A lot has been written about negotiation skills and how to apply them. However, most advice concerns one on one activities, such as a sales negotiation or a personal interaction. There are times that negotiations are wider in scope than one on one situations. For example a person may represent a company and is negotiating with a supplier and an end user. In this situation, the person doing the negotiating is affecting three outcomes. The supplier has a price point they are looking for, the company has a profit margin to protect and the end user is looking for a price point as well. A careful negotiator will recognize the needs and motivations of all parties and work the negotiation process appropriately. There is a lot of talk among negotiation experts about getting to a win – win for both parties, in the case of this style of negotiation; we are looking at a win – win – win situation. Let’s take a look at a scenario involving a manufacturer, a distributor and an end user. All three are looking to get maximum return for their efforts and are trying to price accordingly. Thus the manufacturer may have a wholesale price, a suggested retail price; the distributor may have a margin number or percentage in mind and the end user has a purchase price in mind. In the case of the end user being a retailer, the same margin percentages would be in consideration. So the entity in the middle has a delicate game to play and must negotiate with both sides to get to a profit margin necessary to maintain the business. Thus we are looking at an illustration similar to balance scales. If, for example the distributor can negotiate a lower price from the manufacturer then it can enjoy a higher margin rate. It can also have a higher margin rate by negotiating a higher sales price to the end user. And if both of these scenarios can be achieved an even higher margin can be achieved. Conversely, any pressure on prices at any point in the spectrum can affect the profit margin of the distributor. So how can this distributor show win – win – win to all parties? First of all, in dealing with the manufacturer, the distributor needs to show the qualities of stability, reliability, responsiveness and capacity. All of these items must be explored in the negotiation to assure maximum value for the manufacturer. In dealing with the end user, those qualities are just as important with the added responsibility of support of the items sold. Negotiation is all about two emotions, happiness and pain. If any party can increase the first and decrease the second, the negotiation is well on its way to success. Add to that a sense of urgency and the negotiation can reach a win – win – win for all parties!
February 27, 2014