How to negotiate customer contracts?

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Negotiating customer contracts involves several essential strategies as shared by trusted experts:

  1. Understand Current Needs: It's crucial to be aware of the economic environment and adjust expectations accordingly. Mark Suster of Upfront Ventures notes the importance of accepting that customers may want to renegotiate prices and that it's better to secure a lower-priced contract than lose it entirely. He advises finding mutual agreements in exchange for price reductions, such as longer contract terms or adjustments in service offerings 1.

  2. Customization: Keith Creel from Canadian Pacific Railway emphasizes customizing contracts to match each party’s capabilities and needs. He suggests focusing on specific areas where business alignment is possible, thus ensuring long-term relationships and trust. This approach helps in avoiding overcommitment and supports sustainable growth 2.

  3. Collaborative Approach: The art of negotiation heavily relies on collaboration. Chris Voss, a negotiation expert, advises letting the other side speak first and using questions like, "How am I supposed to do that?" to navigate through difficult propositions. This method fosters a collaborative atmosphere where both sides feel involved in the decision-making 3.

    Negotiating Customer Contracts

    Mark Suster shares his advice on how portfolio founders can navigate discounting discussions with loyal customers. He emphasizes the importance of accepting the changing economic environment and finding a balance between honoring customers and running a business. Mark also discusses the potential renegotiation of software contracts and the need for companies to have a plan in place to handle these situations.

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  4. Honesty and Openness: Kat Cole from Cinnabon highlights the importance of being honest about what your business offers and the value it brings. An authentic understanding of one's strengths and weaknesses can facilitate better partnership contracts 4.

  5. Long-term Relationships: Alex Hormozi suggests negotiating with a long-term perspective, balancing immediate needs with future implications. He stresses that good negotiations are not about winning but about creating win-win situations where both parties leave the table better off 5.

These insights frame a robust strategy for negotiating customer contracts effectively, focusing on flexibility, collaborative engagement, and long-term relationship building.

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