Whether you are buying or selling in today’s economic environment your clients who require ICT solutions will in all probability be asking you to negotiate a better deal. Even the clients who never mentioned price before are coming under pressure to get more value for money, so how will you hold onto your margin and protect your bottom line while keeping your clients happy. The people who succeed in this tough task are those who understand the rules and principles of negotiation and are skilled at implementing them.

“Hi Lucy thanks for calling in as I mentioned on the phone we are under pressure from the top to make savings in our IT Budget  so can you please tighten up on the price.”

Poor sales people will simply mentally collapse with the sound of clear disappointment in their voice and start the process of throwing away their margin and company profit. Great sales people and negotiators take a different approach. Firstly they have immense confident in their product offering, they know why people buy their products and how they compare to the competition, they understand that most people don’t buy on price alone. What people want is value for money. Yes price can be important but if your product offering is strong, your customers should think twice before risking a switch to your competition. Great sales people ask customers questions that remind them why they bought their product in the first place.

“It is a tougher trading environment Frank, there’s no doubt about that, and we can certainly look at our overall deal and assess where we can make changes to help you achieve your companies goals while not threatening the quality and flexibility of our current arrangement, Firstly can we review the last 3 months and our performance, in terms of delivery times, quality and customer service how have we done?”

Rule 1

Know Your Product Offering and Present It Brilliantly.

When times were great and business was rolling in, some sales people became glorified order takers, some car dealers and auctioneers in some cases forgot how to really sell their product but rather presented it in a take it or leave it manner. Now it is time for the cream of sellers to come forward, those sellers who can spot and develop opportunities, they know the questions to ask to direct the customer’s minds to their product benefits. If your company is not the lowest priced in the market place but rather delivers higher levels of customer service then your questions should focus people’s attention on customer service.

“Tell me Frank, what would you say is the main reason people do business with your company rather than your competition?”

“Well we deliver on our promise of giving the customer what they want” “Oh so your competitor advantage is the level of customer service your deliver”

Your ability to have a clearly communicated punchy relevant message that hits the important points for the customers will make any negotiation much easier.

“Well I suppose the main reason so many people chose to do business with us is because……..”

If your people can’t finish this sentence with confidence you will loose sales ahead of the negotiation process

Rule 2

Know Your Competition / Know Your Industry

Most good negotiators will know your competition, they will also know your industry and how it works. If you are selling into the motor industry it is important to realise that they will probably be making just as much money on the finance deal as on the car. Skilled buyers will be able to play the competition against you. However if you know your business and your competition’s business you will know the weak points of their product offering and while you should never criticise them, your job is to highlight your strengthens in their particular area of weakness. You must create doubts in the mind of the buyer that a switch to an alternative supplier would be too great a risk against the potential saving. Remember when it comes to it, fear of loss is far greater than hope of gain.

Rule 3

Broaden Your Base and Develop Options

The very worst time to negotiate is when you have few alternative options. In the old days some supermarket giants used to select one supplier and take 100% of their product ensuring that they were a sole supplier and then they would negotiate a lower price every few months, these suppliers had no option but to agree a lower price. The more clients you have the less reliant you will become. Broaden your base so that you can easily walk away from a deal that you think is not good for you. Often the very fact that you have the confidence to walk away seals the deal.

Rule 4

Define Your Tradeables

Poor negotiators focus purely on price, not realising that there are many things that are just as important, delivery terms, payment terms, order size, joint marketing, long term agreement, introductions to other clients etc. If you are a small company doing business with a large cash rich multinational, you maybe very happy to reduce your price by a small amount in return for prepayment for a year’s order of product or service. You may in the end make more money and complete a deal that is better for you while your customer is happy with a better price. Always look at the big picture.

