Do you negotiate with customers daily? Are your margins eroded due to price pressure from competition? Can deadline pressure result from tough negotiations? Can customer complaints result in negotiation?
Negotiation is a vital business skill. A few minutes or even seconds of haggling can result in winning or losing thousands of dollars – more than we earn in an hour, or even in a month. Yet it is not a skill that is given much attention in university business qualifications. Salespeople need to develop and maintain negotiation competence too. A one percent difference in the margin they make has a massive impact on the bottom line.
So, what’s the secret negotiation formula? People often ask me, “What’s the one piece of advice you can give?”
There is so much to know abut negotiation. There are many tactics and counter tactics. However, there are also principles, and if we stick to those principles, these alone will make a huge difference. There are seven “Laws” of negotiation. Here are two of them:
Negotiation Law # 1. Care, But Not Too Much
Of course we should care about getting the deal! However, the moment we desperately “need” the deal (perhaps because we’re behind on budget or need the cash) we become emotionally involved. The moment we get emotionally involved, we lose our walk-away power. It is at this point we will give the customer (or the buyer) anything they want, making us very poor negotiators indeed.
How do we stay emotionally detached? The key is to not “need it”. A salesperson who can walk away from a deal that’s going badly usually has lots of other opportunities in their pipeline. This implies they’re great prospectors too. Sure, it sucks when you have to walk away, but if you have lots of other opportunities, it’s not the end of the world.
So, if the key is to remain emotionally detached from the deal, the same law must apply to the customer, which brings us to Law Two.
Negotiation Law # 2. Get THEM Emotionally Involved
Make THEM break Law #1. Make THEM “need” it. If you can do this, they will lose THEIR walk away power. This means we have to get THEM emotionally involved. How can we do this? The two common emotional triggers are Pain and Gain. We can discover their Pain or Gain points through skilled questioning.
For example, if they need delivery in a short timeframe, what happens if their deadline isn’t met? Could it be loss of productivity? Could their work come to a standstill? What would be the cost of that? What would be the consequences? This is an example of Pain. To avoid this, they will pay more in order to get supplied on time. This gives the salesperson all of the power.
We frequently see these power dynamics in manufacturing or construction. For example, it costs a whole lot more to have tradespeople standing around, and concrete mixers waiting if the reinforcing steel delivery is late. Their foreman will pay a premium if you can ‘get them out of a jam’.
Final thought: if you increase your total sales revenue by as little as one percent, and if you increase your average gross profit by a mere one percent, what would be the impact on your net profit? Understand and get comfortable with these two Laws of Negotiation, and the results will amaze you.