January 8, 2024

TENSE RECESSION NEGOTIATIONS

Recessions create pressures which translate into tensions at the negotiating table. Sales are harder to close and margins are evaporating. Procurement and supply chain managers are under tremendous demands to reduce costs. Internal negotiations face increased competition for reduced resources.

Today your negotiating skills are critical — they might have become your survival skills! You are going to have to work harder – and smarter – to negotiate successful agreements.

The key issue today is how to negotiate a Both-Win outcome where both you and the other party benefit. 

Don’t underestimate your negotiating power. So often we fail to examine the limits on the other party’s power. In a recession there may be more limitations on the other party. Only start a negotiation with full understanding of your strengths and a full examination of the potential pressures on the other side.

Slow down.

The longer a negotiation takes, the more you discover about yourself and the other party. This is the framework for a better agreement. A quick deal generally is a dumb deal. Not always but often. And a quick deal may fail if it leaves out what may be the most important part of a negotiation, which is making a better deal for both parties.

The cure for tense negotiations is to quickly transition into a search for a Both-Win outcome. This helps dissolve the tension. As soon as the other party senses what you are doing, their comfort level with you will soar. Suppose a salesperson says to a buyer: “Let’s stop talking about whether the price should be $1.00 or .95 cents. Let’s talk instead about ways to make this deal better for both of us. Do you need financing? How about staging shipments or just-in-time deliveries? What if I change the design like this? Can this specification be modified; it could save both of us some costs. Are there any ways we can increase the size of the project? When a salesperson does this, the potential for mutual satisfaction soars.

Examine Total Cost

The total cost approach is a powerful negotiating tool for any negotiation that is focused on prices. Direct the negotiation towards total cost instead of price. The price of what is being sold is only one component in the total cost of ownership. The process of identifying all of the components that go into ‘Total Cost’ provides a fertile environment for relationships to build between the negotiators and for each side to uncover potential Both-Win opportunities that are not focused on the single issue of price.

Many salespeople will have a tendency to convince themselves that if only they had lower prices they could bring in more business. They will increasingly discount their company and product advantages because buyers will be telling them that those ‘value added’ aspects don’t mean a thing today. Sure prices are important, but often price is not the crucial aspect of a negotiation. There can be many reasons to win or lose business besides price. The buyer who returns to their organization with the best price and nothing else is not considered a winner. The successful buyer is one who looks at the full picture, from quality to delivery to product specifications to support services and yes price. A buyer who gets what they need on the other issues can give a little on price. Will they? That’s going to be determined by negotiating skills.

Concessions and Satisfaction

The recession is going to condition everyone to ask for more and more concessions. How you make concessions is critical to success in negotiations. Make sure you do leave yourself room to negotiate, to come down. Why? You want to leave the other party with a degree of satisfaction. They want to leave the negotiation feeling that they have won some concessions, so make certain you allow for that. And don’t make large concessions. Large concessions leave the other party wondering what else they can get out of you. The same goes for making concessions too quickly. So go slow and small. Whenever you make a concession, learn to ask for something in return.

In a successful negotiation, in the final analysis what you are doing is creating satisfaction for the other party. In fact, all the advice above relates to that. These are ways to create satisfaction. If you happen to be in sales, do this and, even if you don’t land this deal, you will get a chance to negotiate on the next deal. You will have established a relationship, and that’s really how you will succeed in business. Recession or not.