Kraljic’ matrix – Routine
Kraljic’ matrix – Routine
Imagine a traditional negotiation. You are sitting on a chair and a buyer is sitting opposite of you on a chair. Right in between the both of you is a table. This should probably sound familiar to you.
When talking about negotiation, I often use 2 different colours for the chairs you are sitting on: blue and red.
A blue chair means that the focus of that person is mainly on price. The result will be win-lose, the one with the highest perceived power wins the negotiation and the other one loses. These negotiations are cold, short-term and relationship is unimportant. An example of this is when you buy or sell a car. You want the best possible price for it.
A red chair means that there is a high focus on a long-term relationship. There are many important variables to consider besides price such as contract length, joint innovation, service levels etc. Typically, both parties gain something from these negotiations since they are warm and based on equality and trust. An example of this is a negotiation with a strategic partner.
At the risk of generalisation here, buyers are typically blue since they are mainly focused on obtaining a good price and sellers are typically red since they are interested in a long-term relationship with their customers.
Now, the colour of the negotiation table is determined by the colour of the chairs.
- 2 blue chairs equal a blue table. You can expect tough negotiations here.
- 2 red chairs equal a red table. This is the foundation of a warm and fruitful relationship for both parties
The interesting scenario is when one chair is blue and the other one is red. What colour do you think the table has then?
The correct answer is blue. Here’s why.
When one party shows ”red” behaviour by focusing on establishing a relationship and the other party shows “blue” behaviour by focusing on price alone, the result will often be that red will be giving and blue will be taking.
In other words, blue wins and red loses.
So, what can you do if you’re sitting on a red chair and the buyer opposite of you is sitting on a blue chair. Well, there are only 2 options here:
- You decide to sit on a blue chair as well, acknowledging the blue table. This is easier to do since you can control that yourself. If you want to win these types of negotiations, make sure you have more perceived power than the other party. It’s important to note that deciding to sit on a blue chair impacts the relationship with the other party.
Or you can go for option 2
- You get the other party to sit on a red chair, turning the table red. Even though this might be your preference, it is harder to do since you need to persuade the other party to change the colour of their chair. The best way to do this is to step into the buyer’s mind and understand why it would be beneficial for the buyer to establish a long-term relationship with you. Don’t assume too quickly here.
A small piece of advice, the best way to make the buyer “red” is by making sure you have something truly unique to sell. The more options buyers have, the more they can afford to be blue.
Happy negotiations everyone!