Weekly value-added in 5 minutes
Dear Procurement Enthusiasts,
Navigating the Landscape of Negotiation: Embark on a journey to understand the fundamentals of negotiation, tailored for those who may find this area challenging. This introduction explores the nuances of negotiation, providing insights to ease discomfort and foster a sense of confidence in these crucial interactions.
Examine the underlying reasons for negotiation apprehension and discover practical strategies to transform discomfort into empowerment. Uncover the psychology that shapes successful negotiations, equipping yourself with tools to enhance communication skills and navigate diverse scenarios with assurance.
As part of this exploration, delve into recommended bestsellers that seamlessly blend strategic wisdom with actionable techniques. Whether you’re new to negotiation or looking to refine your skills, this introduction invites you to uncover the layers of negotiation, empowering you to approach conversations with newfound skill and assurance.
In today’s email
• Getting started - how to feel comfortable in negotiations and why it can be fun.
• Why it’s important to negotiate - understand how prices are calculated.
• Book recommendations.
• C2B takeaway.
HOW TO FEEL COMFORTABLE IN NEGOTIATIONS
Why do we feel uncomfortable about negotiations?
Many people may feel uncomfortable with negotiation due to fear of conflict, lack of confidence, or uncertainty about their own value in the negotiation process.
Some of us might also also feel uncomfortable negotiating because we perceive it as confrontational, we worry about damaging relationships, or lack experience in handling complex discussions.
No matter why we feel bad about negotiating, we can change this. Following some ideas that might help.
What can we do against it?
Developing confidence in negotiation and overcoming fear involves a combination of mindset and practical strategies:
1. Education and Preparation:
Knowledge is a confidence booster. Educate yourself on negotiation principles, study successful negotiators, and thoroughly prepare for each negotiation. The more you know, the more confident you’ll feel (see our book recommendations to learn about it and be prepared).
2. Role Play and Practice:
Actively engage in role-playing scenarios or practice negotiations with a friend or mentor. This hands-on experience helps desensitize fear, builds muscle memory, and enhances your ability to handle unexpected situations.
Acting courses as well as free improvisational theater can not only be fun, but are also used as methods in management training.
3. Positive Visualization:
Picture successful negotiation outcomes. Visualization can help reduce anxiety and instill a positive mindset. Envision yourself calmly navigating discussions and achieving favorable results.
4. Start Small:
Begin with less intimidating negotiations to build your confidence gradually. Small victories provide a foundation for tackling more significant challenges, allowing you to grow your negotiation skills organically.
5. Learn from Experience:
Embrace failures as learning opportunities. Reflect on past negotiations, identify areas for improvement, and apply these lessons in future interactions. Experience is a powerful teacher. By combining these strategies, individuals can develop the confidence to negotiate effectively and overcome the fear associated with these crucial conversations.
UNDERSTAND HOW PRICES ARE CALCULATED
Differentiated overhead calculation for pricing:
The proportion of overheads (%): differs depending on the seller's business/industry or strategy.
COGS: these costs must be covered in order to avoid losses.
Profit margin: this markup ensures the profit before interest, tax, depreciation & amortization. This markup also secures the managing director's salary and compensation for risks taken (also called "risk premium").
Cash sales price: minimum price in case the customer pays cash.
Cash discount: surcharge in case a customer wants to pay by card/paypal/other service and the seller has to pay fees or simply has to wait longer for receiving the money.
Discount 5-20 %: calculated felxibility in case the customer wants to negotiate. The percentage also differs depending on the seller's business/industry or strategy.
Wrap-up:
With this list selling price per product/service, sick days, vacation days and holidays pro rata per employee should already be taken into account, as well as re-investments. Even if every customer (e.g. YOU) was to receive a 20 % discount (atfer negotiation), the selling party would still be very fine.
To be very clear at this point -This is the principle to which there are always exceptions.
A very small company should, from an entrepreneurial point of view, calculate in this way. But there can be many different reasons for this why it does not. This does not apply to Non-profit Organizations, public swimming pool operators, kiosks around the corner or other small businesses (their margin is probably way smaller or there is none). We're sure you got the story.
Be certain that most medium-sized companies and almost certainly all large companies calculate this way, or something similar.
Always do a reality check and try to compare 3-5 requested quotes with the same specification (apples to apples comparison).
BOOK RECOMMENDATIONS
To understand the psychology behind negotiation discomfort, “Never Split the Difference” by Chris Voss provides insights into the emotional aspects and practical strategies. Click here for the German version of this book.
“Getting Past No” by William Ury is an excellent resource for teaching negotiation skills, offering practical techniques to handle difficult situations and turn conflicts into opportunities. Click here for the German version of this book.
For beginners exploring negotiation methods, “Influence: The Psychology of Persuasion” by Robert Cialdini provides valuable insights into human behavior, helping to navigate negotiations with a better understanding of influencing factors. Click here for the German version of this book.
C2B Takeaway
Areas in which you should always negotiate privately are, for example, when buying a car, before concluding long-term contracts (such as insurance, mobile phone tariffs) and real estate.
To be able to negotiate confidently, you should start small and have read/learned something about it beforehand. Ask friends or relatives what their most successful negotiation so far was and what they think was the reason for their success.
Take into consideration:
• The flexibility for your negotiations may already be priced in by the seller!
• The question of how the quoted price is calculated often work wonders!
We learned today
Knowledge is Empowerment:
Understand the classical sales price calculations, from Cost of Goods Sold (COGS) to list sales price. This knowledge empowers buyers to navigate negotiations with clarity, ensuring fair and informed discussions.
Transparent Relationships:
Embrace transparency in negotiations. Seek sellers who are open about their pricing structures, as this fosters trust and accountability, laying the foundation for long-lasting and fruitful relationships.
Strategic Approach:
Approach negotiations strategically. Recognize that both parties seek value, and by understanding market standards and cost structures, buyers can negotiate effectively while respecting the seller’s need for profitability. Remember, negotiation is not just a business tool but a life skill.
You can look forward to next week's newsletter in which we present 10 simple steps to consider and prepare before going into a negotiation.
Thank you for being part of our community - See you next week!
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