Change the Way You Negotiate with Your Vendors

The world is going digital. Almost everything we do during the day, is digitalized – we order things online, socialize online, study online, work online. The fancy products and services that companies provide to their customers, become commodity in months, sometimes even days, and the companies have to run much faster in comparison with some years ago in order to stay on the market and grow their business. This challenge made a shift of the vendors’ perception from simple suppliers of goods, and services, to partners of every enterprise, as they became a critical part of each enterprise ability to be agile, adaptive, and able to constantly shorten the time to market.

However, traditionally the interactions with the vendors are handled by the Procurement departments, which use hard negotiation and communication techniques, focusing mainly on receiving a price reduction and a position, rather than an interest. Instead of strengthening the relationship with the partners, that strategy leads to playing the game of procurement targeting a low price, and the partner sacrificing quality, competence, and scope, in order to achieve that price.

Companies start to realize that a different approach towards negotiations with partners need to be taken, and partners should be considered as part of the team, rather than external company that has only a commercial interest. There are a few main areas of focus that help for improving the relationship and communication with the partners, with the main focus on negotiations (as almost every communication is actually a negotiation – two parties having different set of opinions about a certain topic):

Provide new value for your partner

Consider whether you can help your partner grow its business, by opening new markets for the partner in case they’re working with you for example, or try to understand the risks a partner is facing and help them mitigate some of them (a long term contract for example provides the partner with security and proves your commitment to build a good relationship).

Manage your demand 

Far too many companies don’t coordinate their purchases of products and services from a partner, having different departments communicating with the same partner, no single accountable person for the partner contract, and different orders submitted all the time without internal prioritization and coordination. That often leads to increased prices and delivery times, and tension from both – the customer and the partner side. Trying to coordinate all demand as a customer, will enable the partner to have a clear visibility on the requirements of the customer and their priority, and eventually deliver quicker, and cheaper. A lot of international companies for example internally gather all demands from the different country entities, prioritize them internally, and then negotiate the price and delivery schedule with the partner, using a centralized customer unit.

Put yourself into your partner’s shoes

Try to think about your and their interest, rather than about positions. Simply rephrase the goal “Getting a 10% discount” with “Receiving a service with great quality at a price that fits our budget”. The issue with leading hard negotiations is that people focus on position, and when we focus on position, our ego starts working and the negotiations become a fight in which somebody needs to loose. When we start thinking about a common interest, not about our position, we’ll realize that the partner has the same goal as us – to have happy customers.

Put attention to your partner maturity level

There will still be cases when some of your partners will be acting as traditional suppliers, and will not be willing to work with you for bringing value to both companies, and this is completely natural. In these cases you might still need to use hard negotiation skills to achieve your goals and that will be an opportunity to reevaluate the value you receive from a particular partner, and if you wish to invest time and efforts working with it, or you will look for an open minded and cooperative partner, whose main goal is to bring value for your organization.

Partners are slowly becoming part of our core company teams, and that trend will emerge during the next year. So we should start treating them the same way we treat our internal units – communicate, negotiate, and motivate them in order to make sure we achieve great outcomes together.

Find out more in our courses on Vendor Management & ITIL® 4 Specialist: Drive Stakeholder Value.

Julia Oliveira is a highly qualified IT Service Management and Project & Portfolio Management Senior Consultant with more than 15 years of experience in the industry. She has successfully lead some of the largest ServiceNow projects in Southeast Europe.

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