Speaker 1: Hello, Sorcerers. I'm going to talk to you about negotiating this week. And did you ever notice that when you watch negotiation videos on YouTube, there's always someone saying, This is how you win at a negotiation. Win, win, win. I do not subscribe to that philosophy of negotiation. I don't think that a negotiation is a win situation because if you're winning, that means someone is losing. And I don't think that way. I think a negotiation, and this is not my own personal quote, a negotiation is a dance. And you need a partner and you both need things out of that dance. And you should both walk away feeling good after you've danced. That's how I feel about negotiation. And I'm going to talk to you about how to feel good about negotiation. Let's do it. Well, Sorcerers, this is a procurement channel, and I typically don't talk about negotiation too much. I've done three or four videos about the topic over the last three years, but I felt it was time to dust off the older material and talk about some new stuff. Talk about it in a different way. I know that this is going to sound obvious, but the first thing that a person needs to do to have a successful negotiation is to prepare. That shouldn't be a surprise. But when you are doing procurement and negotiating on behalf of other groups daily, sometimes that prep work gets overlooked. So if you are struggling, if you are feeling frustrated on something that you are currently negotiating, and you can apply this to anything. It doesn't have to be for procurement people, by the way, but I am viewing this from a procurement lens, and I'm going to say some very procurement-y stuff throughout the duration of this video. But you have to prepare. You have to sit down prior to going in and engaging with the other side. What you actually want. What does your customer actually want? What are the things that you actually want to achieve? The most obvious thing when people are talking about preparation for a negotiation is price. If I'm going to go off and buy a new car, I probably want to get the best deal for whatever it is that I'm buying. But let's look at the last few years of car buying. There's a shortage of cars. The CPUs aren't around. So they're not making as many cars. And all of the cars that are out in the market right now in 2023, they're going for over list price. So if you have a negotiation strategy where you are going to get at list or under, you may be severely disappointed and disadvantaged. So you have to pivot and think about other things that you may want out of that negotiation for a new car. Or you may have to go further from where you live to get the price that you want. Either way, you have to have a strategy and you have to be prepared to do things that you may not normally do. So let's go back to the procurement scenario. Let's go back to preparation. You have to sit down with your customers and you have to understand what the walkaway points are. What aspect of this deal is absolutely untenable and that you have to walk away. And you also have to prepare to understand who are the competitors? What are the alternatives in this thing that you were attempting to buy and attempting to negotiate? Do you have options? Especially if these aren't major deals where you're doing RFPs, you may have a customer that presents you with a service or a solution and they're just like, I need to buy this thing and I have a month. You don't always have alternatives. Price may not be the primary thing that you are always negotiating. When you have to back into a solution, it could very well be in your preparation that the things that you are most concerned about are contract terms, SLAs, liabilities, termination clauses. Those might be the things that you are really focused on. It's not about the dollars all the time. So you have to be prepared. You have to lay out what you actually need and what you actually want. And once you figure out what you need or what your customer needs and what your customer wants, sit down and think about what your supplier needs. What does your supplier need for them to walk away and feel good about this negotiation? You don't want your supplier to be in the poorhouse. You want them to make a healthy profit. You don't want to get murdered. You don't want to get taken advantage of in a negotiation. Or if you're in an advantageous situation where you're able to squeeze a supplier at a certain timeline and you get a really, really, really good price and they're not making money on the deal, they're going to start taking shortcuts and then you're going to end up being miserable in the service and in the management of that solution. So you have to make sure that a supplier has a healthy profit margin and they are enjoying doing business with you so you can continue to use the service and do business with this provider and not having to pivot. Look at the market. Look at what the supplier is doing. Did they have a bad quarter? Did they have a series of bad quarters from a stock or performance perspective? Do they need this win? Do they need to make this at a certain timeline? Is it about a sale? Is making a sale with your company going to be a good boost for them? You have to think about what the options are for them. Just because you may be focused on a price or terms, that may not be the thing that they're worried about and they're willing to give you the concessions that you need if you can give them a couple of concessions. Try to figure out and understand what will make your supplier feel good and what will make them feel like this is a successful engagement. And again, you don't have to give away and you should not give away the house to make the