Negotiating terms, whether they are multi-year, multi-million pound contracts or short term seasonal terms, can be a challenge, even to experienced negotiators. The reason they can be a challenge is the multitude of fluid variables to consider from payment days, different levels of discounts and flexible levels of support and they all have to be negotiated separately and yet as part of an overall deal. In addition, a range of internal stakeholders will have input which needs to be reconciled under one aligned approach.
We have found, after years of supporting clients with multi-million pound contracts and terms, that preparing in advance can pay dividends and we have identified key areas where investing time will result in tangible success.
Old vs new
Review not only the overall investment pot compared with the old levels of investment, but also the levels of investment at a SKU level. Also, review the conditionality with the level of investment.
Balance of power
Take the time to assess the balance of power by rating how much power you have for brands, knowledge, people, alignment, BATNA, history, time, size, conditionality, resources and capability. A good understanding of the Balance of Power will help shape your objectives, your variables and how you will trade them, as well as your stances and how you will move between these different stances.
Be realistic and clear about what you and your organisation want to achieve. Develop your ODE’s for your objectives, and at the same time develop your BATNA. Allow your BATNA to influence your Essential position. Keep track of how you are moving in your ODE’s to maintain your confidence and balance of power.
Clarify the benefits of your new terms and continued relationship in a compelling customer proposition. Investing time and energy in your proposition so that it is seen as highly valuable by your counterpart may mean you don’t need to negotiate and lose value.
When you develop a list of variables consider also the possible variables and issues which your counterpart may raise. Terms negotiations have possibly the widest range of variables in negotiation, including payment terms, investment levels and activation by brands by outlet types. Calculate how you will trade the variables, linking what is important and valuable to you to what is important and valuable to them.
It is unlikely you will complete your terms negotiation in the first set of negotiations and will probably require several moves. These moves will require different positions and stances, sometimes becoming more generous, whilst at other times becoming more assertive. Each of these stances will need to be mapped out in advance, understanding the different triggers between stances and what you will do in each stance.
Alignment within your business
Terms negotiations are the foundation for most businesses. They set the context for how you will do business with your counterpart. From Finance to Marketing, different functions within your organisation will have a vested interested in these terms and they will also have a role to play in the negotiation. Plan how you will gain their alignment to your negotiation plan and how they can help. Ensure all the people in your organisation keep to this plan by regularly communicating and reviewing with all those concerned.
Terms negotiations, whether they are long term multi-million pound contracts or short focussed seasonal terms are fraught with complexity. That complexity can end up costing you money, unless you prepare fully your negotiation approach and execution. We have supported numerous clients in their preparation for terms negotiations and our experience tells us that by preparing the areas above you will prepare yourself for success.