Effective Negotiation Skills – How to Master Negotiation Techniques
“negotiation” noun 1. discussion aimed at reaching an agreement
In this Ultimate Guide we will look at the following, you can jump to sections with these links below:
You have spent three whole days carefully crafting and preparing your presentation and pitch to your Buyer. You are primed and ready for all the incisive questions the Buyer will ask. After all this is one of the largest, most sophisticated supermarket chains in the country. They are going to be tough, focused and keen to see the wonderful new products you have to sell.
After a 45 minute wait in Reception. Strange they always run late? But hey they are busy, busy people right? The Buyer finally sees you and you begin your pitch. As you reach the big reveal of your fantastic new products that are going to make the Buyer lots and lots of money he or she deploys the ‘Oliver Twist’ tactic on you. With a bored expression and a loud yawn they lean right back in their chair and say……… ‘No’ and ‘I want more’ Sometimes (rarely) followed with a little ‘please’ added in for good measure.
Discussion Aimed at Reaching Agreement
Hardly a ‘discussion aimed at reaching agreement’. It seems like more a demonstration of power and potential intimidation. Welcome to the world of supermarket negotiation.
Therefore as a result you can spend (lots of) your money on a myriad of solid, theory heavy, intellectually robust classic negotiation courses. Indeed they may qualify you to negotiate global peace accords but they will certainly not equip you for the world of supermarket negotiation.
Win-Win or Win-Lose?
All classic negotiation courses are predicated on the concept of ‘Win-Win’. Hence as a result both sides work together to reach a mutually acceptable agreement. Therefore it relies on both parties being willing to reciprocate each other’s offers and actions and be logical, commercially focused and principled in their dealings with one another.
The UK wine buyer visiting one of the premier Chateaux in Bordeaux. Invited in front of the massed ranks of the whole estate to taste the new proudly presented vintage. A respectful hush falls as the buyer slowly looks at, sniffs and then tastes the wine………………. A long thoughtful pause and then the considered, logical and principled verdict……….’Very pleasant but it’s lacking a touch of margin’….
How do you then negotiate with a party that isn’t necessarily logical, reciprocal, honest or even commercial in their words and actions? It can certainly be about Win-Win but the first rule of negotiating with the supermarkets is don’t fall for their ‘I Win, You Lose’ negotiation tactics, tricks and games.
The MBM Effective Negotiation Programme will take you on a learning journey to equip you with all the skills you need to effectively negotiate and therefore commercially succeed especially with the major multiple supermarket and other buying groups.
Why then do supermarket Buyers adopt such on the face of it illogical, strange, sometimes weird games and tactics as a basis of their negotiations? The answer is as simple as it is blindingly obvious: Because it works!
Why does it work? – well there are a number of reasons which are explored in depth in the MBM Effective Negotiation Programme.
Balance of Power
At its most fundamental it comes down to Balance of Power. The top 6 supermarket multiples account for 83% of UK grocery spend (Kantar Worldpanel 21.5.17). Therefore anyone selling to a Tesco potentially has 28% or more of their business tied up with a single customer. However to Tesco with UK sales of £44billion (Tesco interim results 16/17) almost every supplier is just a tiny rounding error to them as a percentage of their business.
This is the fundamental metric that drives the arrogance and often power play tactics in the negotiation positions they adopt.
However their games also work not just because of the imbalance of power but because you, the Suppliers let them!
During your 3 days detailed preparation to produce that fantastic, persuasive, impactful selling presentation how much time did you put aside to think of the negotiation?
In that same 3 days how much time do you think your Buyer spent thinking about, planning and actually doing negotiation(s)?
Planning to Negotiate
The simple fact is Suppliers do not spend enough time planning to negotiate. They end up against Buyers who spend their whole time negotiating. It’s not hard to see who is likely to end up with the better chance of winning!
And finally, why also do their games work? Because you put them on a pedestal, you let them get inside your heads and they learn to manipulate their behaviours to distract, divert and sometimes even destroy your plans.
It’s their way of getting an advantage – disrupt the other side, put them in disarray then go in for the kill.
The MBM Effective Negotiation Programme will take you through a structured methodology. Outlining and explaining as well as practically demonstrating the key behavioural strategies that trained and skilled negotiators may choose to adopt.
They may decide to be Confrontational. To use classic power play tactics to undermine, discredit, disrupt and even destroy your planned selling (and sometimes) negotiating strategy.
This style is becoming less prevalent or is subtly shifting. It would have been the ‘house’ style of most of the big 4 supermarket groups up to 5 or 6 years ago.
As a result of the introduction of legislation in the form of GSCOP, A a number of high profile scandals. Plus the fact good suppliers with equally good training(!) were making it increasingly ineffective has meant as a result that most Buyers have moved on.
