A fact-based negotiation strategy refers to a specific type of approach using detailed data and information to support a company’s arguments and claims when conducting negotiations with their suppliers, dealers, and partners. A fact-based negotiation strategy enables you to have a more focused discussion, ensuring that you will be able to strike a deal where you pay a fair price in your procurement activities.
There is no universal fact-based negotiation strategy which works for every company in all contexts. Instead, the company has to find a negotiation strategy/strategies they are comfortable with, has the resources to be able to execute, and aligns with their goals and objectives supported by the data and facts.
Entering a negotiation without being prepared and having a concrete negotiation strategy is usually a recipe for disaster. You’ll fall behind from the get-go and be at a disadvantage in the discussion. Whether it’s a negotiation between two people or between groups, an e-negotiation or a physical one, the negotiation strategy will play a vital role in your success. In this article, we will provide some negotiation support and describe some procurement negotiation strategies to help you succeed the next time you are about to enter a negotiation with your suppliers.
Types of purchasing negotiation strategies
There’s no universal purchasing negotiation strategy that fits all types of negotiations. Instead, you’ll have to find a strategy/strategies that fits your case and preferences the best. Some of the different purchasing negotiations strategies include:
Push for your interests and position without concern for the other party. This is a preferred strategy for procurement negotiations and other negotiations when there’s a need to either make unpopular decisions, stand up for essential issues, or protect yourself and the company.
Aim to satisfy all concerned parties’ interest to gain real commitment. Put your heads together and try to come up with a solution which will benefit both parties by first expanding the pie before dividing it.
Focus on the other party’s interest with little to no concern for your own interests. This strategy is mainly used in order to preserve a relationship/partnership with a dealer/supplier you can’t afford to lose.
Aim to partially satisfy your own and the other party’s interests. Compromising is similar to the concept of “splitting the difference”, trying to argue for places where you can meet each other halfway, or simply agreeing on conceding certain things to each other.
When there’s no value in it for you to address conflict, avoid it. This may seem like one of the more underhanded procurement negotiation strategies, however, sometimes it is necessary to simply not engage. It’s best used when you and the other party’s interests are not aligned, or you simply need more time to gather information and data to support your standpoint/arguments.
The strength of fact-based negotiation
Regardless of which above-mentioned negotiation strategies you plan to use, or fits your situation, backing it up with a fact-based negotiation strategy will always benefit you in the long run.
By having a fact-based negotiation strategy, you will more often than not come out on top in the discussion since you have real-life data and facts to support all your claims. The more facts you have, the stronger your negotiation position will be.
It’ll be easier to identify irregularities or outliers in the differences between their data, and yours. Which is a much more effective strategy than just trying to argue your point across using phrases such as: “Your prices are too high” or “I want a 10% reduction in costs”. Instead, you’ll arrive at the negotiation table armed with specific cost variations and other data to explore and discuss with the other party.
A fact-based negotiation strategy keeps your negotiations on facts and figures rather than accusations and emotions relying on “gut-feeling”.
Negotiation support for fact-based negotiations
The most important step in fact-based negotiations strategies lies in the preparation; identifying and gathering the data and facts that will support your interests, arguments and claims. The old school way is to gather the data manually from different sources and compile it into an Excel spreadsheet. While Excel is a very powerful tool, it lacks flexibility and scalability, and it takes time having to manually organize all data.
Instead, if you want to be able to focus on the actual negotiations rather than having to find and prepare the data, your best option is to get some negotiation support to streamline the process. The negotiation support we provide is in the shape of massive amounts of cost data gathered from multiple sources around the world. With Prognos you get access to the cost data you need in order to get the most out of your suppliers with data tailored for your specific situation. The negotiation support we provide includes data for the following areas:
- Raw material costs
- Manufacturing costs
- Transportations rates and taxation tariffs
- Labour costs
- Currency data
The Prognos negotiation support systems
Prognos provides two different negotiation support systems to help you better prepare for your negotiations and get more out of your suppliers:
- Prognos Online gives you access to 8 000+ indices on raw materials, components, wages and currencies in an interactive online tool capable of handling and transforming the data to fit your needs.
