Don't Concede Things You Don't Need to Give Up

Keep your powder dry.

Good preparedness advice for all kinds of scenarios. Certainly for vendor negotiations.

Suppose you're undertaking an acquisition negotiation with a vendor that has a reputation for toughness. You already have a sense that the price is going to be dear, but the business is pushing you to get it done. You don't have a ton of leverage viz. demand - people really want the service. All your competitors are using it. Your clients expect you to as well.

How do you approach this?

Before any negotiation I always do a quick inventory of the terms, both legal and commercial, I want and stack rank by priority.  Figure out what you are willing to trade at little cost to you (the value of which is known only to you of course) with the plan that what you really want you'll get without it costing you dearly.

Scenario: Horizon Research sells North American and European shipping data. Because of their innovative IoT data collection agreement with every major port on both continents, they are the best data provider for this info. There's no one else even close.

You want both the North American and the European modules. You're based in Atlanta, your company is US-based. Horizon knows you really need the North American data. They don't really suspect you also want the European data - unbeknownst to Horizon, YourCo is actually going to open an office in Lisbon next month. You need the European Data as much as the North American!

Absolutely avoid the stream of consciousness open: "and of course we'd be willing to do a three year agreement and we're totally fine with limiting access to just one division and we'd be fine with a 5% annual price increase and we're happy to pay for print editions as well, and obviously we'd pay for republishing rights too ... just can we please get the European Data module included in our package?"

Congrats - you've just given up a bunch of stuff you may not have needed to give to get what you want - the European Data module. Now the vendor knows you want the European Data -- and how badly you want it - look at what you're willing to give up for it!

Instead, take a watch and listen approach. In all likelihood the vendor already has a strategy for cross-selling adjacent services - he's already got a plan for getting you to buy the European Data. Why sacrifice terms to get something he wants to sell you?

Here's an alternative approach. See if the vendor offers a NA + EU bundle right off the bat. That's great. Work the price down on the EU data - that's the product you'll have the most flexibility on. Perhaps you can even get it comped for 6 months if you're willing to agree to a 2-year. What else is a nice to have? Group license versus per seat? Trade that, give your opponent a small win, and keep working the price down.

What if they don't offer a bundle? How do you express interest without, you know, expressing interest? It's challenging. A turning point like this doesn't advantage you in the negotiation. The vendor will start high with his offer. To counterbalance this, try negotiating for other concessions before you express interest in the additional module. Or agree to a limitation on something you don't even need, like limiting access to just one business line, or forgoing research analyst access.

How ever you play it, keep your powder dry, don't offer concessions unnecessarily and never negotiate against yourself -- make your counterparty respond to your offer before modifying it.

- Kevan Huston