Monday, June 25, 2012

Just Lower Your Price - I'll Buy Today!

Dreaded words:  "You need to sharpen your pencil and come up with a lower price."

Worst Possible Response:  "What will it take to make this happen today?"

I've been to a lot of sales training over the past 20 years.  Most of these seminars involve some small component of Negotiation.  I also attended the "Master of Negotiation Seminar" put forth by the Corporate Performance Institute.  I've been on hundreds of sales calls in which some form of negotiation took place.  Also, I've discussed the "craft" of negotiation with dozens of my peers. Negotiation is the process of getting two or more parties to get past an obstacle and move forward. Let's try to distill a blend of sound logic here when it comes to Negotiations:

  1. FIRST THINGS FIRST:  Negotiation = Handling Objection(s).  The single biggest mistake made by salespeople in negotiations is treating a price negotiation in some special way.  Let's face it - a price negotiation is one of MANY objections you may face during the sales cycle, especially when the deal is about to close.  If you had a product/feature objection, or a value objection, you'd take different steps in getting past the obstacle.  Don't forget this with a price objection.  Do the basics:  1)  Clarify and get a good understanding of it - don't agree.  2)  Ask the customer, "Besides lowering the price, can you think of any way we can get past this obstacle?"  3) Ask them if there are other obstacles besides this one.  Handle all the obstacles at the same time.
  2. PEOPLE NEGOTIATE FOR DIFFERENT REASONS.  The sooner you realize this, the better you'll be at figuring out how to not give away profit.  Among the reasons:  to make money; to get what you want; to avoid fear and consequences; to get control; to be successful; to pay as little as possible.  It's sort of like any decision you make in your life.  It's about risk, cost, legal consequences, quality, desires and fears.
  3. NEGOTIATIONS ARE RISKY.  Let's be honest - in order to enter an negotiation, somebody has to say "No."  This creates conflict and you must stay in this conflict zone for at least 15 minutes (sometimes days, weeks or months).  This is uncomfortable and carries risk.  No risk, no reward.  There's good advice out there to help you prepare for this risky process:  Understand the worst and best-case scenarios.  Remember that this is not personal, believe in your own position and that time "heals all wounds."  Assume the other party knows what you know.  Be prepared for the discussions, practice and/or role-play with others.  Obtain advice from somebody else OUTSIDE the negotiations.
    1. Get to know each other; build rapport; understand all parties perspectives.
    2. Understand your goals and objectives but do NOT share this with the other party yet.  Write them down.
    3. Make a chart of all of the negotiation topics.  In a complex negotiation there will be a list of items that vary in importance both to you and the other party.  Categorize these into two sections:  Important and Not-So-Important (NSI).
    4. Now you're ready to start negotiating.  Enter the negotiations by expressing your disagreement and that this is a significant problem.  This entry starts the risk-zone, but must be done.
    5. Reassess and Compromise by allowing the other party to "win" items that are NSI to you.
    6. Get agreement in principle, then put it in writing.
  5. USE STRATEGY AND TACTICS:  Strategy is what the two parties want and how important each item is in the negotiation.  Tactics are methods to get what you want.  Key traits in a complex negotiation include:  persistence, competitive issues, attitude and involvement.
Some of my favorite tactics are below.  Use caution and practice these before you use them in a real negotiation.  There are hundreds of negotiation tactics and understand who you're dealing with.  There are professional negotiators out there that know every tactic ever devised.  Think twice before dealing with these folks (or bring in your own):

  • Contracts are Negotiating Tactics.  Who care if there are standard agreements.  Somebody had to have written these documents.  Change them.  Ask them to be changed.  Contracts are written to favor the party who wrote them.  
  • Time Deadlines are 90% Artificial.  Almost all time-frames can be extended.  Do not get caught in the other party setting artificial time-frames.
  • Feinting and Leaks.  I don't like these tactics - they either border on being unethical or clearly are.  Your job is to be aware that some people do unethical things in a negotiation.  Sometimes people test an idea (feinting) that isn't necessarily true, or have 3rd parties leak information that would favor them. Don't get caught - validate the information.
  • It's OK to withdraw.  Cooler heads will prevail.  Sometimes buyers and sellers need this time to process and reach a compromise.
  • Who are you negotiating with?  Never negotiate with somebody who doesn't have the authority to do so.  Never negotiate with someone who has less authority than you do.  
  • Give/Get.  This is absolutely part of every negotiation.  When you compromise, make sure you've gotten something in return.
So, besides lowering your price, what is your plan for your next big negotiation?