Four Critical Elements Of Highly Effective Negotiations - June 2, 2017
Negotiation is an important part of our lives—at home, at work and in front of the customer. We negotiate with our toddler to put on his shoes. We negotiate with our boss about the need for a new hire. We negotiate with a vendor about the price we're willing to pay per product. And we negotiate with the customer the terms of purchase. Negotiation is vital for an organization's overall effectiveness. Negotiation is critical to establishing the organization's internal system (structure, people, functions, plans, measures, etc.) and its relationship to the external system (markets, suppliers, technology, etc.).
In this issue of Promotional Consultant Today, we share a few key elements to negotiation from Alan Chapman, founder of Businessballs.com, a resource for people and organizations. Chapman states that good sales negotiation—the rules of which follow below—can easily add 10 percent to sales revenues, which arguably goes straight to the bottom line as incremental profit. Try these strategies:
1. Have an alternative and negotiate with freedom of choice. Whether you are buying or selling, if you can't walk away because you need the deal so badly or because the other side is the only game in town, then you are at a serious disadvantage. If the other side believes you are the only game in town then you have the advantage. No other factor is so important: the more you need to secure the deal, the weaker your position, so avoid negotiating when you need the business. The same will apply to your customer, which is why buyers almost always give you the impression that they can go somewhere else—even if they can't or don't want to.
This also means that when selling you must create an impression that there is no alternative comparable to your product or service. You have to create the impression that your product or service is unique, and that the other person has nowhere else to go and cannot afford to walk away. This positioning of uniqueness is the most important tactic, and it comes into play before you even start to negotiate.
2. Negotiate when the sale is conditionally agreed, not before (if buying, then the opposite applies). Don't get drawn into negotiating until you've got agreement in principle to do business. If you start to negotiate before receiving this commitment, you'll concede ground and the customer will attain a better starting point. This would put pressure on you to find more concessions later, and ensure a better finishing point for the customer.
If you are not sure that the customer is conditionally committed to the sale, then ask a conditional closing question such as, "If we can agree to the details, will you go ahead?" If you're buying, then the opposite applies; start to negotiate for concessions before agreeing you want to buy.
3. Aim for the best outcome (buyers aim low, and they tend not to go first either). If you're buying, aim very—even ridiculously—low but do it politely. Whatever you're doing, your first stake in the sand sets the limit on your best possible outcome. There's no moving it closer to where you want to go; it'll only move the other way. Your opening position also fixes the other person's minimum expectations, and the closer your start point is to the eventual finishing point, the more difficult it is to give the other person concessions along the way and ultimately arrive at a win-win outcome.
If you have the option to hear the other person's offer first, then do so. It's a fact that whoever makes the opening offer is at a disadvantage. If you go first, the other person can choose to disregard it and ask for a better offer. And the other person avoids the risk of making an offer themselves that is more beneficial than you would have been prepared to accept. It's amazing how often a buyer is prepared to pay more than an asking price, but avoids having to do so because they keep quiet and let the seller go first, which leads to the final point.
4. Let the other side go first. Try to avoid 'going first' on price if you can. If you know the other person's starting point before you have to give your own, you'll have a clear advantage. For example, if selling, ask the other side if they have an 'outline budget.' Sometimes you will be pleasantly surprised at what the other side expects to pay (or sell at), which obviously enables you to adjust your aim. Letting the other side go first is a simple and effective tactic that is often overlooked.
Letting the other side go first on price or cost also enables you to use another tactic where you refuse to even accept the invitation to start negotiating, which you should do if the price or cost point is completely unacceptable. This forces the other side to 'go again' or at least re-think their expectations or stance, which can amount to a huge movement in your favor before you have even started.
These tactics are just a start. Read more of Chapman's negotiation tips at the link below and go into your next deal-making opportunity with both confidence and key strategies.
Source: Businessballs is a free ethical learning and development resource for people and organizations, run by Alan Chapman. It was founded in Leicester UK, and is now based mainly in Eynsford, Kent. Businessballs.com launched in 1999 and is now used by approximately one million people each month. Chapman originally created the Businessballs name for juggling balls in his training and development business.