Grow Your Training Business

Rich Trainer, Poor Trainer

In this tough economy, it has obviously become more difficult for virtually every independent corporate trainer and OD consultant to make a living. And since I have numerous friends and acquaintances in this industry I've had many conversations about the challenges they are facing.

Existing clients are tightening their training budgets. Prospective clients don't even want to talk to a new training vendor (they have plenty of existing vendors, all of whom are working hard to retain their business). We all know that when the budget is tight, training is one of the first items on the chopping block.

But I have also noticed that a few of my friends in the training business are doing quite well. Some are having the best years they have ever had. Some are landing huge contracts and monster elephant clients. While another trainer just down the road is taking his LCD projector to a pawn shop. One could make the assumption that those who are doing well are actually providing better services to their clients - but I know many amazingly gifted trainers and consultants who are struggling. And I know quite a few, shall we say, less-then-gifted folks who are pulling in serious dollars.

So what is it that truly separates the rich trainers from the poor ones?

I can't claim to know the full answer to that question, but I got a clue when talking to several individuals about how they handle situations where the client asks them to adjust their fees downward because of the tough economy. Three training consultants had three dramatically different perspectives and approaches:

1. Give in and lament.
2. Hold firm and let go.
3. Partner and prosper.

Give in and lament - This training consultant was clearly depressed as he talked to me about how he has had to reduce his daily training fee in order to remain competitive in this market. He hated the idea that he was diminishing his perceived value in the client's eyes, and of course he also hated the reduced revenue.

Hold firm and let go - This training consultant was adamant that he was not going to reduce his fees, and if he lost a few clients so be it. He was definitely not depressed. But clearly frustrated and annoyed. He had in fact lost a few clients, but was determined to stay the course.

Partner and prosper - This training consultant spoke about partnering with his clients, understanding their financial constraints, and developing true win/win outcomes. For example in some cases where he had to reduce his fees, the clients agreed to provide audio and video testimonials that he could post to his web site. One client agreed to participate as a reference in a few telephone calls with large prospects. And another agreed to provide a significant number of referrals. So while this training consultant did in fact have to make some financial adjustments, he made sure to get something of value in return. This not only diminished the negative financial impact, it also helped him maintain his confidence and perceived value from his client's perspective. They had to "earn" the reduction - it wasn't just given.

So which of these three do you think is doing the best financially during these tough times? Without question it is my "partner and prosper" friend. He had a few other interesting ideas which I will share in future posts.

Client Negotiations: Building Blocks of Trust

Helping your counterpart trust you is key to successful negotiation. The more confidence your counterpart has in your honesty, integrity, and reliability, the easier you will find it to negotiate a win-win outcome. If, for whatever reason, your counterpart considers you untrustworthy, you will find it difficult to obtain even minor concessions. Think about it. If you were interacting with someone you didn’t trust, wouldn’t you proceed very cautiously, and compromise very reluctantly, for fear of being victimized?

Building Blocks of Trust

Demonstrate your competence. Convincing your counterpart that you have both the expertise and the will to support your end of the negotiation builds trust. We are all more comfortable with someone we can look to for honest answers, options, and solutions. For example, when you are buying a computer, you have a higher level of trust in a sales associate who gives knowledgeable answers to your questions.

Overcommunicate. When negotiations get tough, the natural tendency is to communicate less. Resist that tendency! Open, honest communication breeds trust.

Discuss the undiscussables. Many negotiations or conflicts have issues that are difficult to address. Salary is one example. When people discuss their performance with their boss, they often find it difficult to bring up the subject of salary. But discussing these types of issues helps build trust and eliminate future problems.

 

Make sure the nonverbal signals you are sending match the words you are saying. Your counterpart can tell more about your total message by reading and understanding the nonverbal signals you are sending than by just listening to your words. Congruence between your verbal and nonverbal messages helps create trust in the relationship.

Maintain a professional appearance. Rightly or wrongly, people do judge a book by its cover. A well-groomed, professional appearance is important. Further enhance your appearance with good posture, a careful choice of words, a clear confident voice, and eye-to-eye contact.

Communicate your good intentions. Although no counterpart is likely to tolerate repeated mistakes or failures, most people will give greater leeway to an individual if they know his or her intentions are good. Emphasize that your counterpart’s needs and goals are important to you and that you will do whatever it takes to create a lifelong win-win relationship.

Do what you say you are going to do. In any relationship, you build trust when you keep your promises and honor your commitments. If you tell your counterpart you will discount the price of a product 5 percent, make sure you do so. Each time you fulfill a promise, you let your counterpart know ho or she can rely on you. Your reliability may be the most important factor in a counterpart’s decision to negotiate with you again at a later date. If you do what you say you are going to do—even when the negotiation is over and you may no longer feel like doing it—your counterpart will perceive you as a trusted partner.

Listen. Listening openly to your counterpart’s ideas, regardless of whether you agree with his position, will provide you with a greater opportunity to build trust. Encourage your counterpart to exchange ideas. Get complete information before expressing your opinion. Also, recognize that your counterpart’s opinions and positions might change as the negotiation progresses.

Provide accurate information, without any hidden agenda. Many negotiators think it is wise to provide their counterparts with as little information as possible. We disagree. To build a win-win relationship, each counterpart has to have enough information to make good decisions that meet both negotiators’ goals. We also think it is a good idea to give your counterpart information on both sides of an issue, not just the side you prefer. (Note how the negotiator who supplied us with his competitors’ contracts inspired our trust.) Finally, when you do not have all the answers, admit it. To build a lifelong relationship based on trust, you need to communicate accurately and openly.

Be honest—even when it costs you something. If your counterpart has made a mistake in adding his figures, tell him. A client recently called and told us we had billed him less than we had quoted. This was true, because the client had switched the program we were doing from two half days to one full day, for which we charge less. When we explained this to the client, he replied, “You didn’t have to do that. It wasn’t that much difference.” Our response was, “You didn’t have to call us. Maybe that’s why we work well together.” On the other hand, if you make a mistake in your calculations or decision making, admit it. Doing so goes a long way toward building your credibility.

Be patient. No one likes to negotiate with the fast-talking salesperson who insists an immediate decision is necessary. Patience breeds trust—and better decisions.

Safeguard for fairness. It is your responsibility to ensure that your counterpart gets a fair outcome. If the outcome is unfair, will your counterpart be open to negotiating with you again? If you make sure everyone goes away happy, your reputation as a negotiator will take care of itself.

Negotiate for abundance, not scarcity. When negotiating, most people concentrate on cutting the existing pie into sections and then dividing up those sections. To build trust, focus on creating a bigger pie. As someone once said, “Why waste time fighting over one loaf of bread if you can bake two or three?” If your counterpart in a negotiation wants you to lower the price of your product or service, for example, rather than simply refusing, consider agreeing to lower the price if she will buy more products or extend the length of the service contract.

The philosophy of abundance was successfully employed in 1996 by the executives at Boeing Aircraft in a negotiation with the company’s suppliers. In an effort to make the production of the 717 a profitable endeavor, Boeing asked its suppliers to cut their prices 20 to 30 percent. This was a bold move, since the suppliers’ prices were already competitive. Although not all the suppliers were enthusiastic about the proposition, almost everyone agreed that if the plane could not be produced profitably, everyone, including the suppliers, would lose. In return for lower prices, Boeing promised to outsource as much work as possible to the suppliers and do more business with each of them in the future. In effect, Boeing enlarged the pie, allowing everyone involved to get a bigger piece.

Take calculated risks. One of the fastest ways to build trust in a relationship is to be willing to take calculated risks. A great example is the union-management agreement reached between Southwest Airlines and its pilots in January 1995, which resulted in a ten-year contract for the pilots. This was unprecedented in the airline industry, where the typical contract lasted only three or four years. In exchange for the long-term contract, the pilots agreed to freeze their wages for the first five years in return for stock options. This negotiation, which involved a calculated risk for both parties, built trust between them. It resulted in a successful outcome for everyone, especially the pilots, many of whom became millionaires when the stock increased in value.

Client Negotiations: Creative Outcomes

It is ironic that so many salespeople are uncomfortable with the idea of “negotiating” with their prospective customers. They are fine with “selling” which tends to consist of identifying the prospects needs and presenting solutions to fill those needs. But when it comes to negotiating the TERMS of the solution, to produce a win/win outcome, many salespeople become uncomfortable.

And the greater the importance of the outcome (the bigger the potential sale may be), the more stressful or emotional the negotiation can be for many salespeople. This is why their most typical approach is to either accommodate the prospect fully (give in) or compete (fight to hold their ground without giving in at all).

We are most likely to accommodate the prospect if we feel the ales is at risk, or if getting the sale is so important to us that we give up the power to say “no.” Totally accommodating the prospect can sometimes be the best decision. But not always. If saying yes today means living with frustration or resentment tomorrow, accommodating is not a virtue.

Competing, like accommodating, means one person gets his way. Or at least it seems so at first. In the long run both parties often end up losing. It does little good, for instance, to get a huge new contract for your business if the terms of the contract mean you will generate little or no profit (or worse, LOSE money on the business). Or if the terms put the customer in such a tight bind that they end up being frustrated by working with you.

Creative Negotiation.

Creative negotiation involves looking for the hidden opportunities presented by challenges. Rather than accomodate or compte, both parties search creatively for a "third way" to a win/win outcome. An integral part of this creative effort requires that possible solutions meet the needs of each stakeholder. The task at hand involves overcoming at least four difficulties.

First, our natural tendency is to come up with stances, that is, we give our best solution to a given set of needs. We tend to take a position that seems reasonable to us, then firmly hold our ground.

Second, we are inclined to focus exclusively on OUR needs and assume it is the other stakeholder’s responsibility to worry about having her needs met. Ironically, by showing a sincere interest in the needs of others we increase the chances to have our needs met.

Third, our emotions get in the way regularly. Nothing kills creativity quicker than anger, pride, embarrassment, envy, greed, or other strong negative emotion. Anger is often an expression of fear, or lack of confidence in our ability to get want we think we want. Anger is very much self centered. Emotional outbursts tend to escalate rather than solve a conflict. If we can improve our ability to manage our emotions and respond without getting defensive, we have gone a long way toward creative negotiation.

Fourth, we frequently fail to explore beyond the obvious solution. It helps to validate the other stakeholder’s needs as a starting point in exploring creative solutions and as a way to reduce negative emotion. You can help your customer begin to creatively negotiate with comments like:

“Clearly your most important need is to ___________, so maybe we can brainstorm a few out-of-the-box ideas to get us to a win/win outcome.”

“I’m wondering if there might be a creative way to help you get _______________ which is obviously critical to you, while also helping us come to a mutually agreeable outcome.”

As we practice creative negotiation, faith in our ability to turn challenges into opportunities will increase. This self-confidence will help us focus on problem solving and reduce the chances of falling back on contention, negative emotion or competitive negotiation. Even if you are not able to come up with an innovative or creative solution, the activity and energy generated by this effort can be helpful. So, next time you find emotions getting the better part of you, see if creative negotiation will help to fill your needs as well as those of the other stakeholder.

