We’ve all been there — the dreaded negotiation with your most difficult customer at some point in our careers. Every year, he beats you to the ground on pricing and everything else you have to offer! Every discussion becomes a war very fast, and your self-confidence plummets.
There are several fallacies about negotiating that aren’t helpful if you’re dealing with a difficult scenario for the first time. However, like with many myths, the reality is generally quite different.
Myth: It may be a harrowing experience.
You tell a trustworthy colleague or coworker that you’re heading to negotiate next year’s large deal. What do they have to say? “Best of luck!” The majority of people consider negotiations to be an unpleasant and a difficult task, yet it is a necessary measure.
Reality: Not if you plan ahead of time.
As with all things in life, we fear the unknown, especially if we are unprepared. The reality of negotiating is that with adequate preparation comes confidence. Before your meeting sit down and ask yourself the following questions:
- What do you want out of this negotiation?
- What is your lowest, acceptable and best price?
- What are you prepared to ‘give away’ if necessary?
- What do you know about the other company’s position in the deal?
- If you don’t know much, what questions can you ask to improve your understanding?
- Thorough preparation is a great confidence booster. See the negotiation as a presentation and plan your approach and questions before hand.
Myth: Successful negotiators are born.
Most people believe that you either have it or you don’t when it comes to negotiating and if you’ve got, you must have been born with the abilty.
Reality: You can learn to be a good negotiator.
Like any skill in business, negotiation skills can be learned and put into practice. There are lots of books, youtube videos and seminars you can attend on this subject. Negotiation is a structured process and once you understand how it all works the task becomes easier. But as with any new skill you have to practice, practice, practice and this is where most people take short cuts. Once you’ve got the basics put in the reps to get highly skilled.
Myth: To strike a deal you have to concede on price
The perception is that many negotiations end up with one of the parties always having to concede on price just to secure the deal.
Reality: There are other items you can concede on
The reality in any negotiation is that price is not always the deciding factor. There is usually something else that the other party wants in addition to, or instead of, a lower price. It could be that they need the product or service quickly and may be prepared to pay a premium for a fast delivery. They may want the product changed slightly to meet their specifications. They may like some on-site support for implementation.
In your research and needs-analysis it’s up to you to find out what they really want. Dig deep and find it because every part of the deal is negotiable, not just the price. Once you have hit upon it, before conceding on price, bring it into the discussion. Remember, this could be something which means very little to you but a lot to them.
Myth: If their first offer is what you want, say yes
After your sales pitch your client comes back and immediately offers exactly what you wanted. Wow, what a great outcome! He’s got what he wants and so do you. Deal done!
Reality: Always counter the first offer
If you accept immediately there are two problems:
- Your customer will think he’s accepted bad deal, “I accepted straight away! I could have had a much better deal. I’m sure I went in too high.” With these thoughts going through his mind he won’t feel totally happy with the deal and the chance of cancellation or no future business is higher.
- It’s likely that this is your customer’s opening budget. Opening budgets are usually on the low side and used as a starting point. Accepting now, even if it’s what you were looking for, could mean you throwing away margin.
There are instances where the customer will say “I don’t negotiate. This is the price I’m prepared to pay.” He has set the rules, so as long as you are happy with the price, go for it!
Myth: Negotiations have only one winner
If you have a competitive streak this is how you will see a negotiation – something to win or lose. Non-competitive people who believe this myth automatically lower their defences and quickly cave in to the ‘stronger’ player.
Reality: Successful negotiations have two winners
Negotiation is not a competition. The ideal outcome should be win-win, where both sides feel they’ve achieved something out of the whole process – one got a sale at a price he wanted and the other got a purchase at a price he wanted.
Win-win outcomes leave the door open for building strong relationships which will lead to more business in the future. Win-lose outcomes mean that one side will be reluctant to deal again. If, by your very nature, you are a competitive person, temper this and accept the reality that the negotiation process has to have two winners, not just you!
Myth: If you walk away, that’s it
You have found the perfect customer but you don’t get the agreement on price or any concessions and the deal never materializes. However, you are afraid about loosing the opportunity so you decide to go for it anyway, at any price.
Reality: Opportunities often come around again especially when you’ve got a full pipeline of potential customers
Accepting a deal through fear is not a position you want to be in. You will always have a nagging doubt that you didn’t hold the margins necessary to make the living you want and you gave away something which you should not have. Be strong enough to walk away from a deal if it’s not what’s best for you or your company.
You have to learn to detach yourself from the underlying deal and avoid getting emotionally involved with the product or service. Just concentrate on getting the best result. Being emotionally detached means you can walk away with no doubts. You may find that a few days later the seller will be back engaging you in conversation with another offer. Remember that opportunities always pop up and walking away is not a failure!
So take a fresh look at negotiating. Are you clinging onto old myths about how negotiating should be done? Accept that the reality can be very different!
Catalyst Consulting 