The Art of Private Label Negotiations

Investing in negotiation skills is a top priortiy right now

By Malachy O’Connor, Partner IPLC

We are so busy dealing with current challenges at the moment that it’s easy to forget just how much change we have seen in the last three years. Brexit, the global pandemic, war in Ukraine and the consequent inflation crisis mean that all private label manufacturers are negotiating cost increases with buyers who have only experienced cost deflation over the last decade. They are doing this in markets where limited range discounters have redefined their model and are leading a revolution in private label perceptions and penetration. And they are dealing with retailers who have a corporate memory loss on how to manage an inflationary cycle.

At IPLC we have seen the balance of power shifting back and forth between manufacturers and retailers. Eighteen months ago, some manufacturers could foresee the emerging inflation cycle and were requesting cost price increases.  Buyers deployed the inevitable delay tactics but, following the invasion of Ukraine, these inflationary pressures only heightened. Between Spring and Summer 2022, retailers were forced to accept unprecedented cost increases – there was no other option if they wanted to maintain on-shelf availability. But the retailers didn’t like it, and since then they have been actively working on ways to find cost savings and improve their margins.

Negotiation Skills

During this time IPLC has hosted several webinars, attended by hundreds of private label suppliers, and has completed extensive research. We discovered that many national account managers, with significant budget responsibilities, had never benefited from formal negotiation skills training and therefore did not perceive themselves as strong negotiators. We found that the future commercial sustainability of many manufacturers was being placed on the shoulders of the sales team, largely over-looking the role that can be played by training the procurement teams and developing sharper buying strategies. And we found that the vast majority of the sales team remain convinced that they need their customers more than their customers need them. Consequently, many teams are carrying significant stress and anxiety and many manufactures find themselves under severe financial strain.

Investing in negotiation skills is a top priority right now and at IPLC we can support private label commercial teams with impactful training that will deliver significant returns. We train on the core negotiation aspects of preparation, strategy planning and tactics but we also understand that these skills can be greatly enhanced when matched with training on positive mindset, confidence, negotiation culture and managing stress & anxiety. To give you a flavour, here are three things you can do today to dramatically improve your negotiation outcomes.

1. 360-SWOT: Only 14% of sellers have strong confidence in their sense of leverage. This means that there is a little voice in their head that says, “I need them more than they need me”. One core reason for this is that many salespeople struggle to describe their Unique Selling Points (USPs). And if you can’t confidently describe how your proposition is unique, better or superior to your competitors than how can you expect the buyer to treat you as anything more than a commodity. The key is to do a 360^o SWOT analysis. Bring a cross-functional team together, SWOT your business as well as your key customers and competitors. IPLC facilitates these kinds of sessions frequently and we never fail to unearth some really unique strengths that the team did not have full visibility of. Their body language changes before our eyes! They stand taller, shoulders back, chest out and chins up! It’s incredible to witness how their confidence shifts.
2. Stressbusting: 50% of sellers admit to finding negotiations quite stressful, it’s true even for more experienced negotiators. And stress will destroy your negotiation results because when we get stressed, our bodies release hormones to get us ready for ‘fight or flight’. These are defensive mechanisms, but the problem is that when we are feeling defensive, our brains find it almost impossible to think with creativity and empathy. We all know that collaborative negotiations yield better results, but these are underpinned by our ability to ask great questions, to listen to the answers and to do creative problem solving – precisely the things we cannot do when we’re stressed! So, next time you start to feel light-headed, tingling hands, sweaty brow or that unmistakeable ache in the pit of your stomach – just remember to breath. Specifically, breath in deeply for three seconds, hold it for two and then breath out for five seconds. Do this for a few cycles and you’ll quickly get back into equilibrium, it could be just the thing that’s needed to give you clarity on how to proceed in the negotiation.
3. Continuous Learning: We’ve all been on a training course where we’ve left it uninspired, wondering what we’ve gained, without immediately actionable take-outs. On our courses we teach a simple technique that becomes a key part of your negotiation habits. It’s as simple as this. You need to keep a notebook or diary to track your negotiations. After every negotiation you scribble down a brief summary: Who was my opponent? What were my objectives? What did I achieve? What worked well? What could I do differently to get an even better result? This short, sharp summary creates a feedback loop from all your negotiations. You give yourself some praise for what you’re doing well, and you make a note to do something differently next time. It’s so simple but so powerful!

You might be thinking that the inflation cycle has peaked and that the worst has passed. But remember that as soon as the buyers see any evidence of deflation, they will be contacting you to secure cost decreases. You will need sharp negotiation skills to manage this part of the cycle too, so contact us if you’d like to find out more about Private Label Negotiation Skills Training for you and your team on info@iplc-europe.com

In the next newsletter we will send out in December we will discuss ‘How to supercharge your business for your next trade show’.

This is 3^rd newsletter in a series of 12 that we will publish in the coming months. The previous newsletters ‘How to become a private label supplier of choice’ and ‘Being the best Private Label Operator’ can be found on our website. To read more