Insights
Negotiation – how much is your ‘yes’ costing you?
Getting more of what you want whilst maintaining, or even developing, the relationship, then balancing commercial judgement with human nature.
If you get what you want but the other party feels unfairly treated or that they have a poor deal, there is a likelihood they may walk away from the deal or plan revenge at a later date. We then need to take account of the commercial realities of your position financially and the marketplace, balanced against the likely reaction of the other party; people respond differently.
This definition is particularly relevant where you have an ongoing relationship with a client; it is less relevant to a single one-off transaction. We negotiate all the time – we just don’t realise. The ability to negotiate is like a muscle: it requires regular exercise, it needs to develop and strengthen slowly and, as your confidence grows, so it can be used more.
Why are negotiation skills important?
- Clients want more for less
- Profitability is under pressure
- Competition has increased and supply exceeds demand
- Client service people are wired to say ‘yes’
- The buyer has all the power
- Buyer-supplier or peer-to-peer partnership?
- Procurement departments and professional buyers
- Most clients are better trained to negotiate
- Commoditisation
The Four Steps of Negotiation
Prepare:
In a nutshell, this is about getting your ‘ducks in order.’ It can be formal planning or simply taking time to stop and think. This step involves gathering information, understanding what is valuable to both parties, clarifying what it is that you want, choosing your mindset and how you will go about the negotiation. Anticipation of how the other party may react to your approach is helpful. In our negotiation workshop we spend as much time on preparation as on the other three steps put together.
Plans are nothing. Planning is everything.
Dwight D Eisenhower
Open:
This is a key time to influence the other party. Everything from your body language, your opening words, your questions, your confidence and demeanour will affect the quality of your opening and their likely reaction. This is when you expose to the other party what it is that you want. Whatever your opening position, you need to have a reason for why you are proposing it. You need to articulate it clearly, concisely and confidently.
Bargain:
This is the classic perception of ‘negotiating’ – the ‘to and fro’ nature of the bazaar or market-stall. Each move you make should be planned rather than a knee-jerk reaction to what they say or do. Your ability to ask high-quality questions, manage and even pre-empt their objections and your listening skills will be vital tools in achieving your goal. Trading is a crucial skill to be employed during this stage. High quality questions can give you time to think, help you gather valuable information and also demonstrate your expertise and confidence.
Close:
Generally, the close should be straightforward if you have prepared, opened and bargained well. However, the close can be fraught with danger. Last-minute tricks can be employed. Our urgency to close the deal can lead to giving away unplanned valuable concessions at the last minute. Often we are far more aware of our deadlines than the other party. In the best negotiations, both parties leave satisfied and feeling they have achieved the best deal for their requirements and situation.
Other key considerations
Precedents – Precedents can be very dangerous and can commit you for the long term to something you originally offered as a one-off; A short-term act of generosity, which becomes a long-term obligation.
Think about your bottom line -Ensure you are clear in your mind about the implications for your profitability of every negotiation, or at least every major negotiation. Profitability has come under huge pressure in most businesses especially during recent tough economic times. For most client-facing people who are selling to clients, their focus is predominantly on the top line or revenue line – the price we will charge the client.
We must also understand how the revenue translates into profit. All clients must be profitable unless there is a specific strategic reason, such as you want to develop a particular expertise, to raise your profile working with a particular client or in a particular sector or there is greater potential longer term.
Don’t argue, ask questions – The typical reaction when our price is challenged or we are put under pressure in a negotiation is to argue our point of view. The risk with this response is that we appear defensive and emotional. Arguing tends to make both parties dig in, become more intransigent and less likely to be flexible and give you what you want. Instead, ask well planned, well constructed questions, then listen carefully and actively. This is a far more influential way to understand the other party’s thought processes.
Seek Win-Win -This maintains the relationship. Do this by trading and seeking high satisfaction for both parties. Aim for both parties to be highly satisfied.
No deal is better than a bad deal – It is difficult to turn down a deal, even a bad deal, and sometimes we can be tempted to agree a deal that, long term, has poor consequences for us and our agency. We must be able to recognise a situation when we are better off declining the deal and even walking away. The alternative is to agree the deal and then discover it is unprofitable, demands too much resource and time or other negative results for us. It seems many sales people are unable to walk away from a deal, no matter how poor the deal is for them.
