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Negotiation Principles

By Chris Merrington

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Key points

  • The main negotiation principles
  • The four steps of negotiating
  • A framework when planning a negotiation

Great client service isn’t always saying ‘yes’. How much is your ‘yes’ costing you?

So what is negotiating? There are various long textbook definitions for ‘negotiations’ which touch on ‘the resolution of conflict… between two opposing parties… to arrive at a mutually satisfactory result…’

It has received this reputation because most people associate the word with one side dominating or overpowering the other. I define power as the ability to influence people or situations. With this definition, power is neither good nor bad. It is the abuse of power that is bad.

Wikipedia defines Negotiation as ‘a dialogue intended to resolve disputes, to produce an agreement upon courses of action, to bargain for individual or collective advantage, or to craft outcomes to satisfy various interests.’

My definition in the context of agencies is:
Getting more of what you want whilst maintaining, or even developing, the relationship, then balancing commercial judgement with human nature.

If you get what you want but the other party feels unfairly treated or that they have a poor deal, there is a likelihood they may walk away from the deal or plan revenge at a later date. We then need to take account of the commercial realities of your position financially and the marketplace, balanced against the likely reaction of the other party; people respond differently. This definition is particularly relevant where you have an ongoing relationship with a client; it is less relevant to a single one-off transaction. We negotiate all the time – we just don’t realise it. The ability to negotiate is like a muscle: it requires regular exercise, it needs to develop and strengthen slowly and, as your confidence grows, so it can be used more.

Why are negotiation skills important for everyone but especially for advisers, consultants, sales people and for those working in agencies?

1. Clients want more for less. Clients are trying to squeeze every last drop from their (often reduced) budgets.

2. Agency profitability has reduced. The profitability of most agencies, and many companies, is under immense pressure. The traditional business model for an agency is becoming increasingly hard to generate a decent return on investment.

3. Competition has increased and supply exceeds demand. There is always another agency willing to work for less. In tough times, this competition becomes even more cut-throat. Clients can be tempted to take the (perceived) lowest cost option.

4. Client service people, it seems, are genetically wired to say ‘yes’ – saying ‘no’ goes against the grain. A ‘can-do attitude’ is a great attribute and appeals to clients considering appointing an agency but it can lead you to agree fees, timings and activity which are not in your best interest long term.

5. The buyer has all the power. A common misconception is that the party with the budget or the cheque-book wields most or all of the power. Not necessarily. The best business relationships are in balance; each party contributes and each party feels they are receiving a fair return and rates the relationship as ‘highly satisfying.’ Those clients who simply abuse their position as the buyer will not get the best work in the long term.

6. Many services provided by agencies have been ‘de-mystified’. The ‘black-art’ of many agency services has been unveiled. Clients believe, rightly or wrongly, that they are able to develop some campaigns themselves without an agency’s involvement. In fact, we have increasingly seen clients able to produce awardwinning campaigns without help from a traditional agency.

7. Buyer-supplier or peer-to-peer partnership? The type of relationship between the adviser and their client will dramatically affect the quality of work and output. I consistently produce my best work with clients who share their plans, value my input and expertise and respect my opinion. Too frequently, agencies tell me that they are experiencing a ‘master-slave’ relationship or ‘buyer-supplier’ relationship with their clients. Unfortunately, these clients are often the ‘big names,’ the trusted brands on the high street.

8. Procurement departments and professional buyers. Major companies like British Airways and Diageo have invested in the area of Procurement. These professional buyers vary in their understanding of marketing services and marketing communication and can sometimes use powerful negotiation techniques aggressively to reduce prices and agency profitability. Some Procurement specialists have helped make some important improvements for agencies such as improved briefs, improved processes and fairer agency remuneration. However, the malpractice by some Procurement ‘professionals,’ often not spoken of publicly for fear of retribution, is far too common and is a disgrace to the profession of Procurement and to the companies employing them.

9. Most clients are better trained to negotiate than their agencies. Major corporate clients are trained regularly in how to negotiate; most agency people are not. This puts agencies at a distinct disadvantage.

10. Commoditisation. There is an increasing danger of commoditisation within many industries. True differentiation and distinctiveness between agencies is harder to achieve as most differentiators are easily replicated by competitors. The more agencies allow themselves to be commoditised, the less profitable they will be. One of the most powerful differentiators in agencies is the agency’s people. Their relationship with their clients can be an important reason why a client appoints and retains a particular agency.


Copyright © 2011 Chris Merrington
Copyright ©   2011  The Negotiator Magazine
The Negotiator Magazine  (June – July, 2011)