Howard Wingert of Concrete Sealants Inc. talks with Mary and Virgil Knox of Hampton Concrete Products on the floor of The Precast Show, where negotiation takes center stage. (NPCA file photo)
By Bridget McCrea
In his famous book “How to Win Friends and Influence People,” sales guru Dale Carnegie writes that “by fighting you never get enough, but by yielding you get more than you expected.” This quote, originally published in 1936, is just as applicable in today’s business world as it was nearly eight decades ago. Jensen Precast Inc., in Sparks, Nev., for example, has put both time and effort into sharpening its negotiation approach process.
Honesty and facts are key
“Everything in life is a negotiation,” points out Donald Graham, director of safety for Jensen Precast. For precasters, the need to negotiate often surfaces on the job site, where everything from damaged products to budgetary constraints to client expectations can push manufacturers into a mediator’s role.
“You have to be able to work with your customers and make sure they’re getting the value that they expect while also protecting your own company’s profits,” Graham said.
That delicate balance isn’t always easy to achieve. According to Graham, the team at Jensen Precast works through that challenge by maintaining an air of trust and honesty. Position yourself as the honest person who is bent on giving customers a good and fair deal, he suggests, and your customers will understand the need for a little negotiation here and there.
Maintaining factual accuracy is also critical when negotiating with customers who may question small details or challenge the precaster on specific issues when trying to prove their points.
“You really have to know what you’re talking about,” said Graham, who recently advised a customer on the need for a trench box on a manhole excavation job. The customer was not pleased with the fact that he would have to pay more to have the trench box built and installed and reluctant to follow the precaster’s advice – at least at first.
“We explained why the trench box was necessary, how it would keep employees safe, and also how it would keep OSHA off the customer’s back,” Graham explained. “Plus, the work itself would be finished faster.” In the end, the customer understood and decided to follow the precaster’s advice.
The same negotiating rules apply when working with vendors, said Graham, who pays close attention to quantity and contract-based discounts when they are offered. For example, when buying 100 pieces of a certain product results in a significant price break or when committing to a corporate or national contract equates to clear cost savings, Jensen Precast will consider the expanded purchase option.
“Those are two strategies that we use to drive our own costs down and to help maintain and/or boost our bottom line,” Graham said.
It’s an art form
We all know that negotiating is a part of our everyday lives, but in the business world the ability to haggle successfully is often critical to a company’s success. Poor negotiation tactics can bring a company to its knees, particularly when important contracts, bids and jobs are on the line. And while winning a round of negotiations is often seen as the ultimate goal, in reality the best negotiation experience is when all parties involved walk away feeling they received a good outcome and treatment.
For precast concrete manufacturers, much of the negotiation process starts in the purchasing department – where buyers are charged with getting the best possible prices on the best quality products.
“Too many companies gloss over the purchasing function,” said Chris White, principal at The Corporate Performance Group, a business consultancy in Tulsa, Okla. “Very few business owners put buyers in real, managerial positions and instead look at procurement as a clerical-type position.”
One way to get around this obstacle is by training buyers to multi-source when purchasing raw materials and equipment. That way your procurement team will always have leverage when working to get to the right pricing and terms on a specific order. The main obstacle in this scenario, he explained, is the fact that it’s much easier to develop single-source relationships with vendors.
“Buyers get comfortable with certain suppliers and, as a result, never go out and ask a second source to provide a quote,” White said. “By simply requiring buyers to multi-source, you can avoid this very simple negotiating trap and start creating a more dynamic purchasing atmosphere.”
Go beyond price
During the negotiation process, White said precasters should look beyond bottom-line costs and consider the terms and conditions of specific orders and contracts. One vendor may offer the cheapest cost, for instance, but may tack on delivery fees. Another may not be the low-cost provider, but may be located nearby and offer free delivery. By factoring in all costs, terms and conditions to the buying process, precasters can better assess total costs and pinpoint the most profitable choices.
Taking a holistic viewpoint can prove particularly useful when working with municipalities that often request extended payment terms. In such cases, White suggests turning around and requesting similar treatment from vendors. If you get pushback during this process, take Graham’s honest approach and tell your vendors about the cash flow difficulties your company will experience if forced to pay within the typical 30-day terms.
“When you ask for 60-day terms to match the terms on your own customer’s contract, you’re going beyond price and finding ways to even things out without having to ask your vendors for severe price reductions,” White said.
Developing strong relationships
In his role as CEO of Perceptive Selling Initiative Inc., in Highland Park, Ill., Jim Herst helps businesses build sales and accelerate cash flow. In that role, Herst often finds himself serving as a negotiation coach – doling out tips and strategies that clients can use to hone their negotiation techniques. For precasters, he said the first step should be to develop and maintain strong, ongoing relationships within the marketplace with customers and suppliers. This rule is especially applicable to sales representatives.
“The precast manufacturer’s rep must know, be respected and be well received by his or her prospects, who should be made aware of product quality, delivery perfection, ease of relationship, and access, especially when it comes to job site help,” Herst said, noting that performance reliability, when understood by the prospect, can have a bigger impact on the sale than price alone. “When you give customers the right support and service networks, you’re contributing to more profitable sales.”
Consider, for example, the customer who needs daily technical support on site during the course of a 2-week job. On the other side of the equation is a precaster who would benefit greatly from prompt payment – something that’s not always easy to come by in the construction industry. By marrying these two needs, the precaster emerges in a win-win situation where the customer gets ongoing support in exchange for the prompt or even early payments.
“Few would argue with this arrangement and yet it’s a strategy that’s often overlooked during contract negotiations,” Herst said.
Guarantee your work
As many other industries have already learned, offering a product and/or workmanship guarantee helps put customers at ease, knowing that their purchase will be supported in the case of product failure. Precasters who use this strategy can effectively position themselves as go-to providers – even when they don’t necessarily offer the lowest cost. This is an effective negotiation strategy for small-to-midsized firms that lack the buying power of their larger competitors.
“Maybe you can’t offer the lowest prices on the market, but you can back up your work in a way that makes customers want to do business with you,” said Herst, who recently worked with a maker of greenhouses who offered a 2-year guarantee in exchange for surety of payment. This was a new move in an industry where 1-year guarantees are the norm, Herst said. Plus, in the construction industry it’s fairly well known that if something is going to go wrong it generally will happen within the first 12 months.
“This company really took on no additional, major risk by offering the 2-year guarantee,” Herst said. “In exchange, it got paid very quickly and never had a need for a callback – which it expected, based on the quality of the product being offered.”
Getting to yes
Having dealt with numerous negotiation situations over the years, Graham said precasters should explore the numerous resources available through books, trade journals and trade organizations like the National Precast Concrete Association.
“Educate yourself on the fine points of negotiating knowing that in the end, it all comes down to knowing what you want and what you’re willing to compromise on to attain that goal,” Graham said.
Bridget McCrea is a freelance writer who covers manufacturing, industry and technology. She is a winner of the Florida Magazine Association’s Gold Award for best trade-technical feature statewide.