supplier feel good, but you should understand those levers and what they need and what that sales rep needs to be successful and to move on. Speaking of the sales rep, when you are engaging with the sales team, when you are trying to do a negotiation, when you are working with the other company's lawyers, it is a wise idea to demonstrate empathy. As I mentioned, understand where they are coming from. Try to make the negotiation personal. They will likely do the same thing. It doesn't have to be combative all of the time or any of the time for that matter. But again, in a procurement role, things will at some point get a little dicey in a negotiation. Be comfortable with that. Expect that. But it doesn't always have to be that way. And when you make it personal and you get to know these people on a personal level, you can get past those things because it's not you that's causing the problem. It's not you that's being difficult. You are representing your company. And this is where we get to another nuance of negotiation. In general, I'm going to tell you, don't waste the sales team, the other side's time. Don't make them run down things that you have absolutely no interest in buying or doing. You should be fairly upfront about the things that you want because if they have to run down and clear different aspects through their sales departments and through their legal departments, and then you go back and you're like, yeah, no, that's totally, I have no, I don't want any of that. They're going to get frustrated. It's more work for them. They're going to get aggravated at you. So try to be clear about the things that you or your customers want up front to the best of your abilities. But it would not be unwise to ask for a little bit more. And this is where it gets a little kludgy because you may ask for things, more things to get a better idea of pricing and to feel things around. And you may use those bigger swings or asking for more to help scale down the pricing later on. So you have to walk a very tight line of being judicious about the things that you are asking for, creating a little bit of space to negotiate later, but not being ridiculous with the things that you are asking for. A negotiating technique that you can leverage is trying to get the supplier to lock in at a certain price for the year or whatever the normal duration of time is. Then you start to ask them a series of leading questions about duration or quantity. So you've locked in at a price, and then you could say, well, what happens if I go from this one-year deal to a three-year deal or to a five-year deal? What happens to the price? What happens if I pay you immediately or if I pay you early? Can I knock off a couple of percentage points? You're not changing the tempo, right? You're giving them more. You're either buying more of the product, and does that change the quantity? Does that change the unit cost? You're changing the duration so they can book revenue for longer, but the caveat to that one is you better make sure that you have an understanding of what your termination clauses are because if you're locking in for five years, you want to understand what your outs are because things can change in five years. So you're doing a dance, and the dance is not always easy. It can be somewhat difficult, and you don't want to step on your partner's toes. You don't want to overshare ever. You don't want to overshare with your suppliers, but you also don't want to be so buttoned up that you're not actually giving them anything to work with you on. You have to get into a rhythm with these sales teams to figure out the best angles and the best options, and you have levers to play. Duration, payment, quantity, those are all the basics. In many cases in my world, the products are new. They are boutique. They are not incumbents. It's something that's totally like net new. It's a net service. It's a net new platform. It's not always about the price. So in order for me to negotiate a deal, I'm less worried about the dollars, and I'm more worried about what happens if the company has a breach or if they go belly up, what happens to my customers' data. So those are the things that I'm mostly focused on negotiation, making sure that they have the right protections in place for my customers and making sure that if something bad happens because we live in a world where bad data things happen all the time, it's not always about dollars, and you have to understand that during your preparation of what the major triggers are for you and for your company and for your customers. Another aspect of negotiation that people don't always understand, you have to be comfortable as a negotiator with silence, with pregnant pauses, with very direct statements. If a supplier, if things are not following the right tempos and you're trying to figure out pricing, they may come up and say, well, this is our offer. You can just say, that's not going to work for me. Don't fill the air with more words and information. Let the silence marinate. Let everyone bathe in it. Let them come back and say something else. Start asking the follow-up questions. Don't give that information away. Especially in a situation like that, if you guys are so wildly off course that you're just like, that's not going to work for us. Don't feed the conversation. Let them ask the questions. Control the conversation and the narrative. Be comfortable with silence. Be comfortable with short, direct statements. Don't overshare. I'm going to give a shout out to one of my colleagues, Ben, for that particular tip slash trick. This is something we've been talking a lot about lately, so I wanted to make sure that I throw that into this