September 23, 2011

Long-Term Relationships: Who Benefits And What You Can Do About It

Sure long-term relationships are pretty, but are they a good idea?

Sure long-term relationships are pretty, but are they a good idea?

Is A Long-Term Relationship The Right Thing For You?

Man, what a hassle negotiating is. If you have to negotiate every single vendor relationship each time you need to have something done, it sure seems like you’re going to end up spending your time negotiating and won’t have any time left over to do everything else. There has got to be a better way!

Maybe the right thing to do is to pick a vendor and enter into a long-term relationship with them. That could be the answer that you’ve been looking for: do the heavy negotiating once and then you can move on and feel comfortable that at least this relationship is in the bag. Or is it?

The Advantages Of A Long-Term Relationship

On the surface it sure seems like a good idea. Constantly having to create a list of suppliers, evaluate them based on where they stand in the market, financial stability (especially these days!), reputation, etc. takes a lot of your time. If you can find a vendor who does a good job, then you’ve solved this problem.

Maintaining a relationship with one firm over time can be very beneficial. You will come to know who you are dealing with, you’ll understand what they can and cannot do, and you’ll be able to build up a two-way trusting relationship. If nothing else, a long-term relationship can simplify your life because you’ll have one less thing to worry about.

If you are a buyer, then an additional advantage of being in a long-term relationship with a supplier is that you may get preferential treatment if supplies of a particular part become scarce some day. If you are a seller, then the beauty of a long-term relationship is that it takes a great deal less effort to maintain an existing relationship instead of trying to grow a new one.

The Disadvantage Of A Long-Term Relationship

As good as a long-term relationship may seem, there are disadvantages to these types of relationships also. One of the biggest issues is that as a negotiator, you are giving up a lot of your bargaining power when you sit down at the table with a long-term partner.

Much of your power as a negotiator comes from the simple fact that the other side of the table has very little information on you and your situation. However, when you are dealing with a long-term partner, clearly this is not the case.

In addition to the large amounts of information about both you and your company that your long-term partner may have, there is also the issue of personal relationships. It can be very difficult to drive a hard bargain with someone that know well and hope to continue to have an ongoing relationship with.

Final Thoughts

Clearly there are both advantages and disadvantages to being in a long-term business relationship with another firm. The stability and knowledge of who you are dealing with can eliminate many of the issues that arise in most dealings with other firms.

However, you may find yourself at a disadvantage when it comes time to negotiate a new agreement – the other side of the table knows too much about you. Additionally, studies have shown that over time this type of relationship does not continue to stand on equal footing – one of the two sides will start to take advantage of the other side over time.

In the end, some long-term relationships are probably necessary if for no other reason than providing you with the free time to focus on other work. My recommendation is that you try to minimize the number of these relationships that you get yourself into and when you do, you watch them carefully to make sure that you are getting what you bargained for!

Contact Blue Elephant Consulting

Contact Blue Elephant Consulting to find out how your team can be trained to get the best deal out of their next negotiation.