Client Negotiations: Non-Verbal Communication

Learning the art of nonverbal communication is almost as difficult as acquiring fluency in a foreign language. In addition to studying your own gestures and the messages you are conveying to your counterpart, you must also become aware of your counterpart’s gestures and their meaning. As you gain experience at recognizing the various aspects of nonverbal communication, you will pass through three distinct stages.

1. Awareness of your counterpart. After some initial training, you will begin to notice nonverbal signals your counterpart is sending. Is he talking to you with his arms or legs crossed? Is he looking at you eye to eye? Is he covering his mouth while asking a question? You will begin to recognize clusters of signals that may indicate whether your counterpart is honest, trustworthy, bored, angry, or defensive. At first you will not be 100 percent certain how to handle these signals, but at least you will be aware that something is going on.

2. Awareness of yourself. Once you begin to realize that your counterpart is telling you things without opening her mouth, it will probably dawn on you that you are also communicating nonverbally. For example, during a negotiation, you may note that your counterpart is sitting back in her chair with both her legs and arms crossed. Her body language is conveying that she isn’t being receptive. Once you are aware of what your counterpart’s body language is saying, you may realize that you are also sitting back in your chair with your notepad on your lap and your legs crossed. To understand your counterpart’s body language, you must first be aware of your own.

3. Using nonverbal communication to manage yourself and others. In the example above, once you become aware of your counterpart’s body language, you can change your own nonverbal communication. By putting your notepad on the table, sliding forward in your seat, and uncrossing your legs, you can change your position to a much more receptive one. Once you begin to manage your nonverbal behavior and that of your counterpart, you will start reaping the benefits of “speaking the language.” Body language reflects people’s true feelings. The better you understand that language, the more you will be able to use it to your advantage.

These nonverbal gestures convey dominance and power

• Placing feet on desk
• Making piercing eye contact
• Putting hands behind head or neck
• Placing hands on hips
• Giving a palm-down handshake
• Standing while counterpart is seated
• Steepling (fingertips touching)

 

These nonverbal gestures convey submission and nervousness

• Fidgeting
• Making minimum eye contact
• Touching hands to face, hair, etc.
• Using briefcase to “guard” body
• Giving a palm-up handshake
• Clearing throat

 

Gestures Come In Clusters

Skeptics might object that it is difficult to tell what someone is thinking by singling out one gesture. You have probably heard people protest, “I am crossing my arms because I am cold, not because I am being defensive.” The skeptics do have a point. A single gesture, like a word taken out of context, is difficult to understand. You cannot be sure of the true meaning of an isolated word or gesture. However, when gestures fit together in clusters, they begin to reveal a more accurate picture of what is going on in your counterpart’s mind. For example, a man who is not being totally honest might display a group of congruent gestures, such as refusing to make eye contact, holding his hands around his mouth, touching his face, and fidgeting.

The question usually arises, how accurate are nonverbal communications when compared to verbal ones? After analyzing videotapes of conversations, D. A. Humphries, a British researcher, found that clusters of nonverbal gestures proved to be more accurate, truthful representations of the participants’ feelings than their words were.

At first, interpreting nonverbal communication may prove difficult. But if you study your own nonverbal behavior and that of others daily, you will begin to understand the clustering process. Nonverbal communication is critical to negotiations because it lets you know when you must do something different to obtain the outcome you desire.

To make sure you are “catching” the nonverbal signals your counterpart is sending, conduct a “body scan.” A good formula to follow is to divide the body into five categories: face and head, body, arms, hands, and legs.

Nonverbal Signals from your Counterpart

Face and Head

The face and head truly provide a window into your counterpart’s soul. Professional cardplayers are noted for their “poker face,” or their ability to hide facial expressions that may tip off other players. Most of your negotiating partners won’t have a “poker face,” so with just a little practice, you will be able to interpret what their face and head reveal about their inner thoughts. Here are some signs to look for:

• Broken eye contact: Someone who is trying to hide something tends to avoid eye contact or break eye contact when speaking less than truthfully.
• Looking past you: A counterpart who is bored may gaze past you or glance around the room.
• Piercing eye contact: Someone who is angry with you or feels superior may maintain piercing eye contact.
• Steady eye contact: Maintaining good eye contact generally indicates that a person is being honest and trustworthy.
• Head turned slightly: Someone who is evaluating what you are saying may turn his head to one side, as if wanting to hear you better.
• Tilted head: Tilting the head slightly may indicate that your counterpart is uncertain about what is being said.
• Nodding: Someone who is in agreement with you usually nods his head as you are speaking.
• Smiling: Typically, someone who is confident and in agreement with you smiles at you.

Body

The body also plays an important role in nonverbal communication. If your counterpart starts to lean closer to you, you will know you are making progress. The more your counterpart likes you and agrees with you, the closer she will be willing to position her body to yours. On the other hand, when you say or do things your counterpart disagrees with or is uncertain about, she will tend to position her body away from you. If your counterpart feels insecure, nervous, or in doubt, she may move from side to side, shifting her weight back and forth.

In addition to being aware of and interpreting your counterpart’s body movements, you need to be aware of your own. To send messages that create the likelihood of a win-win outcome, make sure you always position your body toward your counterpart.

Throughout most of the negotiation, your counterpart will most likely maintain consistency in his general body orientation. As you negotiate, watch for subtle shifts or changes in your counterpart’s position. These small changes may mean that something is not agreeable to your counterpart, or that he is beginning to lose interest or change his mind. For example, your negotiating partner may sigh, look away, and turn his body slightly to one side. Once you observe the change, it is important to proceed with caution. It might be appropriate to say, “I’m sensing that you may have a concern with the last point we discussed,” or it may be time to suggest taking a break.

Arms

In general, the more open the position of your counterpart’s arms, the more receptive she is to the negotiation process. If her arms are folded tightly across her chest, it probably means she is not receptive to your communication. If she moves away from the table and throws her arm over the back of her chair, it may indicate a need for dominance or a negative reaction to something being discussed.

As the negotiation progresses, the arms are one of the best indicators of changes in the nonverbal communication process. For example, when you start the negotiation, your counterpart’s arms may be resting openly on the table where you are both sitting. Then, when you mention that your company has a standard deposit of 50 percent on all first-time orders, your counterpart may take her arms off the table and cross them over her chest. That would be a good indication that what you just said was not received well. You may need to clarify your comments or, better yet, ask your counterpart if she has a concern about the 50 percent deposit.

Hands

There are literally thousands of hand gestures. While hands in isolation don’t give you a complete picture of what your counterpart is thinking, they can be very revealing in combination with other aspects of body language. Look for these signs:

• Open palms: Open palms are generally considered a positive nonverbal message. This goes back to medieval days when open palms indicated that a person had no weapons. Today they generally indicate that a person has nothing to hide.
• Hands clasped behind head: Your counterpart may be signaling a need for dominance or superiority.
• Steepling of the fingers: Touching the fingers on one hand to the matching fingers on the opposite hand may be a show of dominance, or may indicate that your counterpart has a need to control the negotiation.
• Hand-wringing: Generally, wringing the hands is an indicator of apprehension, nervousness, or a lack of confidence.
• Self-touching gestures: Involuntary touching gestures to the nose,
  ear, chin, head, or clothing usually indicate general nervousness and insecurity.

Legs

If you ask people why they cross their legs, most of them will probably answer that they simply find the position comfortable. Although they think they are being totally honest, they are only partially correct. The position may be comfortable for a while, but if you have ever crossed your legs for a long time, you know that it can eventually become painfully uncomfortable!

Crossing your legs can have a devastating effect on a negotiation. In a recent study of sales transactions, out of two thousand videotaped transactions, not one sale was made by people who had their legs crossed!

If you want your counterpart to see you as cooperative and trustworthy, do not cross your legs. With your legs uncrossed, feet flat on the floor, and body tilted slightly toward your counterpart, you will have a better chance of sending an open, positive signal.

Client Negotiations: Tough Situations

How many times have you heard:

• "You've got to drop your price by 10% or we will have no choice but to go with your competition."
• "You will have to make an exception to your policy if you want our business."
• "I know that you have good quality and service, but so do your competitors.
• What we need to focus on here is your pricing."
• "I agree that those special services you keep bringing up would be nice, but we simply don't have the funds to purchase them. Could you include them at no additional cost?

Every time you hear statements like these, you're in the middle of a difficult sales negotiation. How you handle that negotiation will determine whether or not you close the sale and how profitable that sale will be.

Don't Believe Everything You See and Hear
Part of a good salesperson's skill is to learn to read people and situations very quickly. However, when it gets down to negotiating, you have to take everything you see and hear with a grain of salt. Buyers are good negotiators, and thus they are good actors. You may be the only person who has what she needs, but everything she does and says, from body language to the words she uses, will be designed to lead you to believe that unless she gets an extra 10% off, she's going with the competition. Be skeptical. Be suspicious. Test, probe, and see what happens.

Don't Offer Your Bottom Line Early in the Negotiation
How many times have you been asked to "give me your best price"? And have you ever given your best price only to discover that the buyer still wanted more? You have to play the game. It's expected. If you could drop your price by 10%, start out with 0%, or 2%, or 4%. Leave yourself room to negotiate some more. Who knows - you may get it for a 2% reduction. You might have to go all the way to 10%, but often you won't. A little stubbornness pays big dividends.

Get Something in Return for Your Added Value
What if you discover that the buyer wants to be able to track his expenditures for your products or services in a way that is far more detailed and complex than is standard for your industry? And what if your account tracking system is set up in a way that you can provide that information at essentially no cost to you? Often the salesperson's overwhelming temptation is to jump in a say, "Oh, we can do that. That's no problem." Before you do, however, think about your options. You could throw it in as part of the package and try to build good will. Or you could take a deep breath and try something like, "That's a difficult problem that will require some effort on our part, but it's doable.". In the second case, you've told the buyer you definitely could do it, but you have not yet agreed to do it. You may not be able to get him to pay extra for it, but you may be able use it as a bargaining chip in resisting price concessions. Which way you choose to go will depend on who your customer is and on the situation. However, you do have options.

Sell and Negotiate Simultaneously
Think of selling and negotiating as two sides of the same coin. Sometimes one side is face up, and sometimes the other side, but they are always both there. This is particularly true in your earliest contacts with the buyer. The face the buyer sees is that of a salesperson demonstrating features and benefits. The hidden face is that of a negotiator probing and seeking out information that may be invaluable later should issues like price, terms, quality, delivery, etc. have to be negotiated.

Be Patient
Finally, and most important, be patient. Sales is a high energy, fast moving business. Patience is one commodity that is in relatively short supply, but if you're impatient in a negotiation, you'll lose your shirt. If I'm negotiating with you and I know that you're impatient, I will hold out just a little longer, no matter how desperate I am to make a deal with you. As long as I know you're in a hurry, I'll wait. So be patient. Take the time that you need, don't rush to give in, don't show your anxiety, stay cool and don't panic. Negotiation is a process and a game. Use the process and play the game. You'll be astonished at the difference that it makes!

Client Negotiations: Strategy Mapping

A key to negotiation is knowing the other side's primary and secondary needs - and using the latter as bargaining chips.

