Right now, most suppliers and buyers are busy trading the Christmas Season, not negotiating with each other. Whatever the sector or category, there will likely be a seasonal peak as businesses attempt to grab some of the consumer’s overall spend. The commercial decisions were largely made 6-9 months ago. And, barring some last minute corrections to competitor activity, the Christmas seasonal peak is mainly about logistics, operations and marketing. Each function makes sure the stock is ordered, arrives at the depot, available on-shelf in-store and gets the appropriate air-time in the marketing plan.
Budgets for Next Year
Consequently, you’ll find that buyers are possibly more busy with Q1 and Q2 merchandising plans and negotiating budgets for next year. The budgets are probably agreed by now, for calendar year businesses. Thus, everyone knows the targets they need to hit to secure their bonus or get a good review this time next year. And rest assured, the numbers they submitted as ‘do-able’ are not the numbers that come back from the finance department! There’s always a gap to be filled or a stretch that needs to be made. This puts people under pressure, it ups the ante, imagine a thought process like this.
Lacking Confidence & Aiming High
- CEO: “We need to reduce costs by 1.5% next year so we can deliver our new group competitive position. I’ll ask the Commercial Director for 3.0% reduction in COGS just to make sure we land on-target”
- Commercial Director: “The CEO wants a 3.0% improvement in buying prices, we’ll win some, we’ll lose some, so I’d better target the buyers with 5%!!”
- Buyers: “The business wants me to deliver a 5% improvement from all my suppliers. I’ll start by asking for 10%!!”
Experience versus Match-Fitness
These conversations are happening right now and the resulting negotiations will be happening through Q1. So, for both buyers and suppliers, the bottom line is that your whole trading year can be won or lost in your Q1 negotiations. Here are some things I’ve learned as I’ve trained both buyers and suppliers in negotiation skills.
Suppliers have more experience
On average, suppliers with 14 years in-role experience negotiate with buyers with 4 years experience. Buyers start young and move more frequently between categories.
Suppliers know more
Buyers are generalists, spread over multiple categories and hundreds or thousands of products. Suppliers get to focus on one product range, one sub-category, maybe even one single product. As a result, they understand the dynamics in a way that buyers never will.
Buyers have more leverage:
Buyers decide what products go into their range, and what suppliers supply them. With minimal research or preparation, all they need to say is “no….try harder”.
Buyers are more match fit
Suppliers reckon they negotiate, internally and externally, 6 times daily. But buyers are actually negotiating 20-30 times per day. Perhaps they’re smaller interactions, but negotiations nonetheless. So, even if they have less knowledge and less experience, they are more match fit. Crucially, they are more adept at quickly understanding the terrain, setting a target and asking for it in a negotiation.
Negotiation Skills Training!
So, what does this mean for your business? Invest in training your team, it’s too important to leave to chance. Make sure they get negotiation skills training so you can do fruitful business next year! And use this training to start building a negotiations culture in your business, where colleagues share what went well, what didn’t, and what they’ll do differently next time.
15th & 16th January 2019
The Alpha Group 2-day Negotiation Skills course is running in Dublin on 15th and 16th January 2019. There are only a few places left so have a look at the testimonials and get in contact if you’d like more details. firstname.lastname@example.org
+353 87 9380216