Thought Leadership

Negotiate, Differentiate: Highlight Your Advantage by Building It Into the Deal

If there's one mistake people make when cutting deals, it's that they don't negotiate terms around their differentiators — the things that make them a better choice than a competitor, according to Professor Victoria Medvec, Adeline Barry Davee Professor of Management and Organizations at Kellogg and Academic Director of Kellogg Executive Education's Women's Senior Leadership Program. "I always say that if you're not differentiating, you're commoditizing," Medvec said. "I'll ask people what they want to accomplish in a negotiation, and they'll talk about maximizing price or value, building a relationship, or getting more business. But differentiating your product or service is critical to achieving those objectives. It's the lost piece."

It helps to think of your differentiators as thumbtacks on a corkboard, Medvec offered. And every issue is a piece of string hanging from one of those tacks. Those issues are the points you'll negotiate around, which is another key element to differentiation: it's not enough to merely discuss them. They need to be part of the deal.

For example, Medvec had a client who manufactured monogrammed shirts, bags and other items. Their two biggest differentiators were the fact that they had an internal design team when most of the competition purchased designs online, and they maintained a high degree of quality because they inspected their factories in Asia on a daily basis. In their case, it wasn't enough to talk to potential customers about those advantages because the competition could say the same thing and then beat them on price.

"Their competitor doesn't come in and say, ‘We have ugly designs we bought off the Internet, and our bags rip and tear all the time,'" Medvec noted. "They'll say they have great designs, great quality, and a better price. And if all I'm negotiating on is price, my differentiators fade into the background. This happens all the time. Our competitors don't play fair."

In the case of the monogram manufacturer, Medvec said, the in-house design team was one of the tacks on the board, and the issues to be negotiated around that were the pieces of string hanging from it. "If I were them, I might propose how many times a year the client could meet with the design team, work a fast turnaround time into the deal or specify who owns the IP on the design," she said. "Every time I negotiate around those points, I'm drawing attention back to the differentiator. I could negotiate a return policy, knowing we never have returns, because we inspect our plants in Asia every day. If all we do is talk about those differentiators, it's not enough."

Likewise, another client of Medvec's was a supplier to grocery stores, and they owned the supply chain all the way from farm to shelf. So they didn't just bring that advantage up; they worked its benefits into the deal. "They negotiated farm tours and plant tours," she said. "And the reality is it doesn't matter if someone wants to actually go on a tour. The reason you're negotiating that is to be able to come back and say, ‘This is because we own the entire supply chain.' "

Differentiation is a key idea when it comes to negotiating on behalf of a company, but it's a critical concept when it comes to negotiating on behalf of yourself, Medvec stressed. "In the Women's Senior Leadership course, we teach you how to think about your differentiators, articulate your differentiators, turn your differentiators into negotiable items, and use them to your advantage with clients, customers, suppliers, financiers or partners."

Dr. Victoria Medvec is the Adeline Barry Davee Professor of Management and Organizations at the Kellogg School of Management at Northwestern University. In addition, Dr. Medvec is a co-founder and the Executive Director of the Center for Executive Women at the Kellogg School and the CEO of Medvec and Associates, a consulting firm focused on high stakes negotiations and strategic decisions. Dr. Medvec is a renowned expert in the areas of negotiations, executive decision making, influence, and corporate governance. She teaches these topics to senior-level executives and Boards of Directors from companies around the world. In addition, she teaches in Kellogg Executive Education's Governing Family Enterprises, Women's Director Development and Women's Senior Leadership programs.

Kellogg created this special leadership program for women executives to equip top women talent to break through the barriers that have historically impeded their career development and empower them to take their place at the highest levels of corporate leadership.