Business Negotiation Nuances

If people think about negotiating at all, they assume you should play it hard and reveal nothing.

Yes, there is a place for this but only on some occasions. When I last wrote about this subject I emphasised the dangers of bluffing; the importance of always having a Plan B; persuading versus bullying, but most important of all, the need to do your homework in advance and prepare.

Beyond this is the need to recognise that various negotiating styles work well in different situations and markets. If you are in a market where timing is key, then that should determine your tactics. The television airtime market in the UK is limited by the number of advertising minutes that can legally be transmitted each hour. If a TV contractor can’t sell all his minutes he cannot make it up the following day – it is one of the most perishable commodities.

So in the days of a separate weekend franchise held by London Weekend Television, at my agency we knew that if we could keep talking and delaying on Friday night the price would tend to come down dramatically.

If your negotiating is intended to result in some form of partnership, then the approach is different again. There must not be a sense that one side has to lose for the other to win. I remember an interminable negotiation in the Far East to set up a joint venture with the biggest agency in one of the so-called tiger economies. We were really keen because it would have been a landmark deal that we could have used to enter other markets. For that reason we were very patient – too patient. The deal was signed but our ‘partner’ had squeezed any potential for profit out of the deal and then looked to grab more and more services from us. The JV broke up inside 18 months.

It was afterwards that I overheard the agency owner being described: ‘He’s built a terrific business, the trouble is he never leaves any meat on the bone for someone else.’ Try to avoid people like that, they’ll suck the blood out of you.

See also: When to walk away from a negotiation – The art of negotiation is a vitally important business skill to possess. Knowing when to push for the highest figure possible, settle for a reasonable compromise or move on to something new is crucial to success.

Sometimes you have to deal with chisellers like this. Many of those in procurement departments have this approach. They will be obsessed with what an item or service costs rather than what it is worth. Therefore, you have to be very careful if your product has a high intellectual property component.

One route is to go round the procurement department if you can, to find someone senior who can override them. Many get pulled into the ritual of providing a detailed cost breakdown which is inflated in some places so that procurement can beat them down to somewhere near where they expected to be in the first place. I don’t pretend to be an expert in dealing with procurement departments, but the best advice I heard was to concentrate on their costs and their processes and show how you can improve them. This is only relevant to some suppliers but it can transform the whole negotiating process.

It is essential to show confidence in a negotiation (again, this is where preparation helps) and I was reminded of this recently in the most unlikely circumstances.

My wife and I were enjoying a long weekend in Suffolk and found ourselves in the village of Saxmundham. The high street was closed up except for a convenience store and a second hand book store. It too was empty except for the proprietor – a large gentlemen with a plummy Home Counties accent.

My wife put to one side a rather battered poetry book, marked at £3. I’d been browsing the art books and selected a 25-year-old book on David Hockney, but it had ‘£15’ marked on the inside.  This sounded pretty steep – after all, the shop was jammed full of stock and we were still the only people in it.

Confidently, I went up to the proprietor with the book in my hand. ‘I’d quite like to have this one, but you’re not really asking £15 for it are you?’

Ponderously, he took the art book and then the poetry collection from the two of us. Turning the aged, discoloured pages, he noted the prices. ‘Hmmm…,’ he said and then, with an air of finality, he announced: ‘£17 for the two to show I’m not completely heartless!’

Commercially, this gentleman didn’t have a leg to stand on, except for knowing the value of books.

But I had to admire the gall of his six per cent discount. He had gone beyond demonstrating confidence – this was chutzpah of the highest order!

When to turn up the heat in a negotiation

Sometimes it pays to be nasty. In the early days of commercial television, I worked in a small agency in the media department, which meant I had to do a little of everything while our larger competitors had specialist buying departments.

The bigger agencies were seen as rough, tough and nasty, but I was really keen to further my media education and so became determined to join an organisation with a reputation for hard negotiating. A job offer came quite quickly and I snapped it up: they wanted my thoughtful planning skills and I wanted their street-smart buying skills.

I soon saw the plus side of their approach – they had overall negotiating strategies with each media group, ensuring close co-ordination between all the buyers and a concentration of power. This was not always to the benefit of their clients, but they were playing hardball with the media and there were no exceptions.

First appearances could lead you to think only brute force was being used. It was, however, more sophisticated than that. There were lengthy meetings to agree strategy before each negotiation and every possible scenario was well thought through, with agreed fallback positions for each.

It quickly became clear to me why my creative but unfocused approach to negotiation did not work within this well-oiled machine. I learned the benefit of making threats: ‘If you don’t give us this deal, you won’t get another penny from us!’

I was surprised how often this in-your-face style of negotiation worked, even though it was often bare-faced bluffing. I began to realise that the media owners who responded to the most basic form of bullying were those I had been least aggressive towards in my previous job.

This was a style I didn’t have – and didn’t want – but I was pragmatic enough in later years to hire a smattering of “buying gorillas” on the team. The air was blue and quite a few phones were broken, but I’d learned that, for certain types of people, heavy-handed threats work. So, if you’re not too squeamish, the ideal is to have a team with a blend of personalities which you can match to each situation.

Watching the clock

I also learned that, although ‘time is the enemy’, you can make it your friend. Time and space are perishable commodities and ads that are lost one week can rarely be made up later – that money is either not spent or it goes to someone else. As with so many businesses – airlines, hotels, theatres – a very high proportion of profits rest on filling that last bit of capacity.

So we would keep negotiating and negotiating on Friday evenings for the remaining pages and spots available for that weekend; despite the sales reps being strongly motivated by incentives to sell the remaining availability, they were also desperate to start their weekend and would often capitulate on price in order to get home.

Bullying conjures up images of implied violence, or at least damage, to the well-being of a company and its employees. This certainly happens in business, particularly with those who feel they can throw their weight around. But much of it is psychological and that can be just as effective.

In the final years of my media agency Tempus, before we sold, I had started to build a collection of modern British art and sculpture. Much of this is hard and edgy, heavily influenced by the two World Wars. We had several meeting rooms in the head office and I dressed some of the rooms to have an uneasy feel to them and others to be extremely relaxing.

Pressure points

Less subtly, a former colleague of mine started a beverage business and, after some early success, he met with the buyer from one of the big four supermarkets. When he arrived he was startled to find in reception a board on the wall, with two columns on it, saying “Those we like this week” and “Those we don’t like this week”. His knees were almost knocking as he looked for his name on the board. He then had to wait 30 minutes in a tiny meeting room before the buyer deigned to see him. By then he was ready to give his lowest possible price before the meeting even started.

Negotiating with suppliers is completely different from negotiating corporate deals, but it’s surprising how easily people forget this. They negotiate on everything and try to win every point. Instead they should concentrate on the points that are commercially significant to them and ensure that they win. Conceding the other points is great for maintaining goodwill.

I remember looking to set up a deal with a well-known businessman in South East Asia. We were new to the region and he held nearly all the cards, a position that he exploited mercilessly. Each time we thought the joint venture (JV) had been agreed, he’d come back asking for more concessions.

It left a sour taste in our mouth and, once the JV was established, our regional CEO found it easy to be unhelpful whenever his co-operation was needed.

The saying “Always leave some meat on the bone” is great advice. It isn’t weakness, it’s good business sense and a lot of retail buyers could learn this lesson.

Chris Ingram

Chris Ingram

Chris Ingram is a businessman, entrepreneur and art collector who was judged London Entrepreneur of the Year' in 2000 in the Ernst & Young awards and was founder of the CIA advertising agency.

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