Rule 5

Value Your Tradeables and Slice them Up

It is important to know the value of your tradeable. What would it mean if you drop your payment terms from 30 days to 7 days? What is the value of a long term contract? However remember to value your own tradeable in terms of the value to the other party. If you are in computer consumables you might choose to throw in a free delivery because you have a truck on the route half full anyway however if your customer had to pay for the transportation it could cost €300, so value it at €300 rather than throwing it in. You can also get more for your tradeable by slicing them up. Rather than agreeing a 3 year deal. Ask what price they will agree for a 1 year deal and then for a 2 year deal and finally for a 3 year deal, remember a dog will move just as fast for one doggie biscuit as it will for a bag, so split them up and get more movement for them.

Rule 6

Be Creative and Think about Interests and not Positions

In negotiations people tend not to be very creative in terms of coming up with solutions to move the process forward. In the national pay talks a number of years ago the Unions wanted double digit pay rises, the employers would not hear of it. There was a stalemate. The negotiators had to find a solution, so they talked to the unions to find out the interest that was behind their position and they found that the unions had committed to their members that they would only settle for a double digit increase. Because the negotiators knew that the unions needed this, they found a creative way of giving it to them that kept everybody happy. They agreed an implementation of a double digit increase in a timeframe of 3 years and 9 months! Everybody won. In negotiations you should give the other party what they want but on your terms!

Rule 7

Ask Questions and Clarify Issues

Don’t just jump into a negotiation on price invariably it will become a haggle with little sense. You will probably end up taking positions with little reason and may even split the difference. Ask questions to uncover what issues are most important to the other side. If they have a number of issues that they would like to discuss in the negotiation ask them to prioritise them, this allows you focus on what is most important to them. Insist on logic rather than haggle. When the other party request a particular price, ask them, on what basis they have picked that price? This stops them pitching outlandish prices in the hope that you will move close to them by the end. Ask questions like, why is that so important to you? Are there any circumstances that they would be prepared to move on a particular issue? However, never ask the other if that is their final offer, invariable it will be.

Rule 8

Speed up the process by focusing on proposals

Negotiations can take time, and as we know time is money so the quicker you can conclude the negotiation the better for all. Proposals move negotiations forward and stop them becoming a talking shop. With regard to proposals remember if you think you are far apart, make your proposal first. However if you believe that you are close ask the others to propose first. If you are selling a house and I believe you want €700,000 but I think it is worth €500,000 it is better for me to propose a price first closer to €500,000 so that I will reduce your expectations. Psychologically you will drop you own price range to one closer to €500,000 than if I asked for your asking price first. Whereas if I believe we are both thinking the price will fall around €500,000 I will ask you to propose your price first.

Rule 9

Negotiating is about trading – Don’t give things away.

While it is tempting to concede on certain items in a negotiation never do it outside an overall agreement. Poor negotiators give things away for goodwill. Goodwill does not exist. All negotiations should be conditional.

“If you agree to enter a 3 year contract and pay each year up front and give a written testimonial endorsing our products then I will give you a price of €400 and restrict the yearly price increase to 5%”

Rule 10

Be hard on the issue and soft on the person

If I don’t like you I will work harder to get a better deal, I will think more in terms of beating you, whereas if I like you I will endeavour to conclude a win-win deal where we both get what we want. Therefore in negotiations signal your intention early to be open with information and try to give the other party what they need from the process. It is perfectly fine to be a tough negotiator but you should do the deal with respect for the other person understanding that everybody has a job to do and that we can create good relationships that could last a very long time.

Good Luck

John Ryan, Evolve

Evolve is a training consultancy company founded in Dublin in 1997. Currently we have offices in both Dublin and London. We provide high quality, inspiring training and consultancy to service and manufacturing sectors.

John Ryan is an Executive Director of Evolve Organisational Learning Consultants. He specialises in the areas of sales, negotiation, media and interpersonal communications. John also mentors and coaches a number of top executives in many blue chip companies. His client base is here in Ireland, the U.K., and Scandinavia.

http://www.evolve.ie

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