It is however still seen in ‘flashes’. How many times have you been to a meeting to be greeted by Mr. Jekyll who strangely morphs part way through the meeting into Mr. Hyde only to transition back to Mr. Jekyll by the end of the meeting?
More commonplace these days is their use of Manipulative tactics and behaviours. Much more subtle, much more clever, sometimes even seen as corporately sponsored ‘fishing missions’:
‘We would like to invite our valued Supplier Partners to join us on the Escalator to the Starship to Growth 2018!’
A slick, professional, senior invite only, ‘Supplier Briefing Conference’. Hosted at some swanky location with lots of ‘Finest’ nibbles, a ‘Taste the Difference’ finger buffet and of course some ‘Extra Special’ Prosecco. Followed a few days later by the meeting that culminates in the humungous outrageous investment ‘Ask’
A cornerstone of the big multiples success at driving lower prices for customers whilst still driving corporate profits is their recognition that actually certain Suppliers at certain times actually help drive interest, innovation and excitement into their assortments. It is therefore sometimes it is beneficial to adopt a Collaborative approach to negotiation.
This is the world of the genuine JBP (one that actually has a J in it!). They see the value you bring to the category and their business and actively jump on board. They will actively seek to engage and work with you.
However two critical things to remember when they adopt this approach. First, they are still out to transfer money from your business to their business and secondly, it won’t always last long.
Easter’s star supplier of Easter Eggs is unlikely to be the star of Christmas Chocolate Advent Calendars. It pays them to keep their Suppliers ‘churning’. It makes them more money, it keeps you unsure.
To be effective in the world of supermarket negotiations. Just as with any negotiation you need to be planned and prepared. Not just organised and confident with the numbers. But also with the tools to deal with the negotiation tactics and games they will deploy against you.
The MBM Effective Negotiation Programme will equip you with the good negotiation techniques required to get the best outcomes for your business. Thereby delivering a solid, measurable investment return on the training.
The Programme will expose all the different games and tactics that may be deployed against you whether they are intending to be Confrontational, Manipulative or Collaborative with you (or a mix of all three!)
Dealing with ‘Games’
It will equip you with a robust, tried and tested process and methodology to Recognise what is happening at any given point in the negotiation. To Diffuse that particular situation. Then Restore commercial logic and move the negotiation on to a positive conclusion.
When your Buyer has kept you kicking your heels in reception for 45 minutes. Apologises that the booked meeting room is no longer available and that you must set your carefully crafted and choreographed selling presentation up in the Canteen at 1pm. Sits down in front of a window with the sun streaming right into your eyes. Offers to get you a black tea that turns up as a white, sugared coffee then introduces you to his or her colleague – the forensic accountant. Who wants to have a ‘chat’ about promotional triggers going back 2 years – what do you do?
Recognise, Diffuse and Restore
Therefore and hopefully, you have all Recognised what is going on. A classic physical power-play designed to be Confrontational, to disrupt your presentation and divert your focus and attention to their advantage.
As a Delegate on the MBM Effective Negotiation Programme you will experience first hand in role plays similar such scenarios. You will be expertly coached in the appropriate response to Diffuse and Restore the situation. Remember it is almost always in your interest to keep the meeting going. Storming out is never an option and even a polite walking away is only in your interest very rarely. How many direct competitors do you have?
When you have practised and started to become comfortable with dealing with the negotiation tactics and games they will throw at you. Then we will introduce how to effectively prepare for the negotiation itself as the next step in how to improve your negotiation ability.
The Value of Money
Therefore ask yourself the very simple question – how much is £20 worth?
A basic principle of effective negotiation is recognising the simple truth. Money is only ever worth the value printed on the note.
£20 is only ever £20!
Therefore if we try to negotiate with just money we are guaranteed to get very quickly into complete and total Deadlock.
If we allow the negotiation to just focus on money itself a Buyers job is to get a £20 note off you for £10 or £5 or maybe even £2 in return! Not an economically or commercially sustainable way of doing business for a supplier!
Not surprisingly what do you think Buyers are trained to go after first?
Correct – always the money!
Do they show a determined interest in your factory’s food safety accreditation? Do they want to know the financial health of your business. Are they after an in depth understanding of the cost and production elements of your products?
No, they will always, if you will let them, go straight for the money.
Our UK supermarket wine buyer does not want to understand 200 years of French vinicultural history. The struggle the vines have to grow on the dry gravelly soils of the Gironde Valley that makes the grapes (wine comes from grapes – really?!) so exclusive and so expensive.
No, he or she wants alcoholic fruit juice that sells for a fiver a bottle but makes 35% margin!
How many Buyers for the top supermarket multiples in the UK do you think are Masters of Wine? The answer not many!
