A Buyer’s Guide - Identifying Interests In Procurement Negotiations

Posted 23rd Jun

Negotiations should be about the interests of the parties involved. Interests are areas which are of particular importance to one or the other (or all) parties. This sounds like an obvious statement, but there is a real danger in procurement negotiations that the interests are not clearly identified, resolved or trained for. 

This can come from a number of directions. Firstly, there is a danger that procurement engage in only a part of the negotiation. We often see situations in which the negotiation is delivered in part by internal stakeholders engaged in legal or technological specification, sometimes finance, or senior managers with a different or incomplete view of interest. The net result is that partial groups of interests are engaged at different times, and the interface and interplay between them are unclear. 

Secondly, there may be a series of unstated or invisible interests on our side, particularly if the development of business requirements has not been completed in depth. We need to establish the areas of interest which need to be addressed in a broad negotiation, to make sure we understand both the clear definition of the interest, but also the relative importance of the interest. 

Lastly, we need to consider what this looks like from both sides of the table. There will be areas of interest that the other side has which we do not either understand, or relate to. However, if it is a significant interest for the other side, we need to recognise that and aim to address it. If we do not, then the negotiation may either fail or reach a less than perfect outcome. 

Examples of the last area might include achieving a particular sales or volume target, or access to particular markets or even individuals. If we don't identify these as issues, the sales team (in a buy- sell relationship) is less motivated to deliver an outcome. 

In a recent example, a sales team had failed to identify that a large corporate buyer had a significant internal target regarding marketing support. By not recognising that as a valid target, the negotiation was progressing really badly, with a real potential for the supplier to be delisted. Once a question about the buyers targets was submitted, and the importance of that element was revealed, the negotiation changed tone to one of partnership and success. The net cost outcome was not materially different, but responding to the buyers previously unstated interest was the key to success. 

There is a technique to consider here, where we can use establishing interests as a way of developing a negotiation further, or breaking a deadlock. Even in unbalanced relationships, there are often ways of exploring interests as a way of establishing a better level of engagement. A small UK water company often exceeded its expected negotiation position because it was very aware of the interests of its suppliers, and able to help with those interests more than other water companies. By providing a close working relationship with technical staff to explore new and developing technologies, and being willing to share those explorations with other water businesses, it won close relationships and better outcomes in negotiations. 

Interests, and our understanding of them and ability to uncover them in the round, are core to negotiation success. We all need to find ways to get better at this and to explore listening and testing techniques. 

To learn more about this, contact us at www.futurepurchasing.com/contact

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Tagged by topic: Negotiation

  by Mark Hubbard

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