How To Use The ''4C'' Negotiation Strategies
PurchTips edition #294
Are You Skipping Strategies In Your Negotiations?
Your negotiation skills will influence whether you end up paying your preferred price, the supplier's preferred price, or a price somewhere in between. If you look at negotiation as a continuum of possibilities with four different strategies on it, you can avoid paying more than you should. The "4C" negotiation strategies and the order in which you should use them are:
- Compelling. In the "Compelling" strategy, you insist that the supplier meet your terms exactly. You present yourself as someone who "won't take no for an answer." In most cases, when a supplier tries to convince you to pay a higher price, your first approach should be to insist on your price, without revision. Do not move to the next strategy too soon!
- Collaborating. If you rebuff your supplier's initial attempts to convince you to pay a higher price but your supplier won't agree to your preferred price and your experience tells you that it is unrealistic to compel the supplier to agree to your preferred price, the next step is to collaborate. Ask your supplier for ideas on how it can create the value you're seeking via your preferred price via other non-price terms. In sensitive or strategic situations or relationships, you might start with the "Collaborating" strategy.
- Compromising. If after using the "Collaborating" strategy you still feel you can achieve better pricing than what the supplier currently has on the table, you can compromise. The "Compromising" strategy is based on each party sacrificing a little in order to reach agreement. For example, if your preferred price was $10,000, your supplier's initial price was $11,000 and the first two strategies resulted in your supplier reducing its price to $10,500, you can say "Let's compromise and meet in the middle of where you are ($10,500) and where I want to be ($10,000). Splitting the difference gives us a price of $10,250."
- Caving In. If the first three strategies didn't get you exactly where you wanted to be, the supplier leaves you with the option of accepting its price or not doing business, and your experience tells you that the supplier is not bluffing, then "Caving In" is a last resort. It's where you accept what the supplier has last proposed. In some cases, Caving In could mean that you've failed at negotiating. But, if you've gotten concessions with each of the three preceding negotiation strategies, it could also mean that you truly pushed the supplier to its limit and got the most value for your organization.
View the "4C" negotiation strategies as a sequence of steps to avoid the negotiating mistake too many buyers make: Caving In as soon as Compelling didn't work.
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By Charles Dominick, SPSM, SPSM2, SPSM3
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