3. Skillful negotiator delivers results but doesn’t burn bridges
This blog explores how procurement should negotiate to maximize results in both the short and long term.
First of all, the one who wins negotiations is the one who has done their homework better—as discussed in previous blogs. The better you prepare, the more likely you are to be satisfied with the outcome. Remember, the best salespeople prepare thoroughly for negotiations. They network with multiple people in the client company and try to uncover what the company really thinks of the supplier, the supplier’s position relative to competitors, whether the client truly has other approved supplier options, what factors influence supplier selection, where the supplier is better or worse than competitors, how the buyer operates and what they aim for, and what differentiators will secure the deal. As mentioned in the tendering blog, the best buyers prepare even more thoroughly.
There are countless books on negotiation tactics. Among procurement professionals, there’s disagreement about whether a hard or soft negotiation style yields the best results. We don’t believe that pounding the table and punishing suppliers wins much. Instead, if you’re well prepared, you can be demanding yet gentle. Ultimately, the buyer decides whom to buy from, and the seller decides at what price to sell.
Whoever initiates the negotiation has an initial benefit—whether it’s the buyer launching a tendering process or the seller sending a price increase letter. Naturally, the balance of supply and demand determines whether it’s a buyer’s or seller’s market, as discussed in the first blog.
If you want to sharpen your negotiation skills, start by leveraging the law of supply and demand: increase supply and tender. Then practice negotiating. After dozens or hundreds of negotiations, you’ll know which phrases are effective, which aren’t, and what you should never say.
In procurement negotiations, you’re not just buying—you’re also marketing your company to suppliers. The supplier’s salesperson needs arguments to convince their boss that it’s worth selling to your company at a lower price than to others. These arguments might include: we’re a growing customer; working with us helps the supplier improve; we forecast our needs well, enabling smoother production and logistics; our operational purchasing process runs efficiently and doesn’t create extra work; we only complain when justified, helping the supplier improve; we’re reliable in everything we do and say, etc. Even if you’re a small customer overall, you might be a major customer to the specific salesperson. They don’t want to tell their boss they lost a client. They’d rather present multiple reasons why selling to you at a lower price is justified—even if the sales director disagrees. It’s procurement’s job to feed those arguments to the salesperson. That’s why procurement must understand each supplier’s and salesperson’s main goals.
Procurement should offer suppliers both carrot and stick in the right proportion. The carrot is usually organic growth; the stick is volume loss. Consider other motivating and pressuring factors to get the best out of your suppliers.
Rarely does a negotiation conclude in one sitting with all goals achieved. A good practice is to start with a remote pre-negotiation, then meet face-to-face, and finally squeeze out any remaining concessions by phone. Don’t leave money on the table. If you do, recover it in the next tender.
In face-to-face negotiations, it’s wise to bring a technical expert if the buyer lacks sufficient technical knowledge. Negotiating alone with a large supplier delegation risks missing arguments or losing confidence—even if you’re well prepared.
If the supply-demand situation clearly favors the buyer, it may be tempting to squeeze suppliers to the bone. Avoid pushing prices so low that a supplier goes bankrupt or stops producing the desired products—because then you lose the buyer’s market.
If you’re negotiating in a situation where demand exceeds supply and prices are rising, there’s not much to gain—even if you’re the world’s best negotiator. Still, you can take action: buy everything from the supplier with the smallest price increase, or shorten the contract period in hopes the supply-demand situation changes (and it will, eventually). Price increases won’t surprise you or your boss, because you’ve been monitoring supplier markets and communicating internally.
Negotiations feel good when they end as well as you envisioned during the tendering planning phase—with an outcome that improves your company’s profitability, cash flow, and competitiveness. If the result falls short, you either set your goals too high, the suppliers were better prepared, or the market situation unexpectedly turned against you. Either way, you’ll run the next tendering better.
In summary:
The best negotiator is the one who has prepared most thoroughly. Be demanding but fair. In negotiations, the buyer is marketing their company to suppliers and persuades them to offer better terms. Negotiate until you’re satisfied with the outcome. Under time pressure, you won’t get the best result—so start the tendering process too early rather than too late. With each negotiation, you’ll become a better negotiator.