Therefore to effectively negotiate commercially profitable outcomes we must look to generate Tradeables. Those that have a differential cost and value to both sides.
Low Cost – High Value
For an instant cash in the till business like a supermarket the cost of paying invoices early is very low relative to a small cash strapped producer. Who needs to regularly pay downstream suppliers for ingredients, materials, power, plant and light.
Therefore quicker payment terms for small suppliers is a Low Cost Tradeable for a supermarket. But represents a sometimes lifesaving High Value Tradeable to the Supplier.
Conversely a period of exclusivity for a high profile, innovative new product is a very High Value Tradeable. Especially to a young, ambitious Buyer in a supermarket that prides itself on the best new products. Therefore in some circumstances, especially if production is gearing up and full market supply may be limited then offering exclusivity to a particular supermarket group becomes a very Low Cost Tradeable to the Suppler.
Prioritise Your Tradeables
The MBM Effective Negotiation Programme will provide you with a cutting edge, template framework to enable you to generate effective Low Cost, High Value Tradeables.
It then shows you how order and prioritise your Tradeables. How to plot out at which stages of the negotiation to introduce them to gain maximum return for your business.
The Programme differentiates between different negotiation scenarios. From large scale, multi-step and multi-level Organisational negotiations through to Email and Telephone negotiations.
The Importance of Ambition
A critical element of any effective negotiation is ensuring you are credibly Ambitious throughout.
Imagine the scenario that you are selling your 3-year-old VW Golf with 30,000 miles on the clock privately. You want £5,000 for it, what do you advertise it for? Advertise it for £5,000 and you won’t get £5,000. Advertise it for £15,000 and you won’t get a single call. However advertise it for £5,995 and you have created yourself £995 of negotiation ‘wriggle room’.
Some negotiation courses talk about extreme opening positions. They tend to be the providers that train the Buyers! As you will see from the example, extreme doesn’t work if you are selling. You need to remain credible.
Unfortunately, the world is not fair. What does the first professional motor trader say and do as he or she comes to see your car? They suck their teeth. Take a sharp intake of breath, sigh. Then tell you everything that is wrong with your pride and joy
‘Well it’s like this mate. ‘The alloys are shot’. ‘The colour is so last year and have you any idea how expensive it is to repair those dents’! They take an impressive looking bundle of tenner’s out of their back pocket. Then offer you a derisory but ‘because you seem like a decent fellow’ £500 for your car!
These extreme opening Buying positions are designed to shock, intimidate and hack away at your resolve. They don’t expect you to fold instantly to the ridiculously low £500. But they will see the doubt in your eyes and almost hear your thoughts. ‘Well I’ve had no other calls’. ‘They are right I really should have done something about those alloys’. ‘They have come a long way and do seem awfully nice, after all they did call me Mate! So maybe I could probably drop my price by maybe a bit’.
They are now ‘in your head’. They are in control of the negotiation. You need to Recognise what is happening. Use the skills and techniques from the MBM Effective Negotiation Programme. Properly Diffuse the situation. Then adroitly Restore the negotiation to terms much more in your financial favour.
An important element of becoming a skilled and effective negotiator is the ability to ‘read’ others. Therefore it is vital to be able to control in yourself any ‘soft’ language. It shows weakness or movement in your negotiation position.
‘My opening offer is £4,500 ish‘.
‘I could probably look at’.
‘The best price I can do now is between £3,500 and say £4,000?’
‘Shall we meet in the middle?’
Soft language is not just verbal. The negotiator leaned back in their chair, arms behind their neck, looking relaxed and happy is not a negotiator being pushed to the limits of their planned negotiation zone!
In conclusion negotiation is an Art not a Science.
Computers negotiate iteratively and hence will always come to the most logical, commercially equal, Win-Win outcome.
Therefore, the moment you bring humans into the equation the game changes. Human negotiators have good days and bad days. Some are honest, some outright liars. They have prejudices, different levels of experience, different backgrounds and different approaches.
To be an effective negotiator you have to understand and embrace that human element. You need to recognise and understand the behaviours they adopt that underpin their negotiation approach. Therefore you must also have the skills to deal with those behaviours.
Once you have dealt with the behaviours and have control of the negotiation. Then you need a properly thought through, planned, costed and sequenced set of negotiation Tradeables. These will allow you to efficiently engage with the other party. To deliver the negotiation outcome that works for you principally but potentially the other side as well.
You can find further insight, detailed definitions and clarification of all the key Negotiation terms mentioned in this guide in our Glossary of Terms.
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About Andrew Grant
Andrew has extensive Commercial Buying and Marketing experience gained at a senior level with a number of the UK’s largest and most respected retailers. He combines this comprehensive category knowledge with highly developed negotiation skills and an in-depth experience of category management and business development planning gained trading with major blue chip FMCG suppliers.