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Chapter 2 - Total Cost of Ownership

Chapter 6 -
Communication Skills

Chapter 9 -
Tactics and Counter-tactics

From Chapter 2
Total Cost of Ownership

Total Cost of Ownership (TCO) is the single most important principle in all of supply chain management.  The TCO concept has evolved from near cult status to preeminence.  TCO quantifies and measures costs.  The principle of TCO has impacted Advantageous Negotiations by expanding the narrow confines of Price only negotiation to a vast field of opportunities for attaining Win-Win results.  Anyone can get a lower price.  The object of good business is to attain the lowest TCO. 

In professional purchasing, we can reduce the essence of everything that we do to a single word – Cost.  Any discipline (logistics, inventory, purchasing, etc.) falling under the umbrella of Supply Chain Management can be interpreted and expressed in terms of Cost.  The relationship between Cost and Value is that the Best Value means the lowest TCO. 

Many of us carelessly confuse the concepts of price and cost, using them interchangeably.  To define them simply, price is the money coming in, cost is the money going out and profit is the difference.  For this reason, cost management is crucial to business success.  For two companies selling at competitive prices, the higher cost company realizes lower profits.  Basic economics show that high costs are bad for business. 

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From Chapter 6
Communication Skills

Early in this chapter, we noted that the meaning of the words, the intent of the speaker and the comprehension of the listener have three distinctly different messages.  We call this the three levels of meaning in anyone’s speech.  These are:

1. What the speaker says

2. What the speaker thinks he is saying

3. What the listener thinks that the speaker is saying

These three levels of meaning must be recognized in any communication, let alone negotiation.  In fact, this communication mechanism is the reason that we need to deploy tools like the reflective response, ‘I’ and ‘you’ statements.  It is not possible to always have these three levels overlap.  Moreover, it is more likely that the more familiar negotiators are with each other, the greater the odds for confusion because we assume that we know what the other side means.  Here is an example taken from the domestic scene.

One hobby that my youngest daughter and I share is cooking.  One night, my 10-year-old and I were preparing pasta primavera.  The vegetables were done, the sauce finished, and the pasta al dente.  The cooktop is on an island in the kitchen.  With my back to her, I could not see that my daughter had set up the colander in the sink.  As I removed the steaming pot from the fire, seeing my daughter in my peripheral vision with her back to me at the sink, I growled, “Clear the sink!”  Let’s apply that one sentence to the three levels of meaning rule.

1. “Clear the sink!”  That is what the speaker said.

2. What the speaker thought he was saying were words to the effect that his daughter should move away from the sink so he would not risk scalding her. 

3. The listener thought, quite to her consternation and confusion, that her father wanted her to remove the colander from the sink.

Similar scenarios play out multiple times per day in our personal and professional relationships and are in need of our deliberate attention.  A good habit to adopt is to give level number three the most weight in communicating.  Think of the listener as the customer.  It is the customer’s opinion that matters most in business relationships so let this be your guide.

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From Chapter 9
Tactics and Counter-tactics

The Silence tactic is intimately and explicitly understood as a personal relationship tool between men and women.  Leaving that field to the experts, we will move on to the business applications.  Silence is unique for its absence of words.  Unless we add body language, this tactic is completely open to subjective interpretation.  I learned the power of the tactic quite by accident.  In a routine sales visit, the VP accompanying the National Accounts rep assigned to me summarily took over the meeting and proceeded to dazzle me with an unexpected proposal for a new product.  He told me about its markets, the features and benefits, and how it would supplement our current business.  I sat in amazement and a bit of amusement as this fellow sped through his presentation and brushed aside signals of his prospect’s confusion.  His mission was to get to the closing question.  As he raced to the climax of his spiel, he ended unexpectedly on the price. 

I was so taken aback that I was not sure what was next.  As I remained silent, his facial expression betrayed fear and embarrassment.  He had ended on the price.  My silence must in some way reflect my disquiet with the price.  After an uncomfortable eternity of 15 seconds or so, he couldn’t stand it.  His next uttering improved the price.  He was negotiating with himself!  Since this tactic is silence, enough said.

One of my favorite tactics is Sacred Writings. It is so effective because of the persuasive suggestion of the written word.  We believe what we read, even the jaded, skeptical purchasing types.  In a cab from midtown Atlanta to the airport, I read a national newspaper.  On the front page was a picture and obituary of a Supreme Court justice.  This judge had retired in my college years, and I could not remember if I favored or opposed his politics, but another piece of my life had slipped away.  I ruminated sadly on his passing.  The very next morning, in my hotel room, I picked up the same national paper and found a picture in the errata section.  It was the correct old dead judge.  Nonetheless, I had firmly believed what I had read.

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