Geoff:'Hi Sally, you wanted to have a word.'
Sally:'Yes Geoff, take a seat. I know that you are going to enter your first negotiation next week and I just wanted to go over a few things with you. I know it's obvious, but the main purpose of the negotiations is to make a deal with the other company. Remember, anything can happen until you have that signed contract in your hands. So be prepared and do your homework about the company, what they want, what they need and who our competitors are before you start.
Also, be aware that you're representing our company and that both our and your reputation is very important. I don't want you being aggressive and bullying them into signing the contract. It's not good business. Try to persuade them that they are getting the best service from ourselves. In this type of negotiation, we're not looking for one-off deals, we're looking to build up trust and confidence with them and obtain follow on business in the future with them. So don't try to negotiate for a zero-sum game.'
Geoff:'Sorry Sally, but what does zero-sum game mean?'
Sally:'It means that one side wins and the other side loses. It's good for one-off deals but it's the worst thing you can do when you want to build up a relationship. So negotiate for a win-win result, where we both benefit from the deal.
Because we're looking for follow on business from them, our margin on the deal doesn't need to be very high. But do not make a deal where we make a loss. All negotiations are about give and take, they will make a demand for more than we offer and you'll agree to it if they do something in exchange. I have no problem in you doing that. They will certainly ask for a reduction in the price they will pay for the whole project.
When they do, tell them the price is the price. That we can only do it for the price that want to pay if there is a reduction in either the services they'll receive or in the scope or size of the project. Make them aware that there will be a trade-off between the price they are willing to pay and the level of support, service or functionalities we can provide. This is normal when negotiating and it usually ends with each side reaching a compromise, in which both parties are satisfied, although both haven't got their ideal price or service level.'
So just keep me updated and if you have any problems, let me know.'