Negotiations are part of the different aspects of life. Whether in business or our personal lives, negotiations contribute to getting ahead, resolving disputes, and coming to a peaceful agreement. In the realm of event planning, negotiations can contribute to customization and maximum profit for your event.
Negotiations are not just about getting what you want. It is a form of communication and a strategic skill everyone must learn from. We will teach you how to negotiate with vendors and give you some tips and techniques that can benefit you.
Before we delve into the specific strategies of vendor negotiation, let’s define what vendors use as a standard for their businesses with suppliers – the vendor contract. This important document will serve as an important point of reference in your negotiation.
What is a Vendor Contract
A vendor contract is a legal document that states the terms and agreements between the vendor and the client.
Almost every vendor contract or agreement has the following elements:
- Scope of work: The scope of work section enumerates the list of tasks that a vendor agreed to perform for the client. Some vendor contracts include the goals and objectives of each task. It is also best to indicate exclusions and limitations in the contract to avoid not meeting expectations.
- Payment Terms: Another important section in the contract is the payment terms. During the meetings, the vendor and client will agree on the mode of payment and payment terms. Milestones or phases, installments, and upfront payments are some of the types of payment terms you have to consider. Include the number of days a payment is expected after receiving the invoice.
- Warranties and Returns: Clients seek assurance before choosing to get a vendor. Indicate the duration and terms of your warranty whether it’s for a product or service. If applicable, also state the applicable return policies of your products.
- Cancellations or Reschedules: For event vendors, these are the usual things you can expect and encounter. Be specific on the circumstances for when cancellations and rescheduling are acceptable. Be transparent about your refund policies too.
- Disclaimer: Consult your legal team and inform your clients that you are not liable for loss, damages, and legal claims from your products and services.
- Protocols of Communication: Set expectations on how deliverables should be discussed and implemented. Indicate the point person and method of communication in the contract.
A vendor contract is a way to preserve and maintain relationships between vendors and clients. When expectations are set from the beginning and written in black and white, it eliminates the possibility of misunderstanding.
Types of Negotiations
Before starting your negotiation process, it is helpful to learn about the different types of negotiations. Check out these different types and try what works best for you and your business.
Compromise Negotiation
When engaging in negotiations, you can try the compromise technique where both sides find a middle ground during the negotiation process. Seek a balance between both interests and professionally discuss the things you can let go of to reach the best compromise.
Once you have reached a compromise, reaffirm the benefits of both sides and document it in writing. For example, if a client wants engaging entertainment for their corporate event but has a limited budget, the event planner can suggest local or up-and-coming entertainment services that they can vouch for. Suggest vendors can pass the client’s standards and budget.
Collaborative Negotiation
A collaborative style of negotiating prioritizes the relationship between vendors and clients. The negotiation process may look like laying out each of their interests and objectives. Share information and perspectives on what is workable and what is not. Both parties will amiably discuss possible solutions and weigh in on the pros and cons of the final agreement.
Accommodative Negotiation
The accommodative negotiation refers to the adjustment of one party in favor of another. This negotiation type is focused on the importance and value of relationships. The acts of generosity and goodwill of one party can lead to reciprocation from the other party.
Steps on How to Negotiate with Vendors Effectively
Do Your Research
Come to your negotiation session prepared. Start by doing your research and understand the context of the other party. Research about their context, background, and history to get an idea of how they make their decisions.
Furthermore, identify all parties involved and understand their interests, positions, and concerns related to the negotiation. When you present your proposal in your negotiation process, it should also have the interest of the other person involved.
Consider Your Best Alternative to a Negotiated Agreement (BATNA)
BATNA is the term invented by the Harvard Negotiation Project that serves as a compass guiding your decision-making process. When you are prepared with a strong BATNA, it allows you to enter negotiations with confidence.
According to this concept, you can attain BATNA by:
- Brainstorming possible alternatives related to your negotiation objective.
- Consider other suppliers or vendors that can help you achieve your goal.
- Ranking the best options available and considering multiple scenarios
Research says that people get better deals when they enter the vendor negotiation process with better alternatives. This is because when you enter a negotiation with better alternatives, it is easier to walk away.
