Purchasing and Negotiation Training

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

Editor’s note: this is Part III of a three Part series on a score of classic mistakes that mark the user as an amateur.  Click Part I or Part II to see more of the Top 20 Boners. 

14.         Arguing  Save that for the lawyers.  Negotiation involves only two, reasonable and willing, parties.  If your negotiation efforts and skills fail, you’ll have plenty of time to add an expensive third party litigant.  

15.         Losing self-control  This puts the other guy in control.  The justification that I hear most often is that, “He made me so mad.”  Horse feathers!  No one can make you mad; you have to let him or her do it to you.  If I can drive you to an emotional reaction, I can manipulate you and I can control you.  Why would you ever give that much control to a perfect stranger? 

16.         Impatience  This is a weapon we often donate as a free gift for the other side to use against us.  If our impatience is caused by lack of preparation, or advancing deadline, we have another problem.  Otherwise, be prepared to listen patiently.  Stalling is an instinctive tactic when the other side senses impatience. 

 17.         Threatening   You can often tip your hand on strategy by threatening alternative actions.  Take a clue from Washington diplomats who never rule any option in or out, and thus never threaten anything.  If they announced their military preparedness, for instance, they might unwittingly put their forces in harm’s way 

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18.         Belittling and Grandstanding    There is never any room for this in professional negotiation circles.  It is clear lack of respect, and invites retaliation.  You would not be at the table if you did not want something, so why make it harder for yourself?   

19.         Having no clearly defined walk away position.  Winging it is a sure nosedive to failure.  The ultimate power in negotiation is the ability to say “No”, and to live with the deal.  Do you remember Alice in Wonderland?  When Alice came to the fork in the road, and the White Rabbit asked her where she wanted to go, Alice answered, “I don’t know”.  Advised the White Rabbit in reply, “Then, any road will get you there”.  Alice was not much of a negotiator.   

 20.     Misunderstanding power   In seminars, I will ask buyers, “Who has more power in buy/sell settings?”  Virtually always, the immediate response is, “The buyer”. To which I pose this follow up question, “Well, why then are we negotiating with them if we have all this power?”  Power is truly in the perception.  If you think that you have it, you have it.  Do not assume that the other guy has more.

The good news is that not making these twenty mistakes in the course of your every day commerce will vastly improve your negotiation skills.  The better news is that it doesn’t cost $100,000,000 to learn them!

"Shorten your sales cycle & increase your win rate through competitive excellence"

Editor’s note:  Stu Schlackman is a frequent contributor to this blog.

All it takes to identify a customer’s personality style is practice. It is possible to identify the personality color of an individual on first meeting them. Consider the annual dinner engagement.

You Can often Hear a lot Just by Listening

How an office is organized and time is managed provides the first clues. For a real-time determination at a first meeting, the best way to identify someone’s personality color is to listen carefully to ‘how they communicate’ and ‘what they talk about’. Does the conversation primarily focus on business issues or people issues? Is the conversation more objective or subjective? Is it about tasks or about relationships?  Ask exploratory questions to see what resonates with them? “Every day for us it’s another school issue or activity; do you have kids?” “What is your main problem with the way this contract is being delivered?” Questions like this help discover what matters to that person and what matters to them is a strong clue to their personality color.

But even if you cannot engage with questions, careful listening can get you the clues you need.  My wife and I attended a formal dinner with speeches and dancing. This is a typical situation where it is important to size up the speakers, so that you can engage productively with them afterwards. After the meal, we sat at our table and listened to the two speakers. This dinner was about a transition in leadership, one board was departing and another was taking over.

Blue  First up was the colorfully dressed, departing president of the organization.  Table gossip said that she had picked out the evening’s band; the one she used at her wedding. She thanked the sitting board of directors for their support during a great year for the organization. She introduced each member by describing something unique that person contributed to the team and the organization during the past twelve months. Each situation she talked about included personal touches that characterized the board member. This was about touching people and building relationships. This is an example of a true “Blue” personality! 

 Green   Next, the incoming president spoke and the presentation, while just as interesting, was totally different. He wore a simple, functional suit and got straight to business. First he thanked the outgoing board and the organization for the opportunity to serve.  Then he jumped into his plans for the coming year. He described in detail each of the yearly activities and how each event could function to promote the growth of the organization. His talk was about being practical. It avoided emotion and personal relationships. He objectively described the business issues before the organization and step-by-step tasks needed to reach its goals. His was the epitome of the Green personality!