One way to nail down those needs? Create a "negotiation strategy map" - a list of the opposing stakeholders and influencers, their interests in the outcome, and the reasons behind them. Plus your planned responses to those interests.

A negotiation strategy map can help you plan your approach by forcing you to focus on the information you'll need, the assumptions you'll have to question, and areas of common ground in a negotiation.

Tips for mapping out a negotiation strategy:

Define the stakeholders and influencers. Before creating the map, define who the stakeholders and influencers are. They could range from a small management team to suppliers, customers, and a leadership pool that spreads across several company divisions. When thinking possible stakeholders and influencers, it's better to start with a long list than to discover too late you left out a person who could help shape the agreement.

Chart the map. List the stakeholders and influencers horizontally across a large sheet of paper or flipchart, and group them by their relationship to each other. Below each individual, list his interests in order of importance.
Design the map so it's easy to draw lines connecting the common interests of different people, then list the reasons behind those interests. Going through stakeholders' needs step by step sharpens your instincts and can help forge effective counteroffers.

Be comprehensive and creative. When listing interests, be open-minded. You may hit on a need that's not readily apparent. List all the hot-button issues. Certain issues are so emotionally charged, they should be avoided. Others need to be confronted and defused. The map should define both.

Define what you DON'T know. The map should highlight any information you know you need to acquire, either before or during the negotiation. If you intend to acquire the information during the negotiation, you should also map out the specific questions you need to ask.

Do a reality check. When you've done your first draft, narrow the list of stakeholders and influencers by getting input from co-workers and your side's negotiating team. This will test your accuracy, prompt new insights and promote team unity.

Unless people feel they have ownership in the negotiation, they won't feel a strong commitment to fulfill the terms of the final agreement. Make sure people buy into the process early on, and see that stakeholders on your side stay comfortable with the way things are going.

Ask questions. Don't go into the negotiation thinking you have all the answers. An interest map outlines your best take on stakeholders' needs. To ensure you're not going in with false assumptions, ask questions to draw out the other side. If you've done your homework in charting the map, you'll know exactly which questions to ask.

Client Negotiations: Value-Added Negotiating

Imagine this scenario. You are a sales representative for Baker distributing. One of your long-time customers, Albertson Metals, operates a mill that produces high nickel alloy ingots. Each year, this mill purchases approximately $500,000 worth of MRO products such as bar conditioning wheels, flap wheels, grinding belts, cutoff wheels, steel shot and grit, and other products for the mill’s laboratories. Unfortunately, you are usually able to obtain only about 30% of this business.

During the last six months, you have been working intensively with the mill’s management to convince them of the value of developing an integrated supply arrangement with you. They have reacted positively to your ideas and you have developed a proposal that you believe fits their needs perfectly. Among other things, you will:

• manage Albertson’s inventory.

• stock all items with sufficient buffer stock to assure JIT availability.

• supply Albertson with OSHA-certified safety seminars on appropriate topics to be mutually agreed upon.

• provide 24 hour emergency delivery.

• invoice biweekly for items drawn from consignment.

You have submitted your proposal at a price that you believe fairly compensates you for your high level of service and for the special features included.

A week later you call the plant and are told, "We got your proposal and it’s excellent. However, we have to refer anything of this magnitude to Corporate Purchasing." You call the Purchasing Department and speak to the buyer responsible for this contract. He says, "You’ve submitted an excellent proposal, and obviously you have done your homework. Unfortunately, we have something of an embarrassment of riches here. Two of your competitors also submitted excellent proposals. You should be aware that your pricing is extremely high compared to your competitors. As a result, at this time your proposal really is not competitive."

You explain to the buyer how you’ve worked with the plant for the last six months to develop this proposal. You discuss at length your excellent service record and how you have gone the extra mile to meet the plant’s needs. The buyer acknowledges this but says, "Your competitors also have excellent service records but are willing to meet our needs at a much lower cost."

Did you see this coming? You worked hard to meet your customer’s needs. You solved problems with your customer. You anticipated a win/win for everybody. Your goal was to avoid a price negotiation by differentiating yourself and focusing on your services and your added value to the customer. Now, at the last minute, price rears its ugly head. In fact, the purchasing agent says that price is the determining factor.

What do you do now? What should you have done throughout the sales process to prepare for the possibility of a serious price negotiation?

In our sales negotiation training programs we stress four key steps that will greatly improve your chances of making that sale while successfully negotiating to maintain your margins.

1. Be prepared for a price negotiation but don’t lead with your wallet.

2. Think like the buyer.

3. Be brutally honest with yourself as to what your added value is really worth.

4. Be aware that the negotiation starts when you say hello.

Let’s look at each step.

1. Be prepared for a price negotiation but don’t lead with your wallet. As buying organizations have become more sophisticated, many realize that the key factor is not price but total cost. Therefore, it is sometimes possible to avoid price negotiations if the customer sees enough value. We know of one manufacturer who was approached by an automobile company to take over production of certain parts because their current supplier was not meeting expectations. The manufacturer called in its machine tool distributor with whom they had had a very good relationship. They said to the machine tool distributor, "We promised the automobile manufacturer that we could do it. Now it’s up to you to make it happen. We’re not here to negotiate the price — just make it work." The distributor sold $10 million worth of machine tools at list price, including a full turnkey operation and the placement of a full time technician at the manufacturer’s location.

There’s a lesson to be learned: If you think there is a possibility that you can make the sale based on your added value and services, try to leave price out of the discussion. Don’t start with price concessions or discounts but focus on the added value.

On the other hand, with today’s ferocious pressures to reduce costs, buyers never forget that price is an important component of cost. Usually, buyers will want to have the best of both worlds. They want you to solve their problems, add value, reduce their costs, and in addition, give them a better price, which further reduces their costs. Don’t be surprised, don’t be shocked, and don’t be hurt. That’s just the way the game is often played. As you start the process, you need to move forward in such a way that while you don’t invite a price negotiation, if there is one, you’re prepared.

2.Think like the buyer. To negotiate effectively, take up residence in the buyer’s mind. Say to yourself, what might actually be going on vs. what they’re telling me? What they say may be the least important information. What they say to each other and what they’re thinking is the key.

Let’s go back to Albertson. We could imagine three different scenarios.

Scenario 1 — Plant: "This proposal from Baker is great. We’re going to save all kinds of costs and solve all kinds of problems. I know they appear a little pricey, but the cost savings are worth it." Purchasing: "Have you looked at any competitors?" Plant: "We’ve looked at two who say they can do it and have offered a much lower price, but their services really aren’t there and we don’t believe they can produce the cost savings." Purchasing: "Would you mind if I use the fact that you got two competitive lower cost quotes to try to bring Baker’s price down?" Plant: "No problem, as long as you promise that we will get a contract with Baker without losing any of the services and added value they have promised us." Purchasing: "You have my guarantee."

Scenario 2 — Plant: "This proposal from Baker is great. We’re going to save all kinds of costs and solve all kinds of problems. I know they appear a little pricey, but the cost savings are worth it." Purchasing: "Have you looked at any competitors?" Plant: "We’ve looked at two other competitors. They’re almost as good as Baker and they are cheaper." Purchasing: "How much more do you think Baker is worth than the best of the two competitors?" Plant: "We think they’re worth about 10% more." Purchasing: "O.K. We’ll try to get Baker down so that they’re no more than 10% above your best competitor, and of course we’ll try to get them even lower than that. If we can’t get them down, then we’ll go with your No. 2 choice." Plant: "Sounds good to me."

Scenario 3 — Plant: This proposal from Baker is great. We’re going to save all kinds of costs and solve all kinds of problems. I know they appear a little pricey, but the cost savings are worth it." Purchasing: "Have you looked at any competitors?" Plant: "We’ve looked at two other competitors that can do the same thing Baker can. They all appear to have the same quality and would produce the same cost savings." Purchasing: "Then you don’t care which one we go with as long as we get the best price." Plant: "Yes, they’re basically the same, so go with the best price."

The buyer will almost always want you to believe that Scenario 3 is happening. But is it really? The profitability of your sale may depend on your ability to determine which scenario really is in operation.

3. Be brutally honest about the worth of your added value. If it comes down to a price negotiation, your added value is worth only what the buyer is actually willing to pay for it. Say, for example, that the only difference between you and your prime competitor is that you have a better reputation in the marketplace. Is that of value? Of course. Is it important? Absolutely. Is it worth anything? That depends on the buyer. If a one buyer says, I’m willing to pay 2% more to go with Company A because of their better reputation, then it’s worth 2% to that buyer. On the other hand, if another buyer says, I’m not willing to part with any hard, cold cash because of Company A’s reputation, then for that buyer it is not worth anything."

For each sale where you have one or more potential competitors, you need to do a value-added analysis in order to figure out the most the buyer would pay you vs. your competitor. Let’s make up a simple example where you have just one competitor, Company A, and let’s assume there are just four different components of value: service, reputation, delivery, and problem solving ability.

Based on your knowledge of the customer and the competition, you believe the customer thinks that you have a better reputation, provide better service and have better problem solving capabilities, but that your competitor is a little better on delivery. Furthermore, although your customer likes your reputation, they won’t pay more for it. They like your service and feel that’s worth up to 2% more. They believe that your problem solving capability has helped them overcome significant difficulties and that that’s worth 4% more. On the other hand, you have had some delivery problems. While not fatal problems, the customer would be willing to pay your competitor up to 2% more for their better delivery.

Your value-added analysis sheet would look like this:

Value Added Item Vs. Company "A"	The Most Your Customer Would Pay Extra for That Added Value
Reputation	0%
Service	2%
Problem Solving	4%
Delivery	(-2%)

Under this scenario, your customer would be willing to pay you up to 4% more than your competitor. Of course your customer will often say, as our Albertson purchasing agent did, "You guys are all the same. You all provide good quality except your delivery isn’t very good. You’ve got to get much more competitive with your pricing." If you’ve done the value-added analysis and it’s accurate or reasonably accurate, you can see behind the purchasing agent’s mask to what is really going on.

4.The negotiation starts when you say hello. At this point you may be saying, "Everything you say is true but if I’m the Baker sales representative talking to the Albertson purchasing agent and he says to me, ‘Your competitors are lower and you have got to cut your price,’ what do I do now? That purchasing agent isn’t going to tell me their real scenario, what they said to each other, or what they really think our added value is worth vs. our competitors."

Correct. If the first time you thought that there might be a price negotiation was when you were talking to the Albertson purchasing agent, it’s too late. You don’t have the information you need, and it’s going to be difficult to get it.

And that takes us back to our first point. Be prepared for a price negotiation while you try to avoid one. The negotiation starts when you say hello. The time to start finding out who potential competitors might be, how your customer views them vs. you, the problems they’ve had with competitors, whether anybody can do as good a job as you can, etc., etc., is from the very beginning of your discussions with your customer.

Have as many contacts with your customer and with as many people in your customer’s shop as possible. Ask direct questions, indirect questions, feel people out gently, and try to get a picture of their whole situation.

Prepare vigorously for a price negotiation, and at the same time do everything that you can to avoid one.

