Top 5 Contract Negotiation Tactics
The CPSM Exam covers a dozen of things and one of its scopes are the strategies and tactics for contract negotiations. This topic is tough especially when you are not an expert in negotiation.
This article will help you discover the top negotiation tactics used by well-known Supply Management experts around the globe.
Price Slice and Dice
This type of tactic is time consuming and is not ideal if you are not comfortable with crunching numbers. You can use this type of approach by presenting a variety of scenarios like a price for the 1 year contract, 2 years, and so on.
In the end, the supplier will give you a price data and from there on you can determine the price model of the service or product being offered.
Good Cop/ Bad Cop Tactic
This ploy refers to two contracting parties that alternate as a tough, adversarial style and a softer, cooperative vendor. Most of the time the good cop usually wins the heart of the deal.
Using silence in negotiation is a golden rule. You can use silence to your advantage. The first advantage is letting the supplier talk for you to have enough information about their deal. Second, you keep the silence to keep the vendor from learning about your business with other suppliers.
The less the vendor knows about you, the better. However, remember that this kind of tactic might not be effective in other cultures.
Lull your suppliers into a full sense of security. Once your supplier fills secured you can insert the “one more thing” phrase. From there one you can insert your demands like to provide you with “free” services every 6 months and so on.
This tactic is effective since the supplier has a strong desire to close the deal with you.
This scheme stands for the “best and final offer”. This is the exact phrase wherein suppliers fear to hear. This tactic can only be applied in the pre-negotiation phase of a competitive bid.
This method work since the BAFO statement implies that they have a competition, and this drives the suppliers towards the game.
Aside from these tactics; you should also bear in mind some considerations. These include the following:
- Price of the product or service
- Payment Terms
- Value for money
- After-sales services and maintenance
- Lifetime cost of the service or product
- Importance of the service or product to your business
Before drawing up a negotiation, you need to list down factors that are important to you.