Stu's Four People You Should Know

• the detail of their descriptions (Green will give more detail) and
• how structured and formal they are with the flow and the timing ( Gold will emphasize this)

When you are hearing more about relationships, emotions, striving for achievement, comparisons, risks and fun; you are more likely listening to a “Right” brain person. So they must be either Blue or Orange. Blues will focus more on significant and personal contributions about people and how they helped others. Orange personalities will highlight events, activities; how everyone looked good the past year and how great they all were. Blues will talk in more detail than Oranges. The Orange personality will focus on the outcome, not the process.

See Four People You Should Know for more

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

Editor’s note: this is Part II of a three Part series on a score of classic mistakes that mark the user as an amateur.  Click Part I or Part III  to see more of the Top 20 Boners.

 6.  Divulging your time frame.  The likelihood of foolish and expensive decisions increases as the amount of lead-time decreases.  In the early 80’s, I imported construction technology from Europe.  After many meetings in the US, and several trips to Europe, the time was right to close the deal, so off I went to France.  Upon arrival, I announced to my hosts that I was there for only four days, we had a lot to do, and I expected to leave with a completed deal.  For 3½ days we negotiated in circles until it all fell apart.  On the ride to the airport, my hosts assured me that we could still do the deal, if I would only be “a little more reasonable”.  They got more out of me in those last twenty minutes than in the whole year we had known each other.  Looking back, I could have stayed on for another week, and probably struck a more favorable deal, but I lost by trapping myself in my own time frame.

7.  Leaving issues dangling.  This habit, at best, encourages argument, and at worst, invites constant renegotiation.  Drive a stake through the heart of issues, adopt measures to ensure they cannot be resurrected as bargaining points, and move on.

8.  Going for the kill.  Suppose you miss?  Do you really need the extra enemy?  Resolve to leave egos, dignity and wallets in tact when you leave the table.

9.  Failing to listen.  The best negotiators I know are the by no coincidence also best listeners.  Listening skills are rare, and not easily mastered.  It is possible, and in most cases highly likely, that we can give the other side what they want at low cost to us if we listen carefully enough.

10. Ignoring conflict.  Conflict in negotiation is inevitable.  Each party has something that the other wants!  Think of conflict as rain: we expect it, it is never welcome, but we respect it for the good it does. 

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11.  Talking about people, not issues.  This is a real amateurish mistake.  Ad homonym attacks never accomplish anything good, no matter how justified.  Focus on the problem and how to resolve it.  As one of the celluloid icons of American business, The Godfather once noted, “Nothing personal here, its just business”

12. Ending on a sour note.  Mutual satisfaction requires mutual commitment.  If one side feels cheated or unsatisfied, how much can we count on their commitment? 

13. Missing a Win-Win opportunity.  The selfishness or greed of one side breeds a culture of resentment that will unleash its revenge at the first opportunity.

Editors note: Steve writes, speaks, and consults on customer service.

The best communicators are people who have learned that good communication happens when someone speaks and another person hears, qualifies, and then understands what was spoken. Never underestimate the power of good listening, especially when it comes to capturing details.

Paying attention to the other person’s verbal and non-verbal subtleties requires that a business professional take the time to note the particulars in writing. Writing down key facts about a customer’s name, location, order quantity, shipping details, due date, or part number are all essential pieces of information not to left to memory. A professional should always have something to write with and something to write on.

At a minimum, four key questions must be answered during every customer service encounter. The easiest way to recall these key questions is to remember four simple “W” words: WHO, WHEN, WHY and WHAT. Here is the methodology:

• WHO – The person, his or her title, company, department and location.
• WHEN – Initial contact date and time, due date, shipping date, and follow up date.
• WHY – Why did he or she call us? That is, the purpose for the customer’s call.
• WHAT – What do they want from us? What is their expectation?

Capturing details using this approach will enable a business professional to be more effective. Getting the information right the first time reduces the need for follow up, rework, returns, and strained business relationships. Even in this age of computers, laptops, and PDAs, from time to time pen and paper still work best.

I learned a number of years ago that the person with best notes always wins. The discipline of concentrating on and qualifying and capturing essential details will pay off with success in business. World-class organizations have learned to be courageous listeners. This means they dare to ask questions when they are uncertain of their facts or believe they have incomplete information. It’s as simple as that.

One of my clients has, with a simple phrase, heightened their service vernacular and the satisfaction of their customers. That phrase is: “Here’s what I can do.” This axiom is posted in the workstation of each of their customer service representatives, to keep it at the forefront of their mind. It produces two key benefits: (1) it keeps the door open and, (2) it gives the service representative something to say while he thinks creatively about how to respond to customer demands. When it comes to keeping customers satisfied and the door of business opportunities open, a little time may make all the difference.

