Tuesday, March 31, 2009

Ask the Vendor, and ye shall receive

The Story
During my internship last summer, I was put in charge of getting a few vendors to design and launch our website. With one vendor, I was very unimpressed with how they managed the project and handled specific directions. Since the company was billing us hourly, these inefficiencies were not just delaying completions, but costing money. I can handle mistakes being made, but I did not want us to have to pay for time wasted when they did not follow my requests and instructions.

I was definitely nervous when I received the bill for services, because I knew I was going to have to call and ask for discounts. I could let it slide and my employer wouldn’t have known, but my loyalties were in the right spot (to the company). Luckily, I had seen this coming and I had a lot of documentation on where time was wasted and calculations showing a more appropriate time-duration.

I setup a meeting with the project manager—letting her know what it was about. At the meeting, I went down the list line by line and explained why I didn’t think each was fair and said what I thought fair was. I gave statistics and showed where our direction had been plainly ignored.

For the outcome, I received 70% of the discount I was requesting. I requested a little high and I think the fair range would have been to receive 80% of my requests.

The Takeaways
I was familiar with BATNA’s going into this, but I hadn’t had negotiation training for years (and what little I had was from reading books and not gaining experience). The only advantage I had was some courage inspired by loyalty. I was aware my boss would refuse to pay if I told him it was unfair, but that would have meant I would lost a vendor and a lot of effort would have been lost.

Next time, I would use this for my BATNA, telling the project manager that I’m working with her to avoid escalating this higher and causing a big debate between our bosses. When I’m trying to reduce the bill by about $3,000, this is actually not a bad BATNA. If she gave 70% without me flexing an alternative, I could have perhaps gotten my additional 10% that I wanted through a very soft threat.

Ask and ye shall receive
“Ask, and it shall be given you; seek, and ye shall find” (Matthew 7:7). I have gotten more of what I wanted in life by just being willing to ask. In this case, I got most of what I wanted by going down a list and stating it. This situation is a great example showing that this advice does not apply only to our relationship with God, but also in our relationships with each other.

Prepare for the Negotiation
I also got what I wanted because I did some strong fact preparation. I knew what to ask for because I did some analysis. The project manager was at a disadvantage because she didn’t know what I’d be asking for (I think that is fair though, she could have delayed and asked for time to think).

In this class’s packet, the last reading is a list of 10-best-practices. The first item in this list is “Be Prepared.” One reason is to be able to better analyze offers more effectively. Because of my preparations, I was able to see her counteroffers as reasonable and accepted. This preparation also helped me to see that my requests were reasonable and thus my confidence had a good foundation as I entered this negotiation.

Next Time?
As I said, I will definitely consider my BATNA next time and do what I can to strengthen. In retrospect, I had a fairly valuable alternative. My preparations came in handy, and the documentation I was keeping from an early stage allowed me to have more “proof” than she did.

What is unfortunate is that I did not enter into a simpler negotiation the first time I noticed the problem. Perhaps the problems could have been rectified and I would never have felt the billing was unfair (and maybe more importantly, the project would have been completed earlier). Next time, I will address the problem early on and be able to ask for less.

Skimping on the Negotiatons Journals

I haven't been getting enough posts on here for my MBA 661 course. So I'm going to step it up. Prepare to be blasted by posts on this subject over the next few days!

Tuesday, March 3, 2009

Pricing & Positioning

Just wanted to announce that I am doing a horrible job of paying attention in Pricing and Positioning right now.