Strong brands are monopolists – their customers cannot switch to competitor brands. This applies even though similar products are usually available, as the alternative product cannot attain the mystique of a successful brand. Manufacturers of these brands are fully aware of this, of course, so they defend their interests with confidence. Buyers from businesses who want to negotiate successfully need to prepare very thoroughly and base their approach on partnership.
Negotiating with strong brands can be challenging, but it’s not in the interests of either the retailer or the supplier to have empty shelves. If negotiations fall through, both sides lose. Negotiators who bear this in mind can act more effectively and ultimately find viable compromises. It’s important to prepare especially thoroughly and carefully for negotiations with teams representing strong brands.
It’s important to prepare especially thoroughly and carefully for negotiations with teams representing strong brands.
The negotiating strategy is based on an in-depth supplier analysis and a Total Cost of Ownership (TCO) review. In addition to sales figures, other factors for consideration include joint advertising activities and the long-term quality of the collaboration. The TCO analysis enables you to formulate realistic negotiation objectives and identify potential win-win solutions. During the next stage, the procurement team develops arguments and counterarguments, assigns roles, and works out negotiation scenarios, escalation steps, and alternative plans.
Schedule regular fixed times to negotiate!
Unfortunately, many buyers and category managers see these discussions more as a necessary evil, and therefore conduct them as infrequently as possible. It is regrettable that holding annual negotiations with suppliers is by no means standard practice as regular negotiations and fixed meetings encourage mutual understanding, deepen trust, and provide an opportunity for innovative shared solutions. A deeper analysis of failed negotiations often reveals that the analysis preparation in the run-up to negotiations was not profound enough to recognize and use the right levers.
Either data is not available, or there is no tool for evaluating it and drawing the right conclusions. By taking this approach, however, retailers in particular are relinquishing a position of power to strong brands instead of genuinely negotiating as equals.
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