How do virtual price negotiations succeed in purchasing?
Virtual price negotiations are the new normal and are becoming more and more important. The advantages are obvious: travel time and costs are saved, the environment is protected and one is not dependent on external influences, e.g. if a train is cancelled or the airport staff go on strike. But virtual price negotiations are not a foregone conclusion; they also require good preparation and other prerequisites, which we will look at in more detail in this article.
One key point that probably all companies will take away from the pandemic is online meetings. They became more and more established in the Corona era - whether with colleagues in the home office, customers, business or negotiating partners. So why not make price negotiations virtual as well?
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A question of trust
Generally, we hesitate at first when discussing sensitive figures and data with someone via the screen. Is someone else listening in? Is the conversation being secretly recorded? Can I trust the supplier on the other side? At this point, as with face-to-face negotiations, I recommend a non-disclosure agreement or NDA for short. Conclude this agreement before the meeting so that both parties go into the negotiation with a good feeling. Ideally, you will have already managed this point via your supplier portal, if available, before the supplier even shows up for the (virtual) meeting. In larger companies there is usually a legal department that provides an NDA - but there are now also very good data sets that can be downloaded from the web. If you want to be sure here, an additional check by a lawyer is recommended. Once all this has been clarified, it comes to the next challenge in online negotiations: technology.
Clarify technical requirements
In contrast to face-to-face negotiations, in which the partners sit opposite each other in a classic meeting room, in online negotiations it is first necessary to define what the "room" should look like. There are different tools that can be used: Microsoft Teams, Google, Skype Business, Go to Meeting and Zoom are among the best known. Purchasing should determine here which programme is best to work with. Additional whiteboard or note-taking programmes can also be used to create meeting minutes and visualise what has been said.
Another aspect that still not everyone is aware of is to switch on the camera when you are negotiating with your counterpart. This increases trust, because who would like to talk to a black screen. If you are in a home office and do not want to show your working environment, almost every programme provides tools to alienate the background or exchange it for a virtual one. Some companies have also set a standard background with a company logo that everyone can use. The necessary hardware should be available to everyone by now: a good camera, headset and of course a stable internet connection.
For virtual meetings, it has proven helpful to set some rules in advance. These include, for example, keeping the microphones switched off until the company or the interlocutors have introduced themselves. Politeness also dictates that you do not simply get up and leave the room or answer the phone without a word during the meeting. Define clear framework conditions and a small agenda. If the meeting is scheduled for a longer period of time, fixed breaks can be planned, for example. If several people are involved, it should be clear when who will speak on which topic. Send this to all participants before the meeting, so there are no questions that disrupt the flow.
In case of doubt: ask for help
If you have not yet had any contact with virtual price negotiations or are not yet very familiar with the technology, you can approach it step by step. Try out with colleagues how best to adjust the camera to look good, whether you can be understood acoustically well, etc. Another possibility is to bring a digital manager on board. Larger companies usually have good people in the IT department who are available to answer questions. They can help prepare the virtual meeting room in the best possible way and, for example, stay in the background during a meeting to deal with any technical failures as quickly as possible.
Prepare the negotiation
As in any negotiation, it is important for the purchasing department to be well prepared. For this purpose, I have created a mind map that contains all the important points and takes into account not only facts, figures and figures but also other aspects that are relevant for a negotiation. It can be invaluable as a "cheat sheet" in the negotiation. You can find more about the mind map in my blog post "Does Purchasing need to prepare for negotiations?". Otherwise, a virtual negotiation is not much different from a "normal" one. At the beginning, you introduce yourself to each other, make some small talk and can briefly talk about the framework conditions before the actual negotiation begins. Then points of view are exchanged, opinions are expressed and, at best, an agreement is reached at the end - the tasks are distributed and the next steps are determined. The whiteboards, which you have already defined in the technical requirements, are excellent for this purpose.
Conclusion: How to make online negotiations a success
In summary, it can be said that online negotiations will become more and more important in the future and therefore three important aspects need to be considered:
- A confidentiality agreement signed by both sides in advance.
- Optimal technical conditions and framework conditions that allow the negotiation to run smoothly.
- Solid negotiation preparation on the part of the purchasing department that takes all aspects into account.
How many negotiations does your purchasing department already conduct online? What challenges do you see in this and in which points do your buyers still need support? I look forward to an exchange with you: gladly on LinkedIn or in a personal meeting.
You can also listen to more on this and other topics for future-proof strategies in purchasing in my podcast.