You have all the leverage…and your counterpart knows it. You also have a relationship with them that you not only want to keep, but to nurture. What negotiation strategy will satisfy your counterpart even when you have more leverage, and therefore will achieve a more robust target?
To paraphrase William Ury, co-founder of Harvard’s Program on Negotiation – help them write their victory speech. Everyone needs to be able to claim a victory in some aspect of the agreement.
What does this mean? It means your negotiation process must include working with your counterpart to frame the agreement so that they can claim a victory.
We didn’t get the price reduction, but we will get a rebate if we can order in bigger lots.
We didn’t get the price increase, but we got much longer lead times, which increases our profit by 7%.
We didn’t get the nicer room for the party, but we got a better dessert.
Let the facts do the “dirty work”
I worked with a colleague who was a master at this. He would be almost apologetic when stating the fact base that gave us the leverage to achieve a much better agreement than the counterpart wanted to give us. It was pure genius, as our counterpart never felt that they were being bullied. He let the fact base be the bad guy.
“Look, we found out the labor rates we paid last year were for a much higher expertise level than was necessary. What can I tell you? We just can’t pay that anymore, which will reduce our costs by 9.3%.”
It turns out you have been getting the same pricing for ½ the volume, and at the rates our customers were paying 3 years ago. Given the cost of raw materials that won’t work anymore.
They of course argued, but if the fact base is solid, the facts win in the end.
But he understood they needed a way to save face when they went back to their own team and boss. He searched for ways to make a concession that made the new agreement easier to swallow.
Often the solution is to divide pricing into tiered categories over the length of the contract, annual spend and perhaps certain scope changes. Everyone knows it probably won’t change the agreement in the end, but it allows them to bring home a victory.
Even if you are walking away the big winner, you need to work hard to help satisfy your counterpart as well.
Remember to Negotiate Smart™!