- Prognos Tailored gives you access to interactive, continuously updated reports allowing you to dig deeper into your material, compare prices to your own cost development, export graphs, or export underlying data for further analysis. The reports in Prognos Tailored are customized for you by us, giving you the time to focus on the actual negotiations rather than finding the data.
Frequently Asked Questions
What negotiation strategies are there?
- Competitive – Push for your interest without any concern for opposing party
- Avoidance – Avoid the negotiation until you have some actual points of value to argue or when you need to further prepare
- Accommodation – Focus on the other party’s interest with little to no concern for your own interests
- Collaboration – Collaborate with the other party to find a solution where yours and theirs goals will be fulfilled
- Compromise – Find a half-way compromise to satisfy you and the other party’s interest partly.
What are the 5 stages of negotiation?
- Prepare by identifying potential value, set goals, research the opposing party’s interest, and develop a fact-base to center your arguments around.
- Exchange information with the opposing party, engage with them and explore options that address yours and their interests in preparation for the bargaining.
- Bargaining is where the “give-and-take” process begins. Use the documents, graphs, and data to strengthen your arguments and try to find a middle ground between you and them that will satisfy both of you, and hopefully either build a new or strengthen a lasting relationship for a fruitful collaboration.
- Conclude the negotiation by putting everything down on paper after having reached an agreement and be sure to agree on the next steps. Never forget to thank the other party for their willingness to negotiate, even when no agreement has been reached.
- Execute the implementation of the agreement. Follow through on your promises and make sure the other party does as well.
What is a procurement negotiation?
A procurement negotiation is the negotiation of different types of purchases, either services or products, aiming to determine the fairest prices and payment terms, delivery, production time, quality standards, etc.
Procurement negotiation strategies shouldn’t only aim to get you the cheapest possible price. It should rather aim to fulfill both parties’ interests to help build strong relationships with long term suppliers.
What is a purchasing negotiation?
Purchasing negotiation is interchangeable with the phrase procurement negotiation: the negotiation of different types of purchases, either services or products, aiming to determine the fairest prices and payment terms, delivery, production time, quality standards, etc.
How to prepare for a negotiation?
- Know your strategy/strategies: If your company’s negotiation strategy isn’t clear to you, how can you achieve the expected results?
- Choose a negotiation style/styles: Find a negotiation style/styles that fit your preferences and you are able to execute with the resources you possess.
- Identify goals: What is it that you and your company want to achieve through this negotiation? Make sure you’re aware of the goal/goals before going in, otherwise you might settle with what you end up with.
- Prepare pre-meeting questions: Knowledge is power. The more information you have at your disposal, the more control you’ll have over the negotiation.
- Compile options/deals: Prepare a few feasible options/deals you’d be satisfied with and work towards achieving them through the negotiation.
- Prepare a trading plan: What are you willing to trade? What do you want in return? What points are you willing to compromise on? Start with your most important interests first.
- Prepare data, facts, graphs and other information: By supporting your arguments with data and graphs you gain credibility, enabling you to perform fact-based negotiation ground in reality with confidence.
- Use a negotiation support system: There are numerous support systems that can help you before, during, and after the negotiation to find supporting data, choose the suitable negotiation strategies, and record the information for future reference.
What are the key elements of negotiation?
There are multiple ways to categorize the essential elements of negotiation. One of the most well-known frameworks was developed by members of the Harvard Negotiation Project which consists of seven elements describing the essential tools required to identify one’s goals, prepare effectively to minimize surprises, and take advantage of opportunities. They are: Interests, Legitimacy, Relationships, Alternatives & BATNBA, Options, Commitments, and Communication.
Other suggested frameworks:
- The What (issues), the Why (positions), and the How (interests).
- Process, Behavior, and Substance.
- Attitude, Process, and Behavior.
- Strategy, Process, Tools, and Tactics.