a holiday you are booking (if you havent already), to be fair with the economic climate at the moment there are bargains to be had without even asking, so if you push that little bit harder you could save even more... maybe try get an extra night free, or something that will save you alot but doesn't cost them much, have a think!
I personally think holidays are great, if visiting another country, as it gives you the freedom to try to negotiate without feeling uncomfortable or embarrased. Your allowed to make mistakes, and in many other countries they expect you to negotiate so why not give it a go.
The Western world has created a "fixed price" pay it or who cares attitude to buying. This is crazy as a sale is better than no sale! But this is why people do not challenge prices in shops and I can understand as it can be embarrasing when the shop worker says no.
So to get practise if visiting somewhere outside the Western world go for it. Street markets are a great place to practive (even in the UK) if you don't haggle, your a MUG.
Remember compair, do you really need it/want it, and if so what deal can you get for it. Set your self tasks. While in South Africa when visiting markets I would set myself tasks to get certain things for certain prices and if achieved would feel great after, and if not oh well onto the next deal.

TOTW: Be Optomistic!

There is a definite difference between being optimistic and being realistic... and when negotiating you should try to be both!
Whether buying or selling you should look realistically at what you think the value of the item is worth based on your "standards", as discussed below.
Maybe you are selling a sofa and have based your value on a similar sofa for sale a few weeks ago but this one is in better condition. You know the value of the sofa is £50 as that’s what the other sofa got, but you hope to get more because its in better condition, maybe £60, but you say you will not sell for less than £30. Realistically you will get somewhere between the top and bottom end if your research is correct. But as the top end is not totally unrealistic there is no point in not being optimistic and going for it! Start high, you can always accept less and you can always reduce (a bargain grabs attention) but you can rarely increase the cost without a fight!
Research has shown if you approach with a realistic optimism you are likely to get closer to the deal you want so go for it.
Think, if you genuinely can’t see why you couldn’t get that price for it then try to get that price.