Customer Supplier Negotiation Study

This study, conducted in partnership with The Conference Board, Institute for Supply Management (ISM), the International Association of Contract and Commercial Management (IACCM), and Sales and Marketing Executives International (SMEI), compares buy-side and sell-side perspectives on achieving better negotiated outcomes and sheds light on the factors that lead to those outcomes.

A collaborative approach to negotiations leads to better results

• On both the buy-side and sell-side, organizations that report employing a collaborative (versus adversarial) approach to negotiations are merely satisfied with their negotiated agreements, and with the value realized from those agreements during implementation. Of the top 10% of participants in terms of self-reported value realized during contract implementation, more than
  60% characterized their negotiations as somewhat or highly collaborative.
• Those employing a collaborative negotiation approach report more positive working relations with trading partners, fewer unexpected problems during contract implementation, and a far greater ability to effectively and efficiently work through problems that do arise.

A collaborative approach to negotiations doesn’t mean being “soft” or “giving in”

• Interviews with high performers reveal an ability to negotiate assertively and collaboratively (both in the sense of treating individual counterparts with a high degree of respect and in the sense of actively searching out mutually beneficial solutions) at the same time. Average and low performers overwhelmingly perceive a debilitating zero-sum trade-off between being assertive and being collaborative.
• Similarly, top-performing buy-side organizations balance the use of competitive evaluation or bidding strategies with negotiation strategies and approaches that are highly collaborative (i.e., focused on fair and sustainable outcomes for both sides and with an emphasis on joint development of creative and mutually beneficial solutions).
• On the sell-side, respondents from high-performing organizations report increasingly systematic efforts to invest in customers who are willing and able to act as collaborative business partners (irrespective of current revenue levels), and to limit or sever ties with customers who are not. Top sell-side performers describe consciously assigning their “A-level” delivery teams to customers who work with them in a collaborative fashion and bringing new technology and innovative solutions to these customers as well.
• Low-performers on the sell-side acknowledge that they are prone to give the most on price and terms to customers who are most aggressive during negotiations. However, our analysis indicates that, across the board, suppliers deliver significantly more value to customers who deal with them on a collaborative basis during contract implementation.

A few key findings highlighted include:

1. Procurement organizations with a formal negotiation process report achieving 27% more of the value they target through strategic sourcing efforts
2. Companies that use a more collaborative (versus adversarial) negotiation process realize greater value from their contracts
3. Organizations that systematically develop negotiation strategies that are aligned with their category management and supplier relationship management strategies report realizing 59% more value from their supplier contracts.

To read the entire customer supplier negotiation study, download it below and learn more about Vantage Partners' negotiation training here.