Making the 'Size of Deal on the Table' Count in Negotiation?

Given the current financial pressures in the market, no deal with a customer can/should be regarded as ‘one-off’. In fact, all arrangements with a buyer have a knock-on effect and should be factored into the total business performance for each party. By placing the deal in a proper market context, it is easier to add value on completion and ensure a greater degree of compliance.  

In practice it means making the following upfront calculations:

Customer’s share of the category (£,%)

Establishing the customer’s share of the category allows us to allocate an appropriate level of preparation and investment, with a realistic view of both upside potential and consequences of getting it wrong…

Customer’s share of our business (£, %)

Again, knowing that a customer accounts for 15%, rather than 1% of our business has to help us to prioritise all aspects of the relationship and quantify the impact on our sales and net profit, for the whole team...

Our share of their business (£, %)

Realising that we account for less than 0.001% of the customer's business can explain some of the issues with getting appointments, and difficulties in making the buyer listen, but can help to reduce  arrogance-levels on the part of strong branded manufacturers attempting to break into a new channel...

Our share of their category (£, %)

However, when we have 20+% of a customer’s definition of a category, it is obviously useful to move the conversation quickly from share of business to share of category in order to restore our confidence and buyer-appeal.

Size of the deal for them (Sales, Gross Profit)

Only at this stage is it appropriate to calculate specific dimensions of the deal in terms of sales and gross profit. In other words, if a customer is buying £200,000 from us and resells for £250,000, making a 20% gross profit, this £50k limits on the size of the buyer’s potential concessions available for negotiation.

Size of the deal for us (Sales, Gross Profit)

Knowing that our ex-factory cost is 50% of the £200,000 sold to the buyer, tells us that we have a maximum pool of £100k in discretionary funds from which to make concessions, and can provide a basis for fair-share negotiation...  

If the above process still seems over-the-top for a ‘one-off’ deal, then going in blind will probably result in a ‘one-off’ outcome, adding to our overall uncertainty/stress-levels, and doing little to optimise the relationship in these already uncertain times.

As always, your call….

Definition of an expert

My definition of an expert in any field is a person who knows enough about what's really going on to be scared. 

PJ Plauger

For dog’s ears only: TV ‘Viewer’ involvement…

The advert for Baker’s dog food using an ultra high-pitched soundtrack got its UK premiere on 13 February, during Emmerdale. The Beeb monitored the reactions of two mixed-breed C1 viewers at their home at Hayes in Middlesex. The first 10 seconds threatened to be a complete let down, but then barking and mild snarling began to engulf the sitting room. Initial post-advert sales results are not yet available…

Caution: A pet-food marketing pal of mine Ray Wilsmer tried this idea many years ago using a Great Dane lying asleep on a couch in front of the TV. Ray crouched behind the TV with a high-pitched dog-whistle which he blew several times during screening, without managing to awaken the dog…

Eventually Ray crept behind the couch, leaned over, positioned the whistle on the dog’s ear and blew with such vigour that the dog committed a massive social indiscretion all over the couch…

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Working with Love-blindness, a question of context?

A psychology book on How Pleasure Works reveals that most people won't notice the difference between paté and dog food, so long as the latter is suitably presented with the right sort of garnish. And as for our ability to discriminate wine, even experts may confuse a white wine with a red when it is served at room temperature in a dark glass. And we'll enjoy soggy old potato crisps, it turns out, if our chewing is accompanied (over head phones) by the satisfying sound of crunching. In the same way it is difficult to tell the difference between holding hands with someone we love and holding hands with a stranger, unless we can see them.

The importance of context

Obviously, context matters, and so do our attitudes and expectations, and all can be coloured by analysis…

So too a so-called ‘one-off’ deal with a customer. Given the unknown consequences of any agreement with even the most appealing buyer, it is important to convert uncertainty (unknown) into risk (a question of odds) by placing all deals in the context of the overall market i.e. understand and compare the profitability of the customer with other customers, starting with the major multiples. 

Only with this ‘big picture context can we remove the blindfold, explore the implications, and quantify the risk of exchanging values with the beloved buyer.  

