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We discussed in the last post that seemingly the biggest negotiations are with the suppliers and vendors. There are other critically important areas also where negotiation is required to arrive at the mutually satisfying position.
Pharma people deal with five types of customers: Doctors, Pharmacies, Hospitals, Distributors, and International Buyers.
For long, the doctors were not in the list of people to negotiate with, but now it is so. Previously, if they accepted the product, they would give prescriptions which will convert into business for the company. Now they require many types of services before they prescribe. Negotiation is required to arrive at a mutually beneficial position. This is what is now popularly called ROI – Return on Investment, which is calculated as percentage. The scope of ROI has been steadily enlarging and now occupies a very large proportion of business landscape.
Negotiations with doctors is tricky because they hold greater power. However, they are in business now and understand business language. It is important to stay your ground, highlight mutual benefits, and get the right deal.
Pharmacies’ role in pharmaceutical business was that of a service provider to patients and pharma companies, but now they also tend to go out of their way to influence business. The analogy may be drawn with the property dealers who used to be service providers but now are a business unto themselves. It is a bad development there and in pharma. The Pharmacies would like to get extra discounts and net prices which would be much lower than the original prices. They claim that they can change prescriptions and can convince the patients to buy the brand of their choosing. This happens less often with urban pharmacies in educated areas, but it is so in suburban areas and less literate/illiterate patients. The negotiation should not be carried too far if your brands are doing well. If you must bank upon them for business, then you must create provision for that to use in negotiation.
Hospitals, both government and private, negotiate to get the lowest prices. Government hospitals purchase through prescribed system of tendering, but all systems are likely to be manipulated by the users. Our focus, however, is private hospitals who negotiate directly. Their negotiation is for getting the most discounts, and other services, including but not limited to renovations, entertainments etc.
There is lot of room for negotiation here. You must know your position and your competitors’ positions also. And you need to design a package of multiple offerings, not just the prices or services.
Distributors negotiate based on the company profile. If you have established business already, they would run to take you. If you are new, they may start from refusal and then agree reluctantly after extracting maximum benefit from you.
For new companies, it is better to start with a small, new distributor who is hungry to establish his own business. He will make extra effort to grow his business which will help you also. He will also accept normal terms. You may have to facilitate in some way, which you should. You can continue with them for long, if your business trajectory is the same as theirs, otherwise you can change accordingly.
International business is different from domestic business. You are dealing across culture, currency, and market. The international buyers, if buying for the first time, are also insecure about the deal, quality, terms etc. During later transactions, greater security is seen.
Negotiations with international buyers should follow these guidelines.
- Establish credibility by being straightforward and factual
- Establish an amicable ground for negotiation
- Understand their requirements and thinking first
- Lay your offer on the table but keep margin for negotiation by adding margins to your bottom line
- Break down the price and present components separately; product price, special packing charges, handling charges, sea freight/ air freight, insurance etc.
- Negotiate for payment terms separately
- Do not try to take advantage even if you can, it will be only for once, and you will lose the customer forever
- Get and give the best to both parties so that the business goes on for long
It may come as a surprise, but you may have to negotiate with the regulators also, not for doing a wrong thing, but to keep your right business running. It may be difference of interpretation, or application, or other considerations.
You must know your ground well, so that you are not at great disadvantage. The regulators are not supposed to act like police, but they tend to do. So, they start by trying to take the ground away from your feet. When you tumble, they catch you. It is therefore important to know your ground and make it known also. You may even then be taken advantage of, but the damage may be limited.
The employers invariably negotiate while hiring employees, employees may also have the possibility to negotiate.
Employers try to save mainly from salary because several benefits are linked to it. Perks are usually standard in good corporates. For less developed, less formal corporates, negotiation may have to be done about everything, salary, perks, benefits, facilities, and so on.
As an aspiring employee, you must consider this for negotiation:
- Get information, know about the corporate yourself, do not just trust what you are being told by them
- Know your position, your strengths, and your tools for negotiation
- Remain calm but firm
- Do not over project your advantages
- Do not drive them in obvious manner
- Close the deal with expression of gratitude
Negotiation is a daily thing in corporates, it happens with seniors, juniors, peers, outside and inside. It is therefore important to understand the process and its nuances. It is also not a one-time thing to do, you must keep learning and enhancing your skills in this area. Remember, it is mandatory to learn it if you wish to have a successful, satisfying career.
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