Let’s talk about the negotiation itself.
What I end up teaching my clients is that they must 1) stay the course, 2) watch their margins, 3) assume the true value of their offering, and 4) be prepared to walk away from a deal that doesn’t work for them.Sometimes this is about confidence, and often it is about not “negotiating against yourself” by offering compromises before those compromises need to be put on the table.
Negotiating is a back-and-forth ritual.You propose the scope of work and set a price.The Big Brand answers back with an objection, or a reduction in scope, or an increase in scope for the same price (called “scope creep” – when the scope of work is allowed to creep up without more compensation), or some vague notion of budget constraints.
Negotiation is a finely paced dance.Here’s what to do:
- Notice the level of the person doing the negotiating.If he or she is not the true decision-maker, make certain to give this person what he needs to make his case one level higher in Management, but save your significant concessions for the real decision maker or the last step.
- If you are communicating by email (not face to face), offer only one concession for each communication (if you can do this without damaging your margins).If you are negotiating face to face, but not with the ultimate decision maker, behave the same way.
- Answer only the questions that are asked, and no more.If you are asked what is involved in a certain stage of work that makes it cost so much, answer that.
- Do not offer to reduce your price, nor to add to the scope of work — it is not time yet for final concessions.
- Do not protest that this amount of work is worthy of the price you have set for it.Just answer the questions, and stand by the value of your offering and its price.Silence speaks of authority.
After the stages of management have done their work, and you are negotiating with the actual decision maker (by email or in person), be prepared to make certain concessions (at this final stage) to close the sale.
But don’t offer any concessions at first.Let the decision maker suggest what he or she needs (it’s the other side’s turn to offer). You don’t know where the pressure points lie.Instead, if the decision maker is not making a counter-offer, but just pressuring you to negotiate against yourself (a tactic to make you cave in), ask a simple but powerful question:“What is it that is holding up the close of this agreement?Perhaps I can help if I know.”
You may very well get an answer that had not occurred to you.For example, the decision maker may say, “We value your work, and need Phases 1 and 2 done during this fiscal quarter.But our budget doesn’t fill up again until next quarter.It is only an allocation problem, but we only have budget for Phase 1 now.”
In this situation, you can offer to accept a purchase order for the full amount, with payment for Phase 1 now, and a delayed payment for Phase 2 and beyond (given you trust the Big Brand’s purchase order, and given that your margins allow this delay).This pays the full amount, maintains your value pricing, establishes that value and price into the future, and only delays a partial payment.
Similarly, you may re-configure your product mix, or the territories to which you initially deliver, or create a rollout strategy, to allow the sale to close while protecting your margins.
If you don’t ask, you won’t know how to offer the solution.
This is part 2 of a 4-part series of weekly posts on the Tactics of Successful Negotiation:1) Standing up for your value;2) Learning the pace of negotiation;3) Overcoming your demon voices; and4) Coming from Abundance–the real power.