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

Editor’s note: this is Part I of a three part series on a  score of classic mistakes that mark the user as an amateur.   Part II  and Part III to follow.

In 1979, Royal Little, the 83-year founder of Textron and father of the modern conglomerate, wrote a book titled, How to Lose $100,000,000 And Other Valuable Information.  It chronicled some of his colossal business failures, and how he learned from them.  Mr. Little kept a picture in his office of the yacht on which his company lost millions as a symbol of his foolish mistakes.  His point was that it is often far more beneficial in business, to study what not to do.  Since we cannot possibly live long enough to make all the mistakes ourselves, learning from the mistakes of others is also efficient. 

Applying that wisdom, let’s examine what mistakes to avoid in negotiation.  This list of my top twenty list boners, while no means exhaustive, does highlight many common errors.  See if you can find any of your favorites in the list.

1.  Accepting the first offer.  If you do, it will drive you nuts.  How do you know that you could not have done better?  The buyer has an obligation to beat the price down, no matter how good the first offer.

 2.  Being the first to name the price.  This sets the stage for an auction where price is all that matters.  Kodak sells priceless memories, not low priced film.  The solution to the problem sells far more than does a cheap product or service. 

3.  Being the first to offer to split the difference.  Instead, get the other guy to offer to split the difference.  This tactic transfers veto power to the other side.  I once had a customer who bemoaned the fact that we were so close, and how he hated to see the deal fall apart.  In a misguided gesture of conciliation (without getting conditional agreement first), I offered to split the difference.  The next day, he told me that he had considered my offer, but still could not go along, but we were so close…I offered to split it again, to which he agreed.  He gave 25% and I gave 75%. 

4.  Falling in love with the deal.  Do you love your spouse?  Your kids?  Your pets?  Then why would you ever consider loving anything that cannot love you back?  This trait is not all bad, because it represents our devotion to duty.  Do not let that emotional investment take over rationale thinking.

5.  Inadequate preparation.  Most people mistakenly think that most negotiation activity takes place face to face, and involves high power tactics and counter tactics.  In fact, only about 5% to 10% of the actual negotiation time will be face to face.  The lion’s share of the time is in researching and planning.  Information and a written negotiation organized plan are the hallmarks of the negotiation pro.

Linda Byars Swindling, negotiation authority, former employment attorney, and author

Editor’s note:Linda Swindling is a regular guest contributor to this blog.  This is Part II of a two art series on how to influence a negotiation’s outcome.  In Part I, Linda discusses preparation, risk, and questions.  In Part II, she addresses creativity and realism in negotiations.

Making the best deal possible

It is of great value to re-examine the deal you have negotiated.   However, once you’ve evaluated the outcomes and how you got to the result, move on. Paralysis by analysis does not serve someone who wants to improve their ability to influence. Here are five questions to help you review how you did, learn from those results and put them to use for the next deal coming up.

 Were you creative?

What might others have done in the same circumstances? Ask peers, your boss, even the person you are attempting to influence what people have done in the past. Then, ask yourself, what you could offer that the other party would value a lot that doesn’t isn’t expensive or time-consuming for you to provide. Ask yourself the same question about the other person’s position. What could they offer you that you would value a ton that doesn’t cost them much in time or resources. You will be surprised at how much value can be created by these questions. 

 In the Fishr and Ury book Getting to Yes, the acronym BATNA is defined asr the Best Alternative to The Negotiated Agreement. It is a scholarly way of dvising a back up or Plan B. If the agreement you’re facing isn’t better than your BATNA or your Plan B, choose your Plan B. If your current deal is better than your BATNA, proceed knowing you’ve done a good job.

 Was it the best deal with the information you knew?

Another question must answer is, “Was this the best deal you could achieve at the time with the people present and the information you knew?” While it is true that you can always find out more information later that could enhance your results, there is a lost opportunity cost while you delay reaching an agreement. Also, that new information could work against you and in favor of the other party.

Where did you have significant learning that will be useful next time? Determine where or what you are going to change the next time you attempt to persuade or influence. Many bargains are struck that suit the facts that are present at the time. This same fact scenario, stakeholders and limitations may not ever be present again.

Click Passport to visit Linda's site and resources

What did you learn that will be useful next time?

Were you realistic?

You may have set your desires too high or too low. You may have given yourself a shorten deadline or expected a result that the other person could never agree to meet.  Be realistic. Not every deal happens the way we anticipate. Not every deal should happen at all.

 Finally, give yourself a break. No one is perfect. Forgive yourself for what you did wrong. Reflect on what you did to correct the mistakes you made. Celebrate if you took a risk or tried something differently. Learn from this deal and MOVE ON!