Client Negotiations: Survival Rules

While there are a variety of negotiations that can occur throughout the selling cycle—negotiating for time, information, access to key decision makers, etc.—the toughest negotiation for salespeople typically occurs when a customer says something like “I’m ready to move forward, but your price is too high," or "I’ve got other companies with similar offers on the table, but their pricing is better. So what can you do for me?” Another variation is “We’ve identified several vendors who can provide the quality we need, so our decision will be determined by the investment required. We want to work with you, but you’ll have to do better in terms of price.”

A salesperson in this situation faces multiple dilemmas:

• If I don’t come back with a price adjustment, I may very well lose the business.
• If I do come back with a price adjustment, this may be used to leverage an even lower price from my competitors.
• If I stick to my original pricing proposal, I may appear to be inflexible and lose much of the rapport I’ve developed with the prospect.
• If I respond by lowering price, I may lose credibility and rapport—why didn’t they get our best offer in the first place?
• If I lower my price, what happens if other customers and prospects learn about it?
• Even if I get the business, at a lower price will we be able to provide the needed service and support, and still maintain an adequate profit margin?

Faced with these competing dilemmas, most salespeople try to have it both ways by expressing to the prospective customer:

1.      Confidence in the fairness and value of their pricing.

2.      Willingness to be flexible (reluctantly) and adjust their pricing proposal.

For example: “Mr. Kim, I know once you’ve had a chance to experience our services you’ll see that the investment is modest compared to the benefits you have received. And I know we presented you with a fair and reasonable pricing proposal. But at the same time, if we don’t earn your business you’ll never get a chance to experience the benefits. So I’ve talked to my manager and we’re willing to be flexible…” 

While this is the most natural and instinctive response for salespeople, research indicates that it is among the LEAST EFFECTIVE responses. Ultimately this response leads salespeople to lose confidence in the value of their products and services. It erodes profit margins. Customers see this approach as a feeble attempt to rationalize a price drop. They’re happy to accept the lower price, but it doesn’t enhance their respect for the salesperson—ESPECIALLY when many of your competitors essentially take the same approach!

So how does a salesperson survive—and thrive—during these tough negotiations? While every situation is unique, here are seven rules that will help you negotiate the price you deserve.

Survival Rule Number One: Sell Consultatively and Strategically.

Sometimes salespeople end up in tough negotiations near the end of the selling cycle because they have failed to cover all the bases during the sales process. Perhaps they haven’t identified both tactical and strategic client needs. They may not have groundworked every decision maker and influencer. They may not have sufficiently differentiated their proposed solution. Or in some other way the tough negotiation may be a SYMPTOM of inadequate consultative selling. There are many effective consultative selling programs, and most salespeople benefit from having a systemic approach that keeps them on track throughout the selling cycle.

(Shameless plug: REAL Selling™ is a consultative and strategic selling process proven to enhance sales results in complex and competitive markets.)

So if a salesperson seems to consistently face tough negotiations at the end of the selling cycle, first conduct a thorough assessment of his or her consultative selling competencies before focusing on negotiation skills and techniques.

Survival Rule Number Two: Stay fully associated to the value you provide.

Why are some salespeople able to bring in the order at a premium price while others can't seem to get by without discounting? One salesperson gets up in the morning and says, "My product is great, my customers get far MORE value than they pay for, and they are happy to pay my price!” Another salesperson gets up and says, "My product is great, and sure the value is there, but the buyer will never pay our price!"

Don't sell you or your products and services short. Sometimes the person you need to sell first is YOURSELF. Every day you need to remind yourself of the value your products and services bring to customers. Fully associate to that value every day by reminding yourself of the tangible, specific BENEFITS your clients have received. Ultimately, your belief in yourself and your products or services will be your greatest selling asset. If you truly believe that what you are offering is worth ten times your asking price, you’ll never “flinch” when a prospect questions your pricing proposal.

Survival Rule Number Three: Decide what you’re worth.

Just as your doctor, your accountant, and your plumber are entitled to reasonable compensation for their services, you are entitled to a reasonable compensation for your product or service. What is reasonable? This is purely a matter of perception, for both you and the buyer. And no buyer will begrudge you a price that is reasonable relative to the perceived value of the product or service.

What is your time and expertise worth? What value do you bring to your clients? Once you have established the value of your product or service, present your price with confidence. Never apologize for your price. Remember this phrase from your REAL Negotiation training session: Those who expect more tend to get more.

Survival Rule Number Four: Provide reasonable justification.

In whatever manner you present your pricing proposal, whether verbal or in writing, it is always a good idea to provide reasonable justification so your buyer will say, "Okay, that makes sense. I can accept that." Reasonable justification can include references to:

• Tangible Value: Focus on specific measurable BENEFITS the client will receive. Testimonials and references to previous client results are good, as long as the results are specific and relevant to the prospective client.
• Your Required Investment: This is especially important if your organization will have to invest significant time and resources fulfilling the proposal. "In order to provide this level of service and quality, my company will need to invest __ hours for customization and technology development.”
• The Market: Sometimes referencing market norms can be helpful in justifying price. "While there ARE lower priced options, for the level of quality and service you have requested, our price is reasonable for the marketplace. This is the normal rate for the level of quality you require." Clearly you should be able to back this up with actual examples. If your buyers are doing their homework they will know you are telling the truth, but it can be helpful if you do the homework for them.

Survival Rule Number Five: Always be willing to walk away.

While it is important to remain professional and enthusiastic about the possibility of working with the prospective client, near the end of the selling cycle you must be prepared to say "Next!" or your customers will sense your uncertainty. Yes, after all the time and effort put into prospecting and selling a particular account, toward the end of the selling cycle you need to “let it go” to a certain degree. Don’t focus on closing any deal, but on negotiating a mutual win/win deal. Selling and negotiating from strength means having the willingness to walk away from a sale, and it comes from having options. It is crucial to have other potential sales in the line-up. When you know that your sales career doesn't hinge on this one deal, you can exude confidence. And buyers will bow to confidence.

Survival Rule Number Six: Make the buyer work for concessions.

Do not make any concessions unless your customer makes a concession first, or unless it is needed to keep the negotiation going. Salespeople tend to make the first concession far too early, often doing so long before the customer’s resolve is tested.

When you give a concession, get one in return. Some salespeople make concessions in the hope of moving the negotiation towards closure, but forget that they should always receive a concession in return. Strong negotiators take advantage of weaker ones by not making concessions too early in response to concessions by the other party.

If you make concessions, make sure that the way you make them sends the message you really want it to send. If, for example, you say your product is worth its price, but then make price concessions too quickly, the customer will perceive weakness on your part and refuse to make concessions to you. In addition, remember that how and when you make concessions can affect the customer’s perception of your product’s or service’s value.

When you make concessions, first try to give up things which have high value to the customer, but low cost to you. If you can identify multiple negotiables to meet the customer’s need, then you can use those that are low cost first.

Next week: Using Skillful Questioning in Negotiation

Client Negotiations: Profile of a Great Negotiator

As you recall the actual negotiations in which you participated during the REAL Negotiation training, and the group discussions following each negotiation, can you remember the set of skills that most consistently produced the best outcome?

Some of the negotiations were simple and straightforward, while some were intricate and complex. Some focused directly on your specific business issues and some clearly required “out of the box” thinking. But in virtually every scenario there were certain skills and behavioral characteristics that could be counted on to produce a positive result. These competencies form the basis of our profile of an effective negotiator.

The most consistently effective negotiators:

• Are better prepared than the other party. They have spent more time thinking, researching and planning prior to the actual negotiation.
• Have higher expectations than the other party (They understand that win/win doesn’t have to mean a 50/50 outcome.) and have determined a specific objective prior to the negotiation.
• Work harder to understand what the other party REALLY wants, often identifying deeper “big picture” needs.
• State clearly what they want, in persuasive terms that leave room for discussion and build momentum toward favorable agreement.
• Avoid setting deadlines or arbitrary limits.
• Are patient, humble and quietly confident. (Colombo, not Trump.)
• Have the ability to think of flexible and creative win/win outcomes.
• Control their emotions, maintaining a tactful, positive attitude even if the other party is intense, demanding and negative.
• Think well under pressure, defusing tension by being open-minded, asking questions, never personalizing disagreements (even when baited by the other party) and downplaying power and control.
• Are honest and trustworthy. They respect and care about others, knowing that relationship and reputation are more important than any single outcome.
• Are able to assess complex situations and come up with effective counter-strategies.

Next week: Survival rules for tough negotiations.

Client Negotiations: Smart is Dumb, and Dumb is Smart

Imagine this scenario: You are engaged in a business negotiation and Donald Trump walks into the room, representing the other side. What is your immediate visceral reaction likely to be? Because Donald Trump is known as a smart, savvy and tough negotiator who does his homework and seems to always come out on top, naturally you'll be on guard. You'll be more cautious. You'll listen more carefully and be less likely to casually share information.

On the other hand, imagine you are negotiating with someone who is clearly less competent and confident than yourself. Someone who hesitates, doesn't always understand, needs you to repeat important points and timidly asks a lot of questions. Because this person isn't especially savvy, and doesn't appear to be too tough or assertive, you will naturally tend to relax. You'll talk more freely and be more open to the other person's tentative comments or thoughts. You are more likely to let your guard down, share too much information, and ultimately lose your edge in the negotiation.

Do you remember the TV show Columbo? Peter Falk played a detective who walked around in an old raincoat and a mental fog, chewing on an old cigar butt. He constantly wore an expression that suggested he had just misplaced something and couldn't remember what it was, let alone where he had left it. In fact, his success was directly attributable to how smart he was-by acting dumb. His demeanor was so disarming that the murderers came close to wanting him to solve his cases because he appeared to be so helpless.

As you learned during several of the REAL Negotiation experiential exercises, often you are better off acting as if you know less than everybody else at the negotiating table, not more. The less competent and confident you act, the better off you are unless your apparent I.Q. sinks to a point where you lack any credibility. Be a Columbo, not a Trump. Side note--even Donald Trump knows this, and he is rarely present during the most critical negotiations for his businesses. He operates behind the scenes while his "dumb" representatives negotiate the deals. This is sound negotiation psychology, because with a few rare exceptions, human beings tend to help people that they see as less intelligent or informed, rather than taking advantage of them. Of course there are a few ruthless people out there who will try to take advantage of weak people, but most people want to compete with people they see as brighter and help people they see as less bright. So, the reason for acting dumb is that it diffuses the competitive spirit of the other side. How can you fight with someone who is asking you to help them negotiate with you? How can you carry on any type of competitive banter with a person who says, "I don't know, what do you think?" Most people, when faced with this situation, feel sorry for the other person and go out of their way to help him or her.

For salespeople, the most common "smart" and tough negotiators include:

• Prospective customers who deal with multiple vendors for similar products or services.
• Prospective customers whose behavioral style tends toward a win/lose negotiating mode.
• Purchasing agents/managers who haven't been part of the selling conversations, but have authority to block or direct a financial decision.
• Executive-level decision influencers who are aware of the ongoing selling conversations, but don't really engage until a financial commitment needs to be made.
• Any decision influencer who wants to "make his mark" by driving a hard bargain and showing those he works for what a great negotiator he is.

