How does one define the role of concessions in B2B sales negotiation? Are concessions just a part of the proverbial "give-and-take" process within a negotiation, or do they play a more prominent role in a successful outcome? Well, whether it’s negotiating a contract on supply, pricing with customers, or favorable credit terms with vendors, it all boils down to using concessions to move the negotiation forward. What are concessions and how do they help move the negotiation process along to a successful conclusion?
Concessions in Negotiation
Concessions are simply those items your company wants as part of the negotiation, or is willing to give up in return for something else. We’ll look at their role and how your team can better use them in order to have a more successful negotiation the next time around.
Negotiation is always between two parties and as such, there should always be an understanding that one concession from one party should and will be met with a concession from the other party.
To make this post relevant, we’ll break it down in terms of how to view concessions from a sales person selling to a customer and a purchasing agent dealing with a vendor. We’ll then explain why negotiation should never be a “give-and-take” process. Finally, we’ll show how the right approach should always be a “give-and-give” process or better yet, a “concession-for-a-concession” process.
The above video explains the importance of handling concessions, pricing and threats in B2B negotiation. To learn more, please go here.
1. When Thinking of Concessions, View them in terms of “what if”
Concessions are nothing more than conceding something or getting something in return. That “something” could be anything your company wants as part of the negotiation or is willing to give up in return for “something” else. Concessions can be demands, requests or something your company is willing to concede in return for another concession. Concessions are the ultimate response to the “what if” scenario.
The “What if” Scenario in B2B Sales Negotiation with Customers
- What if the customer asks for better pricing?
- What if the customer demands faster lead times?
- What if the customer asks for extended payment terms like net 45 or net 60?
- What if the customer asks for discounts for prompt payment?
The “What if” Scenario in B2B Purchasing Negotiation with Vendors
- What if the vendor refuses to provide better pricing?
- What if the vendor can’t shorten product lead times?
- What if the vendor won’t extend terms and will only provide net-30?
- What if the vendor won’t provide discounts for prompt payments?
What do Both of These Scenarios Have in Common?
When reading the above, what’s the first though that comes to mind? I guarantee you’re thinking about the answers to these questions. If you’re thinking of the answers then it’s imperative that both your sales team and your purchasing department are prepared to provide them.
How does your sales team respond to customer request for better pricing, faster lead times, extended credit terms or discounts to pay sooner? In return, how does your purchasing department respond to vendors who stick to their price, can’t improve lead times, have set terms, and don’t provide discounts? The answers to these questions above determine how successful your company is in negotiation. It’s not simply refusing to take “no” for an answer, but coming back with a concession of your own once the other party won’t budge.
2. Avoid the “Give-and-Take” Situations
The companies that often lose in negotiation are ones that allow for a “give and take” situation. The customer asks for a better price and the sales person gives it to them – asking for nothing in return. The purchasing department wants shorter lead times and the vendor won’t accommodate – but the purchaser still buys anyways.
- The Sales Mistake of “Give-and-Take”
The customer that asks for better pricing for the same volume and gets it without the sales person asking for anything in return is a perfect example of the sales person giving, and the customer taking. Sure, the sales person got the order but could he or she have gotten more? Could they have received something in return? What does this mean for future negotiations?
- The Purchasing Mistake of “Give-and-Take”
The vendor who won’t shorten product lead times and still gets the order is an example of the purchaser giving the order and the sales person taking it. Why can’t the vendor shorten lead times? If they can’t, could they for the next order? Could they cover freight for not having inventory ready when the company needed it?
3. Make it a “Give-and-Give” or “Concession-for-a-Concession” Process
Referring back to our example of the sales person and the purchasing agent’s “what if” scenarios, it basically amounts to your company being able to respond to those concessions with concessions of your own. The best negotiators anticipate the other party’s requests and develop a list of concessions that party may ask for. In return, they develop their own list of concessions they want and are willing to part with. This last part is most important. Develop a list of concessions you want and a list you are willing to concede. Work this list over time and based on your company’s market and industry.
Remember that negotiation is an ongoing process. Nothing is set in stone. You don’t walk away from the table the moment one party can’t accommodate a request. Instead, you continue to offer concessions in return for concessions. The list above is a general list. I am sure your industry and situation are different. Make sure to make your list of concessions from both the point of view of sales selling to a customer and purchasing buying from a vendor.
Using concessions in negotiation will help you defend your position as the incumbent supplier. To lear more about keepign the business you've fought so hard to secure, please read: Defeat Overseas Competitors With Three Simple Steps
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