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

Children are good negotiators.  They interpret ‘no’ to mean ‘maybe’, do not give up easily, and ask for more than they want. 

They do not take no for an answer  Kids dislodge parental authority by asking “Why”.  If they move past “Because I said so”, then they may overcome the objection.  The grown up equivalent words in the sales negotiation context are, “Tell me about it.”  This statement opens the door to frank communication and dislodges the ‘No’ answer.

They are persistent and creative  A rejection merely whets their creativity.  On my 8-year-old daughter Brie’s annual Girl Scout cookie campaign, a neighbor said that she had already bought.  Brie countered, “The thin mints are especially good as frozen treats”.  As the neighbor reconsidered, my budding sales pro added, “They are great for snacks when guests arrive.”  The neighbor bought three boxes, and I relearned an excellent lesson.

They listen and they ask the “What if” question  Since kids hear ‘no’ as ‘maybe’, they relish the opportunity to convert ‘no’ to the ‘yes’ column.  For instance, Brie asked, “what if I do tomorrow’s homework today?  Then Allison and I can go to the mall until dinner.”  While it would annoy a buyer if we were to continually ask ‘why’, we refine it to the “What if” question to reach the same result.  For example, “What if we were to extend the price protection?  Would that seal the deal?”

Brie and Alison, Girl Scout Cookie sales pros

They do not use tentative language  Notice how Brie’s “What if” question closes in the affirmative.  Kids know confidence precedes the sale.  They phrase presentations in optimistic terms and avoid tentative language that might invite denial.  If Brie used the conditional premise of, “If I do my homework today, can I stay longer at the mall with Allison tomorrow?” the pessimistic tone itself puts the result in jeopardy. 

 Their enthusiasm pumps up the customer   Dressed in her Girl Scout vest, Brie ran to up each house, fully expecting to close every sale.  After introducing herself and the cookies, she asked the closing question, “How many boxes do you want today?”  She had the order sheet and the pen in hand.  When sales professionals lose enthusiasm, it tells the customer that there is no compelling reason to buy.

They use High Initial Demands (HID) to their advantage  Kids train their “customers” by presenting HID.  A psychologist friend’s daughter told her horrified father that she wanted a nose ring.  He tried in vain to persuade her of the hygienic and sociological risks.  She burst into a tirade of how she would be scarred for life without such a fashion statement.  Caving to relentless pressure, he compromised on his daughter’s ‘reluctant’ concession that she get pierced ears instead.  To reward her wisdom, and relieve his guilt, dad threw in a pair of earrings. 

On the way out the door, she winked at me and whispered, “Wow, all I really wanted was pierced ears, but I got earrings too.”  Unskilled adult negotiators reject HID in a naïve attempt to save time and effort.  Kids know better.  

Certainly, kids can teach us many lessons about negotiation that we have forgotten as we matured.  Their tactics may be primitive for business setting, but the moral of the negotiation story remains constant.

Linda Byars Swindling, negotiation authority, former employment attorney, and author

Editor’s note: Linda Swindling is a regular guest contributor to this blog.  This is Part I of a two art series on how to influence a negotiation’s outcome.  In Part I, Linda discusses preparation, risk, and questions.  In Part II, she addresses creativity and realism in negotiations.

 There are three mistakes that repeatedly occur not preparing adequately, not taking calculated risks and not asking enough questions.

Lack of adequate preparation usually results in leaving value on the table or forgetting a key aspect of the negotiation. If wants and needs are not distinguished, you signal that everything has equal value. This approach can confuse or even frustrate other parties who may walk away from the appearance of too many demands that can’t be fulfilled. You can also get confused or miss something critical to the negotiation because some wants or needs were not met. It is terrific to receive some items from your “wish” list but not at the expense of unmet essentials.

In your preparation, consider the interests of the other party.  I conducted mediation a few years ago with two doctors, former partners. While in a session with one of the partners, the other doctor had decorated the conference room with neatly written charts that showed “why he should win.” When I asked him where the posters were that reflected his former partner’s interests or why the partner should agree to the position, there was silence. The doctor had methodically planned and thought about his position, but not that of his former partner. I took a break and told the doctor that the mediation would continue after he prepared some posters representing the partner’s side. Fear and force are usually not good reasons to entice someone to negotiate with you. A good negotiator provides benefits which show the other side it makes sense to come to an agreement.