All else is detail….

Calorie-burn via the Eat Fit Cutlery Set

Add another dimension to your multitasking mealtime workouts?

At £69.99 for the knife (1kg) & fork (1kg), this cutlery/dumbbell mash up is designed for fitness fans with a sense of humour…
It also illustrates the essence of creativity, the random combination of entirely different concepts, well executed...
All it requires is a suitable catchphrase to propel it into the Adslogan Hall of Fame...
So  much for the easy part..
Time to make an appointment with Tesco and do some heavy lifting?

Getting the numbers right in logistics, like Walmart

                                                                The shrinking army...

Napoleon's invasion of Russia 200 years ago illustrates just how badly things can go wrong when the supply chain implications of moving a 400,000-man army are underestimated.

It is not enough just to get your forces from A to B - you have to keep them fed and watered as they go, or suffer the 95% casualty rate experienced by Napoleon on the Paris-Moscow back-haul trip.

Napoleon planned to take his supplies with him.

This was a logistical operation of quite staggering proportions, requiring a wagon train of no fewer than 26 battalions - eight equipped with 600 light and medium wagons each, and the rest with 252 four-horse wagons capable of carrying 1.36 tonnes (a grand total of 9,300 wagons).

To pull these wagons and to transport his cavalry and artillery he had gathered 250,000 horses, all of which required 9kg (20lbs) of forage a day.

And yet the figures did not add up. (More)

Walmart was different

We all put Walmart’s success down to discounting, but it was the company’s specialisation in logistics — borne out through obsessions with efficiency, information and distribution that made Walmart what it is today.

Fully 60% of the entire U.S. population lives within 5 miles of a Wal-Mart location and 96% are within 20 miles, all co-ordinated via a data warehouse as big as the Pentagon…

Obsession with individual stores’ weekly performance data

Successful EDLP was driven by obsession with individual stores’ weekly performance data, aimed at rooting out inefficiencies, either within their own operations or those of suppliers. Through this sort of detailed and obsessive scrutiny, Walmart concluded that they themselves could handle most external operations better, cheaper and faster, causing them to identify logistics as their primary expertise. 

See results in terms of fuel efficiency, milk transport, Sustainable Product Index and LED lighting design-upgrades here.

Logistics just a means to an end

For Walton however, this logistical capacity was largely a means to an end. About the company's extensive data network, he wrote: “What I like about it is the kind of information we can pull out of it on a moment’s notice — all those numbers.”

However, the founder remained focused only on how logistics affected performance — measured in profit....

Why not try a right-numbers weekend, from the NamNews Team?

5yr old's view of logos

Are we spending enough/too much on consumer education?

How can finance be used by NAMs, day-to-day?

Why bother?

If the public are becoming more financially astute, due in part to the banks’ slow motion devaluation of savers’ funds via the differential between CPI inflation at 4.2% and 3.2% rates on deposits (the result is a net outflow of 1% value…), coupled with the banks’ added ‘bonus’ of bailouts at the expense of the taxpayer, then perhaps NAMs might profit from applying the same financial insights in their day-jobs?


Real opportunities or not?

In fact, the real issue here is the extent to which there are genuine trade opportunities available in unprecedented times, and if so, what are the tools required in order to optimise those opportunities, faster than the opposition.

What do I need?

Being able to calculate and demonstrate the supplier’s direct impact on a customer’s financial performance, faster than other suppliers, consolidates that edge…

Using numbers from the customer’s latest annual reports engages the share-owning buyer, to the exclusion of any competitor awaiting a return to normal…

So what?

In today’s unprecedented times the only certainties are money, and the need for survival in supply and retail.  Ignorance of your own company accounts and an understanding of how they relate to the customer’s financial performance needlessly adds personal risk to the other unprecedented uncertainties affecting a NAM’s survival in the marketplace.  However, even a modicum of financial understanding can vastly improve the odds in your favour…

For a step-by-step approach finding opportunities in a customer’s latest annual report, see our latest checklist in Kamcity library