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How to Negotiate

Here is something that caught our eye this week:

It’s not enough to just talk about differentiators

Over the past couple of weeks, some of our team members have been working their way through an online negotiation course.  Much of the content has been both useful and interesting, one of the most relevant topics has been the emphasis placed on differentiation vs. commoditization for any company involved in a negotiation.  In short, the idea is that a single issue negotiation (usually price) ends up commoditizing the product or service being offered and drives a race to the bottom.  To combat this, our teacher, Dr. Victoria Medvec, a negotiation professor at Northwestern, recommends introducing additional negotiable issues into the conversation that highlight a business’s key differentiators.  An article by Dr. Medvec, highlights how she guided a client through this exact issue:

“For example, Medvec had a client who manufactured monogrammed shirts, bags and other items. Their two biggest differentiators were the fact that they had an internal design team when most of the competition purchased designs online, and they maintained a high degree of quality because they inspected their factories in Asia on a daily basis. In their case, it wasn’t enough to talk to potential customers about those advantages because the competition could say the same thing and then beat them on price.

Their competitor doesn’t come in and say, ‘We have ugly designs we bought off the Internet, and our bags rip and tear all the time,’ Medvec noted. ‘They’ll say they have great designs, great quality, and a better price. And if all I’m negotiating on is price, my differentiators fade into the background. This happens all the time. Our competitors don’t play fair.’

In the case of the monogram manufacturer, Medvec said, the in-house design team was one of the tacks on the board, and the issues to be negotiated around that were the pieces of string hanging from it. ‘If I were them, I might propose how many times a year the client could meet with the design team, work a fast turnaround time into the deal or specify who owns the IP on the design,’ she said. ‘Every time I negotiate around those points, I’m drawing attention back to the differentiator. I could negotiate a return policy, knowing we never have returns, because we inspect our plants in Asia every day. If all we do is talk about those differentiators, it’s not enough.’”

Many of our companies do highly differentiated things that add value to our customers as part of the normal course of business.  From test baking each mix of dough before it leaves the plant to performing daily property checks during the winter, we are always thinking about how to add more value.  While every negotiation and customer interaction will be different, our course has highlighted how it’s worth thinking about ways we can introduce these differentiators into our customer conversations so that we can retain or enhance our competitive position and our pricing power over time.

Have a great week,

Your Chenmark Team

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