When these negotiators let their egos take control of them and come across as sharp, sophisticated negotiators, they commit to several things that work against them in a negotiation. These include being the following:

• A fast decision-maker who doesn't need time to think things over.
• Someone who would not have to check with anyone else before going ahead.
• Someone who doesn't have to consult with experts before committing.
• Someone who would never stoop to pleading for a concession.
• Someone who would never be overridden by a supervisor.
• Someone who doesn't have to keep extensive notes about the progress of the negotiation and refer to them frequently.

The truly effective negotiator who understands the REAL Negotiation process, along with the philosophy that "dumb is smart, and smart is dumb," retains these options:

• Asking questions to gain clarity regarding the other party's needs and priorities.
• Requesting time to think it over so that he or she can thoroughly think through the dangers of accepting or the opportunities that making additional demands might bring.
• Asking the other party for help in achieving a win/win outcome.
• Deferring a decision while he or she checks with a committee or board of directors.
• Asking for time to let legal or technical experts review the proposal.
• Pleading for additional concessions.
• Using Good Cop/Bad Cop to put pressure on the other side without confrontation.
• Taking time to think under the guise of reviewing notes about the negotiation.

A word of caution-be careful that you're not acting dumb in your area of expertise. If you're a heart surgeon, don't say, "I'm not sure if you need a triple by-pass or if a double by-pass will do." If you're an architect, don't say, "I don't know if this building will stand up or not."  Win-win negotiating depends on the willingness of each side to be truly empathetic to the other side's position. That's not going to happen if both sides continue to compete with each other. The most effective negotiators know that acting dumb diffuses that competitive spirit and opens the door to win-win solutions.

Next week: Profile of a great negotiator.

Client Negotiations: Conditional Solutions, Adjustments and Trades

Competitive negotiations are often prone to deadlock, especially if both partys have staked out "final" positions without giving themselves room to negotiate. During your REAL Negotiation training, you learned that offering up potential solutions in a hypothetical way can be a very effective way to break a deadlock and gauge the other party’s reaction without making a firm commitment yourself.

Rather the saying “I think we should…” or “It makes sense to…” or “What I recommend is…” you instead typically begin with “… what if?” These hypothetical questions are designed to break an impasse in the negotiation by generating alternative solutions and to get people thinking creatively. For example:

• What if we could speed up the delivery timetable?
• What if I could quantify the results achieved in the field test?
• What if we could establish operator guidelines that would ensure your quality standard is met?
• What if we used an alternative manufacturing process that addressed your safety concerns?
• Are there any other ways we could meet your needs, such as…”
• Is there any sort of creative approach we could take that would…”
• Have you spent any time thinking about innovative ways to…?

Another efffective tactic designed to "unstick" a stalled negotiation is to make adjustments or trades. This refers to bargaining, offering incentives, leveraging pressures and setting conditions. Typically an adjustment or trade should be presented in a very straightforward fashion:

I will “X” if you will “Y.”

Or, if you do “X” then I will do “Y.”

For example,

• I’ll lower the price 5% if you increase your order volume by 15%
• I will accelerate the delivery schedule by three weeks if you will include the upgrade on all future orders.
• If you add a 40% volume increase to your contract, I’ll waive the entire installation fee.

It is very important that you are highly CONGRUENT when presenting a potential trade. We communicate in a negotiation not just with our words but with our tone of voice, our posture, and our expressions which reflects our true feelings. When our words are not congruent with what we are really thinking and feeling, we send a different message then we intend, and negotiation problems arise.

When you are making adjustments or trades, make sure you are presenting them with total congruency or the other party will simply perceive this as an opportunity to continue negotiating to get more and more out of you.

 

Next week…Smart is dumb and dumb is smart.

Client Negotiations: Controlling Information Flow

When your selling cycle progresses from consulting with a single decision maker to orchestrating conversations with multiple influencers (often including the purchasing department) it is common for the negotiation mode to shift from collaborative to competitive. Many salespeople become uncomfortable as the selling cycle evolves from a highly collaborative relationship (with a single individual) to a complex competitive engagement (with multiple influencers).

Under these circumstances it is critical to recognize that the negotiation mode has shifted. And a salesperson who maintains a primarily collaborative approach with others who are purely competitive will tend to:

1. Manage information poorly. (Giving away too much and not getting enough in return)
2. Concede too quickly. (In an effort to maintain a "friendly" relationship)
3. Be uncomfortable standing firm in the face of win/lose demands.
4. Lack the confidence to propose win/win adjustments or trades.
5. Instinctively relieve the natural tension of the negotiation rather than leverage it.

Because most consultative salespeople are highly engaged "people people" they often are challenged by the natural tension of a competitive negotiation, especially when dealing with multiple decision influencers at the end of a selling cycle. The salesperson's desire for the business, or to close a deal, may overwhelm his or her better judgment. He or she may avoid difficult issues and give in too easily, or become stubborn and refuse to budge. In some cases he or she may avoid negotiating altogether.

You know that you have shifted into a competitive negotiation mode when the conversations or discussions are characterized by:

• Self-interest (one or both parties) typically without concern for the long-term relationship.
• One overriding negotiable, typically money.
• A "win/lose" approach in which one (or both) party attempts to get what they want at the other's expense.

One common symptom of weak sales negotiating in competitive situations is giving away valuable price concessions without getting anything in return. When this happens, not only does profitability drop, but so does the customer's perception of the product's value. After all, nothing of value was given up to get the price break. Rather than encouraging the customer to pay a fair price for a valuable product, this negotiating mistake prompts the customer to keep asking for more.

Your effectiveness as a competitive negotiator will increase significantly when you learn to declare your demands. When most salespeople first hear the phrase "declare your demands" it feels a bit uncomfortable, almost too strong. But the purpose of declaring your demands is to be assertive, not aggressive. To be assertive means to be clear and direct. To be aggressive means to be hostile and hurtful. Aggression usually includes negative judgments and some anger, but skilled negotiators avoid making negative personal judgments.

It is important that you clearly declare your demands when the negotiation is competitive and the long-term relationship with the other party isn't important.  However, declaring your demands is also important in the most highly friendly, collaborative negotiations.

By declaring your demands, you are essentially protecting your own self-interest. You are making your expectations clear and keeping exchanges or trades within your control. When you clearly state what you need to achieve from a negotiation, your seriousness and determination is communicated. Some of the typical words you will use include:

I want - I don't want - I need - I expect - I've got to have - I would like.

For example:

• I'll need to meet personally with each of the decision makers before preparing a proposal.
• I can't respond to the RFP until I have more detailed information.
• I would like to review my notes of our lengthy discussions with the purchasing department before an RFP is issued, to make sure it reflects the needs we have identified.
• I'll need at least 30 minutes to give a thorough presentation.
• I'd like you to increase your volume commitment by fifteen percent
• I can't accept any offer that doesn't include a non-compete agreement.
• I've got to have a clear definition of your quality expectations.

Some salespeople get uncomfortable with statements like these. They aren't used to asserting their own demands, but this is a very important negotiation behavior. If you don't assert your demands clearly (as well as professionally, politely and graciously) you will tend to lose control, lose the respect of the other party, and your own needs won't be clear.

An import point to make is that when you declare a demand, don’t water it down with a long-winded explanation. That just takes all of the power and clarity away. Just declare your demand, and if the other party has a question, they can certainly ask why. So declare your demands clearly, without aggression or explanation.

Next week...controlling information flow during competitive negotiations.

Client Negotiations: From Collaborative to Competitive

When your selling cycle progresses from consulting with a single decision maker to orchestrating conversations with multiple influencers (often including the purchasing department) it is common for the negotiation mode to shift from collaborative to competitive. Many salespeople become uncomfortable as the selling cycle evolves from a highly collaborative relationship (with a single individual) to a complex competitive engagement (with multiple influencers).

Under these circumstances it is critical to recognize that the negotiation mode has shifted. And a salesperson who maintains a primarily collaborative approach with others who are purely competitive will tend to:

1. Manage information poorly. (Giving away too much and not getting enough in return)
2. Concede too quickly. (In an effort to maintain a "friendly" relationship)
3. Be uncomfortable standing firm in the face of win/lose demands.
4. Lack the confidence to propose win/win adjustments or trades.
5. Instinctively relieve the natural tension of the negotiation rather than leverage it.

Because most consultative salespeople are highly engaged "people people" they often are challenged by the natural tension of a competitive negotiation, especially when dealing with multiple decision influencers at the end of a selling cycle. The salesperson's desire for the business, or to close a deal, may overwhelm his or her better judgment. He or she may avoid difficult issues and give in too easily, or become stubborn and refuse to budge. In some cases he or she may avoid negotiating altogether.

You know that you have shifted into a competitive negotiation mode when the conversations or discussions are characterized by:

• Self-interest (one or both parties) typically without concern for the long-term relationship.
• One overriding negotiable, typically money.
• A "win/lose" approach in which one (or both) party attempts to get what they want at the other's expense.

One common symptom of weak sales negotiating in competitive situations is giving away valuable price concessions without getting anything in return. When this happens, not only does profitability drop, but so does the customer's perception of the product's value. After all, nothing of value was given up to get the price break. Rather than encouraging the customer to pay a fair price for a valuable product, this negotiating mistake prompts the customer to keep asking for more.

Your effectiveness as a competitive negotiator will increase significantly when you learn to declare your demands. When most salespeople first hear the phrase "declare your demands" it feels a bit uncomfortable, almost too strong. But the purpose of declaring your demands is to be assertive, not aggressive. To be assertive means to be clear and direct. To be aggressive means to be hostile and hurtful. Aggression usually includes negative judgments and some anger, but skilled negotiators avoid making negative personal judgments.

It is important that you clearly declare your demands when the negotiation is competitive and the long-term relationship with the other party isn't important.  However, declaring your demands is also important in the most highly friendly, collaborative negotiations.

By declaring your demands, you are essentially protecting your own self-interest. You are making your expectations clear and keeping exchanges or trades within your control. When you clearly state what you need to achieve from a negotiation, your seriousness and determination is communicated. Some of the typical words you will use include:

I want - I don't want - I need - I expect - I've got to have - I would like.

For example:

• I'll need to meet personally with each of the decision makers before preparing a proposal.
• I can't respond to the RFP until I have more detailed information.
• I would like to review my notes of our lengthy discussions with the purchasing department before an RFP is issued, to make sure it reflects the needs we have identified.
• I'll need at least 30 minutes to give a thorough presentation.
• I'd like you to increase your volume commitment by fifteen percent
• I can't accept any offer that doesn't include a non-compete agreement.
• I've got to have a clear definition of your quality expectations.

Some salespeople get uncomfortable with statements like these. They aren't used to asserting their own demands, but this is a very important negotiation behavior. If you don't assert your demands clearly (as well as professionally, politely and graciously) you will tend to lose control, lose the respect of the other party, and your own needs won't be clear.

An import point to make is that when you declare a demand, don’t water it down with a long-winded explanation. That just takes all of the power and clarity away. Just declare your demand, and if the other party has a question, they can certainly ask why. So declare your demands clearly, without aggression or explanation.

Next week...controlling information flow during competitive negotiations.

