What is Negotiation?
“Negotiation is a dialogue intended to resolve disputes, to produce an agreement upon courses of action, to bargain for individual or collective advantage, or to craft outcomes to satisfy various interests.” (Wikipedia)
In business, there is likely to be many occasions in which you will have to negotiate- if you work in sales you will find this task unavoidable. Whilst some professionals may be naturally highly skilled in this area, others often find the process terrifying or at the very least rather uncomfortable.
Invariably negotiation situations are stressful and ineffective processes which leave at least one person feeling as though they ‘lost the battle.’ This is largely down to the fact that one or more of the negotiating parties are seeking a win-lose result in favour of themselves obtaining the ‘positive’ end.
Negotiation in fact has little to do with bargaining, compromise or competition. It is not a verbal or a mental sparring session where the side with the sharpest mind, toughest resolve and most aggressive tactics emerge as the victor. Effective deal makers approach negotiation as a mutual problem-solving process.
In business, you needn’t ‘play hardball.’ There are situations when this is necessary in life- perhaps when buying a house or looking to buy anything of high value in your personal life. In those situations it is not always necessary to preserve your relationship with the seller, however in business it is more often than not critical that relationships are maintained.
Why Do People Look To Negotiate?
As a company (and as people) we look to negotiate when our goals rely upon the cooperation of other people, thus we hope to find ourselves in a position where we have affected our present situation positively. People negotiate (or should do...) so that both sides reach a conclusion that is mutually beneficial.
How to Achieve a Win-Win Result in Negotiation
The important concept to remember when attempting to gain a win-win outcome in negotiation is that you are not trying to get the ‘biggest part of the pie,’ you are simply trying to ‘make the pie bigger.’
Some professionals will undoubtedly enjoy the competition of trying to ‘win’ the negotiation, however this can prove destructive in long term efforts to retain the client’s business. Numerous experts unquestionably agree that utilising a win-win approach drastically increases your chance of creating a deal that benefits both sides of the negotiation and leads to positive long term relationships with your clients.
Top Tips for Creating a Win-Win Resolve:
Don’t focus on price- unless the transaction involves a commodity (such as rice, soy beans or crude oil for example), then price may very well be the predominant issue. Unless your product is a commodity then you do not want to allow your product or service to be viewed as such.
Build value- When the focus on price is eliminated, excellent negotiators know that the best way to offset a concern over price is to build value. This can be achieved by ensuring that you...
Identify a need (and qualify that need). If you are able to communicate that you understand what the needs of the client are and how you can fulfil that need, you will be in a better position to negotiate (If you are unable to discover a compelling reason why your service warrants the full price you charge then unfortunately, you may have to settle for what you can get).
Although reaching a win-win result from the negotiation should be your primary concern it is important to remember the basics of the process:
What does the client want? Although this seems an obvious part of the process, you will be surprised how many times individuals venture into negotiation with very little idea about what the other side are really looking for.
Qualify the negotiation. Is the client professional in his dealings with you? Does he/she have expectations that are unachievable? If your answer to either of these questions is yes you will find it is not appropriate to be negotiating under his/her terms. There may be some instances whereby turning down ‘the deal’ could be more beneficial to you than venturing into something that will leave you at a disadvantage (a win-lose).
Uncover important information. If you have qualified the other person as someone who you wish to engage in negotiation with then gather every bit of information you possibly can- knowing where you stand will assist you further down the line;
This can be done in many ways but some examples include: What has his/her previous dealings with other companies in your industry been? How did they operate? What did they charge? Has he been happy with the results? Importantly you may be able to find out any critical hidden agendas which will prove to be the pivotal point of negotiation.
Analyse and assess the situation. Do you really need this clients business? Are you likely to be able to add value and fill his/her job orders? What will you gain from making any concessions?
Having ensured you have undertaken the aforementioned steps you would be now be in a position to negotiate effectively and will more likely to gain a win-win agreement- your ultimate goal. Remember, if you are not sure immediately whether you want to go through with a deal you can always delay if you really must- better to put off an uncomfortable deal than agree to something you are likely to regret later.
How to Avoid Discrepancies on Price
Even when we are confident that our product or service will be adding value to the client and their business, sometimes the way in which we convey that fact to the client can let us down in negotiation. There are a number of ways to achieve a negotiation that ‘flows’ in a positive direction...
Having given the client a good idea of how their business could benefit from using your product or service by focussing on the value you can add, you can then avoid conflicts on price by assuming they have already agreed to do business with you. For example “I have shown you how I can assist you in this project, our rates are XXXX, including XXXXX. When would you like me to send over the order?
Often clients are happy with this or at the very least don’t really fancy challenging it. It is important to remain confident with your tone of voice and not pause before moving onto the next question. Likewise though, don’t hurry.
Go In High
Whatever you usually charge, go in higher but fair. Sometimes you will find that the client will be happy with the quoted amount and you will get a great margin, however if it’s too high you will have a high starting rate to negotiate from and will usually achieve the rate you set out to get. Provided you don’t start with an unrealistic rate and you have already communicated what a great job you or your product can do this can be extremely effective.
Money Back Guarantee
If you are really confident in your ability to deliver a great product or service (which you should be!), offering a money back guarantee offer can offset concerns over your competency to deliver (if they are a new client) and will give the person you are negotiating with peace of mind.
Create Problems for the Client
By asking questions about their needs you can create an element of doubt/worry/concern over many issues that they had not previously considered. This will allow you to enter the fee negotiation process in a manner that positions you as a problem solver for their business rather than just giving them a product or service;
Examples of this might be:
How do you think that buying this product could save YOU time?
Have you considered the indirect costs of this service not currently being utilised?
How important is this service to you?
You can also directly ‘tell’ the client what problems not having this service or product is already causing for their business and what that means; “the vacancy you are recruiting for is taking XX hours a week out of your schedule in order for you to deal with the extra workload. The cost of that time will pay for the extra XXX pence an hour on the rate. Plus it will enable you to focus on your job.” You see here you are understanding a problem and communicating how you can fix this problem whilst maintaining a win-win approach to your negotiation.
The Economic Argument
Emphasising the importance of investing money into a product or service in order for the client to receive preferential treatment can often give the client a peace of mind that they are now your priority. This can often be a useful method when it is particularly pressing for them to hire a company to provide a service or to buy a product. It is essential in this instance that this client then becomes one of your ‘A’ clients and of course, that you deliver!