So many procurement professionals, and sales professionals for that matter, make the fatal flaw of making preemptive concessions in negotiations.
It just happened to me last weekend. I was at a simple kiosk at a beach boardwalk. I told the proprietor that I wanted to buy 4 of a particular item. I knew the price of each and that the total would be $50. I conveyed intent to purchase.
He responded with “well if you want to buy 4, I’ll give them to you for $40.” I realized right away that he was making a preemptive concession. Meaning, he gave me a discount when I wasn’t even negotiating. I was just going to pay the $50, and if he was just paying attention, he would have known that.
Making preemptive concessions is a rookie tactic in negotiations. It stems from one of three things; consider these the 3 legs of the stool:
- bad negotiation form (i.e., not knowing better)
- Lack of information about the other party’s willingness to agree to your terms
- Lack of confidence in negotiation positions, which is usually tied to #2.
How does it happen in negotiations? Consider the following hypothetical scenario:
Seller: “What are you looking to get in terms of pricing on our product?”
Buyer: “Our target here is 15% discount, but we are willing to sit down and discuss.”
Did you see it? It just happened. By saying “but we are willing to sit down and discuss”, a preemptive concession was made. It’s unmistakable.
Why did it happen? Maybe because the Buyer was trained that way (#1). Maybe because the Buyer didn’t do their advance homework on the supplier’s pricing schedule (#2). Or maybe lack of confidence (#3) because either the price thrown out was way too high, or because the price thrown out was arbitrary, or most likely of all, it stems from #2 – not having done the homework necessary to build such confidence.
A lawyer in court never asks a question of a key witness to which they don’t already know the answer inside and out. The reason is because they do depositions in advance. And subpoenas. And evidence analysis. When it’s game time, they’ve got good form, good information, and good confidence.
And if one leg of the 3 legged stool is missing, the stool falls. If you’re sitting on it, so do you.
The very first corporate negotiation I ever did was for logic analyzers and oscilloscopes. 30 years ago. I thought because I was working for a Fortune 50 company and spending a lot of money, that this was enough. I had enough confidence to run for President of the United States.
We were getting 12% and I confidently asked for 15%. But nobody had trained me, and I hadn’t done my homework. The Seller said “Why 15%? Why not 18%? Why not 25%?!” I had absolutely no answers and I learned a huge lesson: No leg of the stool can overcompensate for the others.
Your homework is done in advance by benchmarking, finding out if the supplier has a published discount schedule, doing should/must/total cost analysis (whichever is applicable), doing bargaining power analysis, looking at alternatives and substitutes, seeing if the product design spec can be simplified or standardized for lower cost & TCO, looking at dual & multi-sourcing models, and so forth.
Once you’ve done all those things, then you can take your positions with confidence (externalized behavioral) and with rationale (internal research). You can make concessions, but they should never be preemptive, and they should always be data driven.
Now go off and do something wonderful. Be your best!
Omid G. “THE Godfather of Negotiation Planning” ~ Intel Corp
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