Client Negotiations: Minimize Your Vulnerability, Part 2

Successful consultative selling requires a huge investment of mental and emotional energy. And most highly successful salespeople seem to pour their heart and soul into every significant prospect.  But when it comes to negotiating at the end of a long selling cycle, this admirable and positive trait can begin to work against the salesperson.

As the selling cycle progresses and you invest more time, energy andresources into a prospective new account, you increase the likelihood thatin the end you'll be overly accommodating to the prospect's requests - evenat times conceding to unreasonable demands - because of complex emotional dynamics.

Your negotiation vulnerability tends to increase when:

• The potential is so BIG that you don't want to see it lost because of "little" things.
• You are VERY close to closing the deal and you've allowed yourself to "smell the roses" or mentally pocket the commission.
• After all of your time and effort, the thought of LOSING the deal is so painful that you don't want to contemplate it or plan for it.  During this vulnerable time, never telegraph your willingness to make concessions ("Our price is X, but I think we have some wiggle room.") or in any way offer a concession without being asked. It is critical that you make concessions based upon a systemic and thoughtful process rather than an emotional need for the business.

Do you remember the concession handling exercise from your REAL Negotiation training session? These were the basic guidelines emphasized:

• Start out at your highest price and conditions. Otherwise, you have no place to go. Always assume the other party is doing the same unless you find out otherwise.
• Concede according to a predetermined plan. (Don't wing it.)
• Make concessions in small amounts, beginning with your largest small concession. Each additional concession should be smaller and smaller.
• Don't give the first big concession. You will look much too eager and possibly even desperate.
• Don't make the assumption that you have to match your prospective customer's concessions one for one.
• Don't give a concession away without some sort of compensation. The best time to get a concession from the other party is when you are giving one.
• Don't grant concessions without making sure the customer understands the value of the concession. You should explicitly state (and document in your final proposal) the value of consulting hours, "free" delivery, upgraded components, enhanced services, etc.

When the prospective customer is on the verge of making a significant final commitment, it is natural for the consultative selling relationship to evolve from highly collaborative to somewhat competitive, at least for a time. This change in the "emotional tone" of the relationship can catch some salespeople off guard.

Next week we will highlight how the most successful sales negotiators navigate from cooperative to competitive, then back to cooperative, as they close their biggest deals.

Client Negotiations: Minimize Your Vulnerability, Part 1

If you typically work within a long selling cycle (numerous sales calls spanning months, sometimes years) and deal with complex customer situations—numerous decision makers and influencers, shifting organizational priorities, multi-faceted solutions, etc.—you can sometimes feel like Sisyphus, the Greek mythological figure who was condemned to forever roll a big rock to the top of a mountain, only to have the rock always roll back down again. From a negotiation perspective, this can make you especially vulnerable near the end of the selling cycle. This is your most vulnerable point in the negotiation because:

• You're VERY close to making a big sale, and you're feeling good. When you feel good, you tend to give things away that you otherwise wouldn't.
• After all the time, effort and energy you have put into sale, you don’t want to see it lost because of “little” things.
• You're thinking, "Oh, no. I thought we had resolved everything. I don't want to take a chance on going back to the beginning and re-negotiating the whole thing. If I do that, I might lose the entire sale. Perhaps I'm better off just giving in on this little point."

Many clients understand this dynamic and attempt to use your vulnerability to their advantage. So, you are often most vulnerable just after the client organization has made the decision to go ahead, or they’ve indicated they are “very close” but just need to “adjust the numbers a bit” to finalize the agreement.

There are several points to remember in order to minimize your vulnerability at this point in the selling cycle.

• Recognize your emotional vulnerability. Often this self-awareness is enough to prevent you from giving away too much.
• Remember that you are STILL selling and negotiating. So ask lots of questions, continue to identify and clarify needs, and reinforce the value of the solutions you have proposed.
• Also remember that the client is feeling the same sense of “relief” that the process has (almost) concluded. They are as anxious as you are to reach a satisfactory conclusion.
• If the client starts to “nibble” on your proposal, take this as permission to nibble back. (“I can adjust this number, but I’ll need to modify the specs…”) This may be the time to make a second effort on anything to which you couldn’t get them to agree the first time around.
• If you stay engaged and refuse to operate from any sense of desperation, you can often get things at the end of a negotiation that you couldn't have gotten the other side to agree to earlier.

Next week: More tips on minimizing your negotiation vulnerability.

Client Negotiations: Active Listening

Listening well - listening ACTIVELY during a negotiation - is obviously important, and can provide HUGE benefits in many negotiations and selling situations: Active listening helps to identify deeper customer needs, it establishes a more comfortable relationship with the customer, reduces the likelihood of misunderstandings or tension, makes problem solving easier and ultimately leads to increases sales and profits.

But what do we mean exactly by the term ACTIVE listening? And how is it different from just plain old listening? Active listeners take the art of listening to a whole new level of effectiveness. Active Listeners are not only paying attention to the CONTENT of a conversation, but also the other person's INTENT and the underlying EMOTIONS expressed. They listen for what's NOT being said, and they know that HOW a person expresses themselves can tell you as much as WHAT they say.

Skills to Improve your Active Listening ability:

• This may seem obvious, but LIMIT your own talking. You can't talk and listen at the same time. So no matter how much information you think you need to share with the other person, if you're going to be an active listener then most of the time your mouth should be closed.
• Tune in to the other person. Be genuinely interested and show it. Are you giving your full attention or is your mind wandering? Concentrate on shutting out any outside distractions. You have to be genuinely "engaged" in a conversation to encourage others to speak freely.
• Think like the other person. They have problems, needs, and opinions that are important. Put yourself in their shoes - what would YOU be thinking and feeling if you were on THEIR end of the selling relationship? You'll understand their needs better if you try to get to their point of view.
• Hold your fire. Don't jump to conclusions too soon. If someone makes a statement or asks a question or expresses a concern, respond only after you're certain you FULLY understand their perspective.
• Listen for IDEAS and EMOTIONS, not just words. You want to get the comprehensive picture, not just isolated bits and pieces. And notice nonverbal language. A shrug, smile, laugh, gesture, facial expression, and other body movements often speak louder than words.
• Use interjections. An occasional "I see," or "uh uh," or "Is that so" shows the other person you're still there, still engaged - but don't overdo it - Don't use interjections as meaningless conversation filler. Just make sure that you're using interjections to let the other person know you're tracking with them.
• Turn off your own worries. Personal worries and problems not connected with the issue at hand can form a kind of "static" that keeps you from hearing the other person's message. So whatever else might be going on in your life - check those problems at the door.
• Take notes. This will help you remember important points. But be selective. Trying to take down everything that's said can result in being left far behind or retaining irrelevant details. But when an important point is made, make sure you write it down.
• Prepare in advance. You should have a PLAN for questioning prepared in advance - this frees your mind for ACTIVE LISTENING. A Questions "MAP" or checklist of items you want to discuss and clarify can help keep you on track and insure that your ACTIVE LISTENING effort pays off.
• Ask REFLECTIVE questions - If there are any issues you are uncertain about, or comments that aren't clear to you, repeat back what you just heard and ask if you understand correctly. This can often quick clear up miscommunication that stems from different interpretations of words and phrases.
• Listen for the other person's particular LANGUAGE and communication style; their words, phrases, ways of expressing themselves - and to the degree possible, without mimicking or obviously imitating them - use their language.

Client Negotiations: Negotiation Power, Part 2

This week we will focus on increasing your negotiation power by recognizing some common buyer's tactics used to negotiate price and other concessions. When a buyer is determined to negotiate a better price, you will typically hear them say things like:

• "I appreciate all the work you put into your proposal. We're required to get competitive bids so I'll give you a call after we've talked with everyone else."
• "Your quote is close, real close . . .there are just a couple of minor issues we need to address . . ."
• "This past year was a bad one; sales are way down, competition is relentless and we're downsizing." Used to gain special considerations because of conditions beyond their control. You might want to run a credit check on these. 
• "Your proposal looks good, I'd just like for you to make a few minor changes." Don't give in too quickly because once you jump one hurdle, they often become more frequent and higher. 
• "I don't know anything else I can do. We seem to be at a standstill; you've got to help me out on this one." This tactic appeals to the seller's ego; mighty mouse will save the day. 
• "We think our requests are fair & reasonable. As long as your prices are in line, everything should work out just fine." Most everyone wants to be fair and reasonable; the danger here is that there is no universal standard for "fair and reasonable". The buyer is asking the seller to meet their standards. 
• "You might have to give up a little now, but think about the potential benefit of having us as your customer." An enticement to give concessions now in exchange for possible future business. 

Counter-tactics for Sellers

You can use the following counter-tactics to increase your negotiation power, protect your profit margin and at the same time build better relationships with your customers. 

• Limited Authority: "Because the installation schedule involves so many people in addition to myself, I can't make any changes in the schedule without the approval of service, installation and management."
• Competition: "It's important that we reach an agreement today if you need the system by the end of the month. There's a lot of demand for our product right now; and I don't know how long I can guarantee this price and the delivery you need."
• Never Get Approved: "Mr. Jones, I'll pursue any avenue you want on your behalf; I should tell you though, that a 90-day same as cash purchase plan would just never get approved"
• Helpless: "I don't know anything else I can do. We seem to be at a standstill; what would you like for me to do?"
• Fair& Reasonable: "I want to work with you, I'm just asking that you be fair and reasonable with your requests."
• Public Knowledge: "In order to get a commitment from our service department to meet your installation deadline, I told them that I would have your approval today."
• Deadline: "To be assured of month-end delivery, we'll have to enter the order today."
• Third Party Pressure: "Before I ask my manager to approve this, I need to know that we have a firm agreement, because once this is done, he's going to expect me to bring him a signed order."

Client Negotiations: Win/Win Negotiations

Everyone negotiates. Negotiations are an integral part of our jobs, our lives, and our relationships. We even negotiate with ourselves when we work out the relative value of things. 

Few people understand the negotiation process and the effect that attitude, people skills and dealing with conflict have in a win-win negotiation.  Negotiation is a life skill and an art. As a life skill, you negotiate every day whether you are aware of it or not. As an art, it has to be cultivated and developed over time. Developing a negotiation talent requires turning our thinking around. Learn the secrets and enjoy the process instead of dreading what you might perceive as a conflict.

Today, negative comments and antagonistic attitudes abound about negotiations.  Most people look at the negotiation process as “war”. Negative experiences and pessimistic attitudes lead to negativity and destructive behavior in negotiations. The potential for a positive outcome and the development of long-standing affable relationships is tremendous. Let’s delve into the myths and truths.

What Are The Myths And Truths?

Myths

• We need to take a position and stick to it since the opposing negotiator’s position will be unmovable.
• There can only be one winner and one loser in negotiations..
• If we propose a price that is too low, we will leave money on the table when we negotiate.
• Our opponent always has an extra 15% to negotiate with.
• In every negotiation, the challenger has the upper hand and they will take advantage of us.

Truths

• Viewing the opposition as unmovable will lead to arguments and a “no win” negotiation for both.
• When both parties approach the negotiation anticipating compromise, both win.
• When you focus on getting and giving good value in negotiating, there is no loss.
•  Greedy people get nothing in negotiations. If you try to get every last dollar, you often end up without anything.
• Everyone negotiating has equal interest in getting what they need.  No one dominates.

