It seems obvious that in a negotiation, when the customer gains, the supplier loses – and when the supplier gains the customer loses – and this would be true if you were negotiating purely on price – it would be a “zero-sum game” where you just fight over the money according to who has the most power, and the graph would be a stright line, as shown by line B on the following diagram:
But there is better way to negotiate, which is line C, where you can find a deal that is better than win-lose, where you both gain. When the customer gains a lot and the supplier only loses a bit, for example – more about this below.
But the reason I wanted to write this blog is to say that I think there is sometimes a Line D, where not only does it bulge out above the straight zero-sum line, like line C does, but it actually goes HIGHER than the amount the customer would get if they pushed the supplier right to their limit – the ultimate win/lose. So the customer could get MORE than that, by finding a win/win with the supplier.
And similarly the supplier can get more by working with the customer than they can get by pushing the customer absolutely to his limit.
So to sum up all the options:
Line A would be the case if there was a conflict between the customer and the supplier – if one or the other has to win. For example the customer only gets quite a good deal if the supplier is pushed way down. Some people believe this to be the case but I don’t.
Line B would be the zero-sum line – if one person gains then the other one loses the same amount. Every gain to the supplier means the supplier has to give up the same amount of value.
Line C would be a world where they enhance each other – they can both be doing better than they would be by focusing on just themselves. You only have to pay a small price as the customer and you can the profitability for the supplier quite a bit, and as the supplier you can get a large increase in value for the customer for only a small sacrifice, a small increase in your work to deliver it.
Line D is where there is positive synergy between the supplier and the customer. By conceding a little bit you can get a much better deal than if you ignored the other party and focussed only on maximising the position for yourself. And by working together you can achieve more than you could if you ignored the other person, (supplier or customer) and focussed 100% on yourself. But there is still a point where increasing the customer’s outcome will reduce the supplier’s profit, and a point where increasing the supplier’s profit does mean the customer gets less.
How can you get to Line D with your suppliers when you’re buying, and with your customers when you’re selling??
