Negotiation isn’t just a part of business. It’s a part of life. Every single day, we negotiate to get what we want, whether it’s with a spouse to determine what’s for dinner or with a potential employer to agree on a salary. The process isn’t always fun, which might explain why nearly a third of people are fearful of negotiating.
Yet negotiating is absolutely necessary. Business leaders managing any sort of supply chain, for instance, know that negotiating with shipping carriers is critical to reducing expenses. In my line of work, I have learned a lot about this particular kind of negotiation, and the strategies I’ve found to be most successful can truly be applied to any contract negotiation. Here are a few of the most effective:
1. Invest time in research for healthy dividends. In any negotiation, the upper hand goes to the one with the most knowledge. Knowledge equals leverage. You must be acutely aware of your own needs and anticipate the needs of other parties involved. If you’re adequately prepared, you’re more likely to ask the right questions, propose creative solutions, and be nimble in your thinking.
A lack of research and due diligence is likely to result in inferior pricing. Most shippers fail to take the time to understand the nuances of their unique shipping profiles, which requires a thorough analysis of thousands of lines of invoice data. Consequently, shippers will often negotiate components of their contracts that have little to no effect on reducing their net spends.
One could argue that ignorance is bliss — you won’t ever be aware to the painful fact that you are overpaying. The old adage “if it ain’t broke, don’t fix it” doesn’t apply to vendor pricing and negotiations. Take the time to evaluate and verify that fair pricing has been provided.
2. Leverage competition to procure competitive pricing. Currently, there are only two national private parcel carriers, meaning shippers have little to pull from in regard to competitive options in the marketplace. The most underwhelming parcel pricing agreements are typically in the hands of shippers that have been loyal to one carrier for years, if not decades. In other words, the shipper as a customer most likely never communicated a genuine competitive threat to the incumbent service provider.
Part of leveraging competition effectively is to prepare and coach nonincumbent service providers without revealing your current provider’s prices. When you have options, you don’t have to commit to a deal that produces an unsatisfactory outcome.
The best deals are made when both parties are equally committed to a mutually beneficial solution. This holds true in personal relationships as well as in business. Competition forces improvement: Quality goes up, prices go down, and the market grows to meet the needs of additional consumers.
3. Focus on the negotiation objective. The most successful negotiators focus on the end goal. When negotiating with carriers, this means structuring a level playing field for vendors to propose pricing (analyzing parcel data is one underutilized approach to this). This process can be as formal as sending out a request for proposal that details timelines, deliverables, and expectations, or as informal as arranging a discussion that lays the groundwork for identifying productive conversation versus unproductive dialogue.
Your goal is to create and communicate the priorities for all parties involved. Use a structured format that includes the guiding principles agreed to by all participants at the negotiation’s start.
Getting to ‘Yes’ Faster
Nothing derails a negotiation like emotion or ego. Eliminate language that insinuates fault. For instance, saying “you” followed by a negative statement can be perceived as a personal attack, even if that was not your intent.
Replacing “you” with “we” or “I” will go a long way. For example, instead of “You proposed pricing that is too high, so you won’t earn our business,” try “While we would like to consider a formal partnership, the proposed pricing is too high and prevents us from moving forward.”
You have to keep your own emotions and ego in check. Keep in mind that operating with too much optimism can be just as detrimental as operating from a position of fear. Likewise, avoid appealing to consequences — a tactic closely related to appealing to emotions — and make sure that you prioritize listening over talking.
Finally, remember that negotiators are just people. When trying to reach a deal, strive to separate the people from the problem.