3 Keys To Getting to a Win-Win Negotiation

In achieving a fair and reasonable price or situation, it’s important to believe you can achieve it. Feeling like you’ve won or lost something only leads to dissatisfaction and poor relationships. There are three keys to achieve that positive desired end state.  

 #1 Key - Create A Non-Defensive Strategy Early

If you establish your main objectives early for price and the conditions, it is more likely you will get the results you desire. If a team of people are involved in the outcome, make sure all members of the team agree on those objectives and that you are clear about what they are. Remember, negotiation is about the situation and price. The conditions of the arrangement are those musical notes that can certainly make your other important objectives agreeable and workable. If you know what you want you can prioritize your requirements. 

Maintain a flexible posture and realize your game plan may need to be revised from time to time. In your negotiations, stay focused on the desired positive end and allow changes that need to happen during the process happen. It’s dangerous to get so entrenched in your plan that you lose sight of the goals. Your objectives must help rather than a hinder.

Key #2 - Connect And Communicate

Many negotiations collapse because people fail to connect and communicate.  These two essential elements of connecting and communicating are so basic and we often overlook them.  Communication requires listening and patience. 

Connecting means you work to find common ground and have the same overarching goal - to come to a mutually agreeable conclusion. These two things involve you and your organization and the other players in the negotiation. When you take a position which closes you to the opposing viewpoint or leave little room for changes to your position, you may win a point but it will likely lead to a less desirable conclusion. When you can view the other party as a colleague you gain tremendous ground. 

It is likely you will meet that person again and need their cooperation. This will put a much different perspective on your communication and connectivity.  

Key #3 - Attitude And Consideration

In any negotiation, begin by clearly understanding both your position and your opponent’s position.  Do your homework - be prepared. Be open to understanding and internalizing both sides of the situation. You will better understand your opponent’s situation and the process will advance more smoothly. 

One prescription for losing is to take a position without listening to the other side. Approach the negotiation table with a positive attitude. Your attitude is often conveyed to the other party within the first few minutes of shaking hands.  Attitudes are infectious and will permeate everything you say and do with you’re your team and with the other team. Negotiating is about both sides feeling satisfied. Be considerate of the other side’s feelings and the work they did preparing. If you are thoughtful, you will chart a successful outcome. Guaranteed!

Easy to Implement Preparations for the Negotiation

Preparation for negotiation is simple. It’s all about homework, people skills and attitude. Technically, you need to become familiar with the product or service you are negotiating about, how you arrived at your price, potential terms, the anticipated schedule, and the work requirements, products or services you will be expected to deliver. It is even more important to refresh your people skills and prepare your attitude.

The Truth About People Skills and Right Attitude

The truth is all of your technical knowledge is not valuable without the people skills and the right attitude. How do you prepare?  Start by refreshing your people skills and renewing your attitude about yourself, your team and the opposition. Practice listening. You can rehearse with a colleague or friend to find out how well you listen. It just a takes a simple exercise. Practices by listening to a colleague recite a simple story first and when you have listened accurately, graduate to listening to your friend restate your opposing viewpoint. Interrupting the other person is not allowed. This is key. Restate what you heard and find out how accurate it is. Find out how well you listened and conveyed their viewpoint. 

Dogmatic attitudes about your team or your opponent will get you to a standstill.  Check out your attitude with people you trust and who will give you honest feedback. If it’s unbending, then fix it.

What you want and what the other party wants is not all black and white.  The gray area is where most misunderstandings happen. Work to understand what the fuzzy areas are and accept that you probably won’t get everything you ask for.  Again, engage a friend or colleague to discuss a simple opposing viewpoint. Find the “gray” areas and investigate what the possible positions might be. Separate your possible positions from the real needs. It is much more fruitful to focus on the real needs of all parties. Anytime, but more importantly in negotiations, posturing is a waste of time and energy.

It is extremely important to be respectful of the other person. Strike a balance between overpowering and giving way on all points. Be mindful of their position and the effort they have made to prepare. Afford the other person the same respect you would want afforded you.

Be gracious. You don’t want to be enemies, but you also don’t have to become fast friends. Hostility and rigidity have no place here. When you approach the negotiation with a friendly attitude you do attain good results.

These skills, when learned, give you almost an unfair advantage over your competitors, with whom you will be negotiating.  They are simple skills but when cultivated and used wisely, you will be surprised at the results.

The Importance of Your Team

Sometimes, negotiations are large and complex and require a team of experts. On large or important issues, it is more difficult to make negotiations work smoothly, without a team working with you. At other times, negotiations are less complex and the stakes are modest. If it’s just you on an important personal item or issue, engage some trusted friends or colleagues for their advice or to actually accompany you to your negotiation. If it’s a major company project, include the senior organization official, project manager or technical leader, pricing guru, and a member of the technical staff as players. 

If you are not an experienced negotiator, you should also include an experienced mediator on the team as well. All of these people may not be active participants but you need their advice and counsel to develop your negotiating position and game plan. 

Negotiations are not simply about the price or terms. You may encounter issues requiring technical contribution, strategizing, and discussion of specialized points.  The technical people are the team members who will provide the merchandise or service. They understand the technical issues. 

Remember to designate a key focus person who negotiates the business arrangement. That person must maintain control of the agenda and the progress of the negotiation.  Do rehearse your negotiation sessions several times. This will reveal difficult issues and allow players the opportunity to practice their roles.  Explore alternatives, discuss merits and weaknesses of your game plan with your team, and assign responsibilities. 

Non-Verbal Cues

Nonverbal cues are the little things that help you understand what is not being said.  These are body language signals (facial expressions, body posture, breathing, sweating, eye movements), placement of players in the room during negotiations, and other pieces of information that you may have noticed from telephone conversations or E-mail messages. It is almost impossible to monitor all of these. Generally, nonverbal cues are the kinds of things your subconscious mind sees and creates a database of information about before you even know it. Pay attention to them as you assemble your team and commence discussions before negotiations.  Also, discuss what you have sensed whenever you take a break during negotiations.  It may give you a few clues to adapt to the situation.

Be aware and sensitive. Awareness and sensitivity skills are the most difficult to cultivate. This is a virtual sixth sense about your surroundings and undertones. You can rely on intuition polished from all of your experiences. Being aware and sensitive means seeing other people’s reactions, listening for the volume and intonation messages, and, most significantly, letting your inner voice tell you what to do “that’s the non-verbal conversation. Rely on it. 

When to Say “Break Time”

It is important to recognize that some negotiations do not get finalized quickly.  Some stretch out over days, weeks, months or even years. When is it time to "take a break”, several indicators will mean you ought to take five. These warning lights will help you keep your cool. 

• When the discussions get overheated.  Let the coffee machine do it’s magic or take a walk in the fresh air.
• When people on either side seem to have some thoughts that would be important to discuss behind closed doors. Remember, you can call a time out when the other team looks like it needs to caucus. It shows you care about their need to take a time out. 
• When 50 minutes have elapsed since the last break. No one is productive without a break at 50 minute intervals. This is not unproductive time. A great deal gets resolved when you just “walk around”.

Have Fun When You Can

I cannot stress the importance of keeping some of the moments easy going.  Lighten up. When it is appropriate, sometimes introducing a humorous comment can break tension. You can tell a suitable occasion if you are sensitive both people and proceedings. Negotiations don’t always have to be serious.

Keeping the Relationship Long After Negotiation Are Over

Surprise! You may, and probably will, encounter the same players again in another setting, at another time. It is also possible they may be on your side the next time.  When you have a positive attitude during negotiations, you foster cooperation during the project, and, potentially easier negotiation next time. It is vital to continue relationships after negotiations are over. Maintain contact on a regular basis and see how the project is proceeding from their point of view. 

The negotiation lyrics are “you can’t always get what you want, but if you try sometimes, you get what you need”.  Negotiations are about give and take. It’s about feeling good when you leave the table. The compromises and decisions were agreeable to both parties. Victory is achieving a mutual positive outcome.  

By understanding the negotiation process and by developing and implementing a plan that works means you will be well-prepared. You will know how to understand your opponent’s position ahead of time and become masterful at considering the options.

Client Negotiations: Situational Strategy

"Never go into a negotiation without knowing what you want to achieve and how you intend to accomplish it."

In a negotiation your strategy is your game plan or basic approach. Effective negotiators have to be "situational" negotiators; they are prepared to adapt their strategy to fit the situation. When assessing what approach to use, they consider five key questions:

Is there going to be a continuing relationship?
In a one-off deal where you never expect to meet the other side again, the incentives to be open and behave reasonably are less than in a situation where you know you have to, or want to, do business with the other party again.

Most people, for example, are more open and reasonable when selling a car to a friend or relation than they are when selling the same care to a stranger whom they never expect to meet again.

Even the most committed win-win collaborative negotiators turn into hard competitive bargainers when they become tourists in the markets of Hong Kong or Mexico.

What are the relative strengths of the parties?
The difference in strength between the two parties, or the balance of power as some negotiators call it, can strongly influence the approach.

If Barrington Industries for example, happen to be the sole supplier of a basic component essential to the success of your business, then they are in a strong position to adopt a tough line in any negotiations with you. It is, therefore, in your interests to cultivate an harmonious working relationship.

If, on the other hand, you can choose from numerous suppliers, then you are in a much stronger position and can afford to adopt a much more competitive approach.

How much trust exists?
A win-win strategy requires a high degree of trust and openness. This usually takes time.

At times you will also have to negotiate with people who have proven themselves untrustworthy. With untrustworthy or unreliable clients you have little choice but to adopt a tougher, less open, approach.

What do we know about the personality and style of the other side?
Like it or not, there are negotiators who simply work for their own interests, view negotiation as a power struggle and care little for the needs of the other side. They are ruthlessly competitive, abrasive, are essentially untrusting and are prepared to win at any cost. With such negotiators, your approach has to be more competitive and less reliant on trust than it is with a negotiator who uses a cooperative style.

Highly cooperative negotiators, on the other hand, are sensitive to the needs of the other side. They emphasize problem solving, aim to maximize joint gains; focus on common interests, not differences; are non-confrontational, non-argumentative, and apply standards of "fairness", "commonsense" and "reasonableness".

Cooperative negotiators often worry that they risk being exploited by competitive opponents. While this sometimes happens, you quickly learn to adjust your style. Similarly, competitive negotiators who lose business because of their aggressive style soon learn to adapt.

How much time is available?
Time is a key strategic variable. Negotiators under time pressure lower their aspirations and concede more. The side with the time advantage can therefore adopt a tougher, more competitive approach.

While this can result in a short-term victory, the long term consequences can be costly. Highly competitive tactics undermine the trust and goodwill needed to build a long-term working relationship which needs time and nurturing to develop.

In short, to succeed as a negotiator you have to be flexible. Your strategy depends on the circumstances and issues of the negotiation. Nevertheless, don't forget that your goal should be to resolve the conflict in a way that leaves both sides satisfied and committed.