conversation. As procurement professionals, as professional negotiators, you have to understand your role in a negotiation. You are negotiating on behalf of someone. You are advocating for someone. You have to understand your role because you may have a situation where you have to play the bad guy. Your customer has to have a relationship with the supplier once that contract is signed. They have to continue to consume the services and use the services. If there is a situation where someone has to be more forceful, I'm sorry procurement folks, you should probably play the bad cop in a negotiation. Your customer should be kept innocent so they can continue to have the relationship with the supplier. Here's the thing. You need to talk to your customer. You need to make sure that they understand their role in the situation and that they're not going behind your back and negotiating with the supplier because the supplier is whispering in their ear saying, we're never going to get this deal done. We're never going to be able to give you this price. Then they go off and they cut a deal and they make an agreement behind your back. You have to work with your customers constantly communicating, constantly educating them and it's like a movie. It's like a TV show. You should be following a script together and you're both playing your roles in this narrative. But here's something you should never do. Don't make idle threats to a supplier that you're negotiating with, especially if they are an incumbent, especially if you're doing a renewal. If you're in a situation where you're like, I'm just going to walk away. I'm not going to buy your services and you have no ability to pivot, don't ever say that. Sometimes people get a little cocky. They get a little aggravated. They get a little stressed out on calls and they're like, well, we're just going to walk away. We're not going to do business and they're going to know their competition better than you do. They're going to know what your options are. They're going to know what your timelines are. So if you have to do a renewal and it's going to take you a year to get off of their services and you have four or five months left in the contract, you have a problem, which by the way, you should not do that. So you should always be checking to see when your contracts are expiring and give yourselves plenty of ramp to move or to pivot and to migrate. So if you tell a supplier, oh, well, we're just going to walk away from you, but you need to sign like a one year extension or a six month extension, they're going to kill you. So don't make an idle threat of a supplier unless you absolutely know you have an alternative and an option and you can move to it relatively quickly. And my final bit of advice is even after you've signed a contract with a supplier and everything seems to be going fine, check with their competitors, check what your options are, keep them honest. You may have signed a deal, something may have changed from a market perspective and a year or two into that engagement, you're like, this isn't working and you need to be able to go back to them intelligently and say, this is why this isn't working or this is why your price doesn't work anymore. You have competitors. I've mentioned in previous negotiation videos that I've done that the RFP is like the ultimate weapon for a negotiation. It creates all of this beautiful leverage, all this additional information from other suppliers about pricing. They know that they're out for bid, so it creates a little bit of a stress for them to keep the business. It creates a good situation for procurement people. But I've also mentioned that if you have a really good relationship with a supplier and you are on point and you understand what your pricing is and that that pricing is viable and you don't feel like you're being taken advantage of, you don't necessarily have to go out to bid all the time. You should understand what your pricing is and if you really like the supplier and you let them know, hey, this pricing, we're noticing that your competitor is doing a lot better or we found out that another company, that maybe an executive left one company and went to another. Now they came in and they saw the pricing and the pricing is not as competitive as what they had before. When those things start to bubble up, give the supplier an opportunity to make it right. So you can call them out on it. If you have a bit of information and they know that you've done your homework, give them an opportunity to do the right thing. And if they dig in and they don't want to do the right thing, that should also indicate to you that it's a good time to go to an RFP and to look at the market for other options. Okay, I think we've covered a good bit of information about how to approach a negotiation. Again, in my world, for my style, I don't think that a negotiation should be win at all costs. It's a dance. Everybody should walk away feeling pretty good. That should be the goal. And if you follow the right cadence, if you prepare, if you have thoughtful, empathetic communications with your sales teams, with their sales teams, understand what their goals are, and then also not waste people's time, you will have a better negotiation experience. But none of this is absolute. People are still people. Companies behave in certain ways. And at the end of the day, if you feel like you are not being treated well, try to move on. Thank you for watching this video. If you have questions, if you have comments, if you have suggestions, please leave it in the comment section below. Thank you for watching again. Have a great day. We'll be back with another video in two weeks. Bye.