I recently led a seminar for about 200 procurement professionals in which we addressed how to gain leverage when there’s only one entity interested in selling to you. In procurement, this is the sole source problem.
Importantly, almost every negotiator has faced a similar situation. Who hasn’t been in a negotiation when you have a really bad alternative (or Plan B) to doing a deal with the other side? With a sole source, your Plan B is not getting the product – a huge problem if it’s critical for you.
These situations often provide your counterpart with strong leverage as leverage is based on a) how much each party needs a deal, and b) the parties’ best alternatives to a deal with each other, or Plan Bs. If you really need the deal and your Plan B is poor, you likely have weak leverage.
What should you do?
First, consider how you usually end up in this situation. Then evaluate how to change it.
Here are three typical situations leading to this problem along with different – though interrelated – solutions.
• Time Crunch Due to Limited Planning
Who hasn’t felt desperate when you wait too long to negotiate and then face a tight deadline? With more time, you could at least find one good alternative. But there’s no time.
Aside from the obvious future solution involving better planning, here are three suggestions. 1) Leverage is relative, so your counterpart may actually be more desperate than you. Find out. If so, you may have relatively strong leverage. 2) Your counterpart may not know you’re desperate. If so, appearing interested but not too much will help. And 3) negotiate the agenda and extend that deadline.
• Your Boss, Internal Stakeholders, or Technical Experts Demand “a” Partner
Your spouse or boss tells you to negotiate a great deal but says she loves the house or product. Or your clients tell you to negotiate the deal but say they’re unwilling to walk away from it. Or your internal experts say only one counterpart meets their technical specifications.
One, tell your colleagues their instructions weaken your leverage and ability to get the best deal. Make sure they understand the straightjacket they’re putting around you.
Two, leverage is based on perception, so don’t even hint at these instructions to your counterpart. Bluffing would help here too by creating the perception you have a good Plan B even if you don’t.
Three, focus on your counterpart’s Plan B to doing a deal with you. How long has the house been listed and has anyone else made an offer?
And four, if your expert says only one counterpart satisfies their needs, independently confirm it’s true, take concrete steps to develop better short- and long-term Plan Bs to doing that deal (even if those other Plan Bs don’t satisfy all your needs, it will help if your counterpart thinks they might), then judge that counterpart’s offer against your new Plan Bs.
• Inertia Leads to Your Existing Partner
Finally, sometimes we just go with our current partner even though we know we should find more alternatives, like bidding out the deal.
Here, especially if you have a mutually beneficial relationship, build into your deal reasonable standards like market value or precedent. Perhaps do a cost plus deal or tie annual price changes to CPI.
Importantly, though, also regularly schedule a bidding process to keep them honest.
It’s not coincidental that most of these weak leverage situations can be avoided with long-term negotiation planning and a systematic, disciplined research-based approach.
However, this is challenging for most individuals and organizations. If you can do it, though, your increased leverage will almost always lead to better deals.
Published October 7, 2010 The Arizona Republic