Client Negotiations: Maximum Congruent Expectation

Once two parties engage in a negotiation and state their opening positions, both parties start to calculate the mid-point, and tend to naturally (often unconsciously) MOVE toward that mid-point during their negotiation. So a  higher opening position will typically lead to a better outcome for you. While this seems logical and obvious, there is a tendency among many people, when they know little about the other side's expectation, to discount or diminish their negotiation request from the very start. But the less you know about the other side, the HIGHER your initial position should be, for two reasons:

1. You may be off in your assumptions. If you don't know the other person or his or her needs well, they may be willing to pay more than you think. If the other party is selling, he or she may be willing to take far less than you think.
2. If this is a new relationship, you will appear much more cooperative if you're able to make larger concessions. The better you know the other person and his or her needs, the more you can modify your position. Conversely, if the other side doesn't know you, their initial demands may be more outrageous.

The term “maximum congruent expectation” refers to the most that you can ask for and still have the other side see SOME plausibility in your position. This is an important concept designed to help you aim higher in your negotiations. In other words, open the negotiation with the most extreme position that you can present as a plausible position, based upon YOUR reasoning. The other party doesn’t have to agree with your logic or rationale (they probably won’t) but it should be clear that YOU believe it. Your congruency is vital here, because if the other party perceives that you have opened with an extreme position as a negotiating tactic, much of the effectiveness will be lost.

It will usually work against you if you start with an outrageously high or low position that has absolutely NO logical foundation, and your attitude is "take it or leave it." You may not even get the negotiation started—the other person's response may simply be, "Then we don't have anything to talk about." But you CAN get away with an outrageous opening position if you imply some flexibility.

Another advantage of asking for more than you expect to get is that it prevents the negotiation from deadlocking. Sometimes it serves your purpose to drive a deadlock, but most negotiation deadlocks are created inadvertently. This happens because one or both parties didn't have the courage initially to ask for more than they expected to get. Therefore, they both START the negotiation at their true, final, inflexible bottom line. If there isn't a quick deal, neither party has left "wiggle room" to negotiate further.

A final reason you should ask for more than you expect to get is that it's the only way you can create a climate where the other person feels that he or she won. If you go in with your best offer up front, there's no way you can negotiate with the other side and leave them feeling that they won.

Key Thoughts

• Skilled sales negotiators ask for more and they receive more. They begin the negotiation with their Maximum Congruent Expectation.
• Skilled negotiators have clear, specific resolution goals and coherent strategies for attaining their goals.
• Effective negotiators tend to make initial offers that are high, yet can reasonably be justified, and which will still leave them room to negotiate to their resolution goals.
• No deal is better than a bad deal. If you cannot bring a negotiation to a successful resolution that is truly beneficial for you and your company, then the best outcome MAY be to walk away.
• Effective negotiators know the value of asking for more than you expect to get. It's the only way that you can create a climate in which the other side feels that he or she won.

Client Negotiations: Dealing with Pricing Pressure (Even More Tips)

The previous two weekly reinforcement messages offered tips and techniques for negotiating against price and discount pressure – this week we offer more information on this important negotiation topic:

Price and discount pressure is an unavoidable part of selling in today's competitive environment. With good planning and an effective negotiation strategy you can minimize price concessions, and increase both your sales volume and profit margins.

Exchange price concessions for true commitment.

When a customer asks for a price concession or discount some salespeople give in with the assumption that this will satisfy the customer and close the negotiation. But many salespeople discover after offering a price concession that rather than a closed order, they end up with even more price pressure. The customer thinks, "I got 8% out of them...I bet I can get at least another 4%!"

When a customer asks for a price concession or discount, experienced negotiators deal with this by TRADING price concessions for something else of value-a larger order, longer contract, or at the very least a firm commitment to do business. It may sound like:

• "I can probably come close to that if we extend the contract by an additional two years."
• "You would need to increase the order size by 10% to achieve that discount level."
• “If I'm able to get you the product at that price, we need to know that we have a firm deal. Do we have your commitment?"

You can minimize the likelihood of conceding a significant discount if you avoid negotiating on price alone. Make sure the price or discount is part of the whole package, not a separate negotiation.

Do not negotiate all aspects of the deal, and then focus separately on price. Your customer must be clear from the start that pricing changes as the scope of your proposal changes.

Get More Information

When confronted with price resistance, ask for more data on the underlying problem solved by a price or discount concession, then work to solve it. Seek to understand the true source of the resistance by asking questions like:

• "I'd like to understand more about the issues surrounding the investment level of our proposal."
• "Are you dealing with a budget problem, or is there some sense that our proposal doesn't include enough value to justify the price?"
• "Is it an issue of persuading someone else in your organization?"

 Questions like these will help you understand the basis for the price resistance, and can serve to identify potential solutions that don't require a pricing discount.

Sometimes a customer's request for a price concession represents a non-financial need, such as a feeling of having "won" in the negotiation, looking good to the boss, or feeling more important than your other customers. Often you can meet these underlying personal needs with other negotiables-those which have a higher perceived value to your customer, but low cost to your company.

Uncover the Whole Rationale

If you give a price concession to a customer simply because they say your price is too high, you may find that your price is still too high after you make the concession.

On the other hand, if you get your customer to give you their complete and substantive rationale for the price or discount request, it makes it more difficult to justify further discount requests in the future.

Use "Limited Authority."

Skilled negotiators use "limited authority" to ensure that they do not have to commit immediately to price and discount concessions. The extra time you create by going back to the office to discuss your request with a higher authority can be time spent developing strategies for minimizing the price concession you finally offer.

In addition, you will sometimes discover that the delay you are proposing is unacceptable enough that the customer is willing to settle at the initial price. In these situations, "limited authority" allows you to discover that the price is not as big a barrier to closing the sale as you originally thought!

Next week’s reinforcement message will address the topic of controlling information flow. How to strategically decide which information should be shared, leveraged or closely guarded. And how to GET more information than you give.

Client Negotiations: Dealing with Pricing Pressure (More Tips)

The previous weekly reinforcement message offered several tips and techniques for negotiating against price and discount pressure - one of the most common negotiation challenges for sales professionals.

This week, a few more tips:

Build negotiating space into your proposals

Structure your deals in anticipation of price or discount pressure, and leave yourself space when you hear client price resistance. This may mean a higher initial price point. However, it should also mean consciously increasing the scope of your product or service offering by adding features to your proposal which can later be removed at the same time you cut price. You can then offer to work with the customer to cut scope in an effort to meet the customer's true needs at a lower price. When the customer expects to get less by paying less, price pressure can be reduced. This also tends to reduce the pricing pressure on your NEXT deal with the customer, because you've set the precedent; paying less means getting less.

Some skilled negotiators anticipate price pressure by offering a number of options to the customer, each with a different price. Rather than getting locked into a negotiation over a single price point, this allows the customer to chose between options, each of which has a different price and scope.

Concede slowly and reluctantly

If you have price or discount space, do not give it all away at once. Instead, concede slowly and reluctantly. Inexperienced sales negotiators often ask their sales managers for authority to give an extra discount requested by a customer, then find that when they give it all at once, the customer asks for even more. A skilled negotiator who gets authority to give an extra ten percent discount only offers the client five, then concedes the rest slowly.

Exchange price concessions for true commitment

Inexperienced sales negotiators find themselves giving price or discount concessions, only to discover that they are confronted not with a closed order, but with even more price pressure. The customer thinks, "I got 10% from them...I bet I can get more!"

When the customer asks for a price or discount concession, experienced negotiators deal with this by trading price concessions for major commitments. It sounds like this: "If I'm able to get you the product at that price, we need to know we have a firm deal. Do we have your commitment?"

 

Avoid negotiating on price alone

 

Make sure price or discount is part of the whole package, not a separate negotiation. Do not negotiate all aspects of the deal, then focus separately on price. Your customer (and the purchasing manager) must be clear form the start that pricing changes as the scope of your proposal changes.

Remember, price and discount pressure is an unavoidable part of selling in today's competitive environment. With good planning and an effective negotiation strategy you can minimize price concessions, and increase both your sales volume and profit margin. Next week...even MORE ideas for dealing effectively with pricing pressure.

Client Negotiations: Conscious Confusion

Generally it is more effective to simplify matters during a negotiation and communicate one’s needs, issues and challenges as clearly as possible. However there are times when it may serve your purpose to do the opposite – to consciously confuse or complicate matters for tactical reasons. 

Conscious complication can be used to forestall a deadlock, make the other person work harder, force through a last-minute demand, or retreat from a prior concession. When confusion reigns, apples can't be compared to apples, and cost comparisons become impossible to make. Sometimes confusion is used to determine how well the other person keeps his or her wits under pressure. You can create conscious confusion by:

• Making sudden demands that appear to be inconsistent with your previous position.
• Introducing new issues, concerns or priorities.
• Asking “off topic” questions.
• Making statements or claims that have no logical foundation.

Again, just to be clear, under most circumstances clarity is the best negotiation tactic. But don't be afraid to create a little confusion when you think it will help your position. When the other party in a negotiation seems to be consciously (or inadvertently) creating complexity or confusion, these steps can help:

1. Have the courage to say, "I don't understand."
2. Keep saying "I don't understand" until you do.
3. Insist that matters be discussed one at a time.
4. Recognize that you do not have to talk about things as the other party wants you to. 
5. Start in your own way and get the other party going down your line of reasoning.
6. Remember confusion and complexity can backfire. The other party can become as confused as you are.

Key learnings: Conscious confusion can be an effective negotiation tactic when used carefully and sparingly. Watch for the mistakes you are sure to make when you are confused or uncertain. Your key defense is to never negotiate an issue until you understand it clearly and thoroughly.

Client Negotiations: Aim Higher

As we discuss in our REAL Negotiation training program, having high expectations is one of the fundamental keys to a successful negotiation outcome. This can be challenging for independent training professionals, especially if they are struggling to grow their business. BUt it is important to remember that in sales negotiations, those who ask for more typically get more, and they are less willing to give away large concessions to close a negotiation. 

Unfortunately, many salespeople have unnecessarily low aspirations. Often their low aspirations occur because:

• They don't want the other party (a valued customer or prospect) to think they are being unreasonable.
• They hope to avoid negotiation by opening with a win/win position that the other party will accept readily.
• They don't feel confident overcoming potential objections to their position.

One of the cardinal rules of effective negotiation is that you should ask the other side for more than you expect to get. If you find it difficult to SET HIGH TARGETS when you negotiate, remember three things:

1. Targets can always be lowered, but it is very difficult to raise them once they are known.
2. Low targets limit the "range of reason" within which your sale will ultimately be negotiated. The lower your range, the less you are likely to receive.
3. Communicating a reasonably high target in a negotiation can positively influence the other party's perception of your product or service.

You should feel COMFORTABLE asking for MORE than some people might consider reasonable. As long as you can back it up with some tangible logic and a process designed to move the other party in your direction, your negotiation is more likely to have a successful outcome for you, even if the other party doesn't see your target as reasonable.

Remember, win/win does NOT have to mean meeting the other party half way. In fact, win/win CAN mean getting everything you want. It can mean getting MORE than you thought possible. As long as the other party also receives adequate benefits from the final deal. Asking for more than you can reasonably expect to gain gives you some negotiating room. If you're selling, you can always come down, but you can never go up on price.