In Negotiations, Small Talk Can Be Huge

PurchTips edition #300


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Can Informal Chatting Be A Negotiation Advantage?

When preparing to negotiate, procurement professionals often focus most on refining those late-in-the-game phrases that will compel suppliers to improve their terms. That's great, but it's important to not overlook preparing for the informal conversations that occur when negotiations begin. Believe it or not, that "small talk" can have a big influence on the negotiation's outcome!

For example, before a "formal negotiation" begins, a salesperson will often ask, "How is business?" If you go on and on about how well your organization is doing financially, it can hurt you. You see, if a supplier perceives that you can afford its price, it will be less likely to reduce that price. So, that 30 seconds you spent talking about your organization's sales growth can end up making you work much harder later on.

Small talk can work for you, too. For example, you should ask how the supplier's business is doing. If the supplier's business is down, that supplier may be more flexible with its terms in order to earn your business.

Another common occurrence in negotiations is a buyer asking for more concessions than the salesperson is authorized to give. At that point, the salesperson will say "I'll have to ask my boss if we can do that." While it would be ideal if you could negotiate directly with that boss, that's not always possible. In those cases, that salesperson can be your advocate/surrogate negotiator.

How hard will salespeople push to make deals happen for you? It depends on a few things, one of which is whether their commission is based on revenue or profit.

You see, if the salesperson's pay is based on revenue (i.e., the amount you pay the supplier), they will still make money on an unprofitable sale. They may be willing to fight to get you a deal in order to get your organization as a customer, even if the supplier takes a loss on the sale. If their pay is based on profit (i.e., revenue minus costs), then they'll have less incentive to push for pricing below a certain threshold.

If you know how the salesperson is compensated, you can better prepare him or her to advocate for your organization. How do you know how a salesperson is compensated (and, thus, how strong of an advocate of yours that salesperson might be later in the negotiation)? You gently work the question in during small talk!

In negotiations, small talk can be huge!

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