Retail Category Consultants helped a large multi-national consumer packaged goods (CPG) company develop a successful negotiating style to use with retailers. The company felt that a disproportionate amount of their negotiations were win-lose, and wanted to engineer more favorable outcomes by understanding the retailers’ mindsets.
1. Develop a training program to help the customer development team see the big picture.
We began by helping our CPG client understand how retailers think and the rationale behind these thoughts. What are the retailers’ motivations? What are their main challenges? For example, if the retailer is concerned about margins, come prepared with a range that’s reasonable for your products, distribution services and the industry, as well as a list of reasons why this number is appropriates. This training helped our client’s customer development team understand where their needs and the retailer’s needs were aligned, and helped the client see the retailer as a partner.
2. Practice negotiation techniques and strategies using simulations.
All successful negotiations require in-depth preparation in a low-risk environment to understand negotiation theories in practice. We developed simulated negotiations that focused on building relationships and recognizing important spoken and body language cues. When should you stand your ground? When should you accommodate a request?
Negotiators on both sides should recognize not just the financial implications surrounding cost and profit, but also how important each area of agreement is for the other party. The simulation will also give you more confidence to demonstrate your expertise. For example, suppliers will often have a more complete picture of what consumers will buy because they supply to other retailers, whereas most retailers will rely on point-of-sales data activity, which is a more narrow perspective.
3. Prepare for the future.
Even if a negotiation does not end in a win-win solution, there is still the possibility of a future rematch. Negotiators on both the CPG and retailing side often mistakenly assume that there is only one successful outcome, which can limit the discussion and erode the overall business relationship. If you’re not satisfied with the existing offer, ask the retailer for more time to think it over. This gives you an opportunity to send in a counter offer that could generate additional incentives like better payment and pricing terms, promotions or exclusivity. We helped our client brainstorm alternate ways of transforming an unsuccessful negotiation into a future opportunity with the goal of fostering a long-term relationship.
The client loved the negotiation strategies and practice simulations. Our seminar led to better negotiation results with their retail partners, improved sales growth and strengthened their retailer relations. Within 2 years of implementing this strategy, our customer reported share gains of over 20%.