Establish Clear Communication
Communicate your objectives and goals clearly throughout the negotiation process. Communication is not just with the words you say but also with unspoken cues like body language and tone.
According to expert Chris Voss in a podcast about negotiation, the three main parts of negotiation are 7% words, 38% tonality, and 55% body language.
Avoid ambiguity or jargon; use simple, precise language to convey messages effectively.
Build Relationships
To get people to listen to you, you need to establish trust. Practice active listening to truly understand what the other person is trying to say. Encourage the other person to talk and make them feel heard.
It is easier to work towards an agreement when there is mutual trust and respect with each other. Invest in relationships more than short-term financial gain. As much as possible negotiate in a way that both parties benefit.
Think of a Win-win Solution
Stephen Covey, author of the book 7 Habits of Highly Effective People, states that this principle is an important aspect of being an effective leader. When applied well, this principle can also create a successful vendor negotiation. Covey states the three important character traits of creating a win-win situation: maturity, integrity, and an abundance mentality.
Ask for More Than You Need
This is an additional tip that can be a strategic move when dealing with vendors for your business. Often termed as ‘anchoring’ or the ‘door-in-the-face’ technique, this strategy involves making an initial request or proposal that exceeds what you genuinely expect to receive. By aiming higher than your actual target, you create room for negotiation and potential concessions.
Document Your Agreements
Another important lesson is to document all your discussions to not lose track of the flow of negotiations. More than just a record of the agreement, the document serves as a reference point for future actions, offering protection against disputes and ensuring all parties remain aligned with the agreed-upon terms.
Review and Clarify
End your negotiation process by reviewing and repeating what was discussed and open the floor for clarifications.
Vendor Negotiation Tips, Tactics and Strategies
Come to your negotiation prepared by familiarizing yourself with these negotiation terms, tips, and vendor negotiation strategies.
Anchoring
A psychological technique where the initial offer serves as the main direction or “anchor” point for the whole negotiation. An example of this technique is when negotiating for a vendor’s price.
You can set your bid for the vendor on a specific budget. The amount you initially set will serve as the center of the negotiation even as the discussions shift and change.
Make Them Feel Comfortable To Say “No”
Expert Chris Voss explained that even if we desire to hear the word “yes” from the other person, we can think of a new mindset. When people say “no”, they feel safe and listen to you better. Interaction is important to build relationships. Instead of framing your questions to get the answer “yes”, you can make questions that welcome the answer “no”.
An example can be, instead of asking “Do you want to be healthy”, you can ask “Have you given up on being healthy”.
Bargaining
Explore opportunities in the negotiation process by offering solutions to the other party. Identify areas where you can make trade-offs and where you can give value in return.
An expert in another podcast on negotiation suggests negotiating on multiple issues simultaneously because not all issues are equal for each party. When concerns are comprehensively discussed, both parties can bargain and negotiate better.
Active Listening
Listen to understand and not to respond. This quote is a helpful guide as you listen to the other person. Be an active listener. Stay focused and present by being genuinely interested in what the other person is saying.
Try to understand what the other person is feeling without judgment. Politely ask for clarifications to avoid misunderstandings. Active listening is one of the many vendor negotiation skills one must develop.
Know Your Boundaries and Flexibility
Be prepared to stand your ground and where you can be more flexible depending on your context. Be aware of your non-negotiables and think of the long-term implications of your decision.
Don’t Reveal Your Budget Immediately
When negotiating with vendors on custom prices do not reveal your budget. If the other party knows your budget, you can be at a disadvantage because they know your limits.
Negotiate Beyond Price
Explore other areas of negotiation apart from price, such as payment terms, additional services, or longer contracts. Negotiation is not just about getting the most discount or saving money. Sometimes, you get more by maintaining relationships and being open to other options or offering trades.
Consider Timing
Depending on the flow of your consideration, consider the timing of when you’ll present or bring up a point. If possible, time your vendor negotiations after a positive rapport with them.
Some planners monitor the vendor’s activity and create negotiations after they discover that they lost a deal or are facing fierce competition.
Know When to Walk Away
Sometimes, it might be necessary to walk away if the terms aren’t favorable or if the vendor is unwilling to negotiate reasonably.
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