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Value Chain Marketing: Negotiating the Outsourcing Contract



[Editor’s note: This installment is part of an ongoing series. You can start at the beginning in order to follow its logical sequence.]

value chain for marketingby Kenneth Rudich

The onus for properly executing a strategic outsourcing initiative lies with aptly negotiating the stipulations of the contractual agreement.

In his best-selling book, “You Can Negotiate Anything,” Herb Cohen acknowledged that some people hate negotiating and don’t want to do it.

“Certainly that’s your prerogative,” he wrote, “but remember that in order to achieve a collaborative result in a competitive environment, you have to play the game.”

The outside-in inside-out dynamic is bound to flex its muscles in this scenario. As the financial stakes increase so do the intricacies of a service-based negotiation, and this often precipitates some degree of sparring or gamesmanship.

The client is liable to want a heavy emphasis on outside-in thinking while the outsource provider is given to indulge an inside-out perspective. Each viewpoint is understandably self-serving, and nobody wants to end up at a disadvantage. Indeed, some would rather best the other.

What really matters under this circumstance is whether one side has an inherent negotiating advantage over the other; and if so, value chain for marketinghow, where and to what extent.

On the other hand, if a relative balance exists between them, then there’s some wiggle room for both sides to work with at the bargaining table.

According to Cohen, three key variables influence a negotiation and it’s a good idea to assess your position with regard to each.

They are:

  • Power: the ability to exercise authority or control in a particular situation. It can be real or perceived.
  • Time: whoever has the most of it generally has an advantage.
  • Information: the side with the most relevant information and/or knowledge holds a better hand.

When both sides have something the other wants and neither holds an appreciable edge, the prospect for fashioning a mutually agreeable outcome is at its strongest — even it involves a rigorous process to get there.

[Note: In his book, Cohen offers tips for potentially leveling the playing field to counteract those occasions when it isn’t inherently level.]

A Negotiation Mentality

value chain for marketingCohen puts a lot of stock in the idea of a good faith negotiation mentality. He’s a proponent of win-win thinking.

Despite the sometime tendency for negotiations to be tense or competitive, with each side trying to get the better end of the deal, Cohen says it doesn’t have to be that way.

Many times the two sides would be better off moving from a competitive mode to a cooperative one; they should look for win-win scenarios.

This entails a certain graciousness and style.

“Successful collaborative negotiation lies in finding out what the other side really wants and showing them a way to get it, while you get what you want,” Cohen wrote.

To get to win-win, you should:

  • Establish trust. Strive for cooperation from the start;
  • Gather information. Be empathetic — learn what the other side wants and why;
  • Build on the other side’s needs. Use them as a platform for constructing a solution;
  • Ask for help. Get the other side’s involvement and commitment to create a solution they support.

The empathy of which Cohen speaks is meant to establish something of an emotional connection or bond between the two sides. This same area of the brain, the limbic system, supports a variety of functions including emotion, behavior and motivation. Activating them can make an ally out of each, even in the most difficult situations.

outsourcing negotiationChris Voss, a 24 year FBI veteran who spent four years as an international kidnapping negotiator, discovered that the turning point of his most unlikely negotiation victories occurred right after his team took the time to listen to the captor’s argument, summarized that argument back to the captor, and then got the captor to say, “That’s right.”

Those two words, Voss says, signal that your negotiating partner feels heard and acknowledged, which opens the door to previously impossible solutions:

‘It all starts with the universally applicable premise that people want to be understood and accepted. When your adversaries say, “That’s right,” they feel they have assessed what you’ve said and pronounced it as correct of their own free will. They embrace it…Reaching “that’s right” in a negotiation creates breakthroughs.’

In his article, “To Be a Better Leader, Learn This FBI Hostage Negotiation Tactic,” Andy Raskin recalls how a CEO used this same technique to get buy-in from a key-but-contrary member of his organization’s marketing team. Once the contrary fellow felt he’d been heard, the complexion of the negotiation shifted from a competitive mode to a cooperative one.

By the time they’d reached, “That’s right,” they’d found they weren’t so far apart to begin with, and that neither had to make any hard-to-swallow concessions. What’s more, they not only arrived at a mutually agreeable solution, but the final agreement was better overall than the one either alone had originally proposed.

Raskin extols the virtue of “active listening” as a means to developing an emotional connection, and he borrows this quote from the book written by Voss, “Never Split the Difference” to explain this idea:

“This is listening as a martial art, balancing the subtle behaviors of emotional intelligence and the assertive skills of influence, to gain access to the mind of another person. Contrary to popular opinion, listening is not a passive activity. It is the most active thing you can do.” -Chris Voss

Fostering a positive atmosphere — with the aid of emotional intelligence — goes a long way toward negotiating in good faith and with a sense of fair play.

If this mentality doesn’t come back across the table in kind, walk away (something you can afford to do when there’s a semblance of balance).

If they’re still unwilling to adjust their attitude on the heels of this move, definitely find another outsourcing provider — or as the case may be, another client.

Continue: Value Chain Marketing — Obtain Business Value via Outsourcing


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