Click Passport to visit Linda's site and resources

Sometimes, you just have to chance looking stupid or hearing no. If you are not hearing no, you probably aren’t asking for enough. It also helps to remember that you are taking calculated risks that you have thought through. Luck does play a part in negotiating. However, negotiating rarely involves gambling your life savings on a roulette wheel or taking a chance that might endanger your life.  The best outcomes come from minimizing the unknowns, structuring the elements you can control and then taking risks by having the courage to act.

"Shorten your sales cycle & increase your win rate through competitive excellence"

Editor’s note:  Stu Schlackman is a frequent contributor to this blog.  In this Part II of a two part series, he relates power in the sales prcess to personalities.  In Part I, he discusses the affect of power on the sales process.   

One key aspect of your motive has to do with your personality style. Each personality style chooses a career in sales for different personal motivations:  

• Blues are motivated by building a long term relationship and pleasing the customer.
• Golds are motivated to sell their company’s reputation and are driven by the financial benefits the customer will receive.  
• Greens are motivated to help the customer craft the perfect solution and enjoy solving technical problems and resolving complicated issues.  
• Oranges are motivated to beat the competition, win the business, and help the customer achieve the immediate benefits of the solution.

Build the relationship by knowing communication styles

Knowing your personality style will help you naturally improve building relationships.  It also can teach you when to downplay your primary characteristics and how to pull out your other character traits that the specific customer personality style likely will respond to favorably.

You must also discover the customer’s personality style to understand what engages them. Discovering your customer’s personality style is crucial to knowing just what parts of your personality to emphasize in order to positively click with the customer.  It also shows what parts of your self to downplay when engaging that color style. Each personality color is influenced by different factors:

• Blues by what a solution can do for people and productivity
• Golds by financial returns
• Greens by innovation and improvement
• Oranges by improving their competitive position.

Face time, follow through, motive

These three points are crucial to building the customer relationship and influencing their decision to buy from you. Proper understanding of personality style improves the relationship, leading to more face time and more effective follow through. To put the customer first, you must know what of yourself to emphasize.  To effectively communicate the value of your products and services, and therefore get more face time, you need to know what the customer personality style values.

To strengthen your influence with the potential customer, pick up  Four People You Should Know. You will learn how to type character and leverage the knowledge of character types, as embodied in the four color personalities.

Harry Hough, PhD, founder of the American Purchasing Society

Editors note: Dr. Hough is a frequent contributor to this blog.

Comparing and evaluating prices are among the most important parts of a buyer’s job. The American Purchasing Society asked buyers from coast to coast and in all types of industries how they accomplish these tasks. The question was limited to the following options.

A. Routinely ask for a lower price
B. Compare prices with those received from other suppliers.
C. Compare prices with other bids or offers.
D. Analyze the cost of labor and material of each component.

The questionnaire indicated that the respondent was to check all that applied. No doubt there is much more to evaluating prices than is indicated by these brief descriptions. Properly done, a comparison of prices must check the risk of doing business with a certain supplier and needs to evaluate the value received for the product. However, the results of the survey give some indication how buyers behave.

The largest number of respondents, 23%, indicated choices “B” and “C.” They compare prices with those received from other suppliers and compare prices with other bids or offers. The intent of including these two choices was not the same. The latter can refer to prices received for other products. For example, slight differences in products should usually mean slight differences in price. If the difference is great, it should be explained.

The next largest group, accounting for 18%, indicated that in addition to choices “B” and “C,” they also routinely ask for a lower price. We are not sure this is a good policy. While a lower price should often be requested, it should not be assumed that the supplier is always making a profit on the price quoted. If no profit, and the supplier is awarded the business, the buyer may soon discover that the supplier can’t or won’t deliver. Also, a supplier may begin to deliberately bid high realizing that the buyer will ask for a price reduction. He is then prepared to cut the price in return for the business. Even with the cut, the price may be higher than necessary. It is far better to determine the component cost to establish a proper price.

The third highest number respondents, at 15%, checked all the options. Perhaps surprisingly, this was the highest number that actually indicated that they analyzed the cost of labor and material of each component.

There were 13% that checked option “B” only. They only compare prices with those received from other suppliers. In probably the majority of cases, this course may be adequate, but where competition is limited or the knowledge of available suppliers is insufficient, this method may result in higher costs than necessary for the buyer.

A significant number of buyers, 10%, selected “B,” “C,” and “D.” With the limited number of options available, this combination of responses seems the best course of action. A slightly smaller number, 9.7% checked “C” only. Since the differences between “B” and “C” may have been difficult to see, it is possible that these two could be grouped together. If so, the resulting 23% would tie with the highest reported group selecting “B” and “C.” Listed below is a recapitulation of the results of the survey except for combinations with answers amounting to less than 1%.