Tired of getting outmaneuvered on cost? Wondering if clients and vendors are taking advantage of you? Gain back your edge with these expert negotiation strategies.
Facebook CEO Mark Zuckerberg, one of the world’s five richest people, is famously known as a shrewd negotiator. Why is he so successful? Here’s one example.
When the much-celebrated social network bought Instagram in 2012, Zuckerberg hashed out the deal on his patio, while his company’s lawyers sat inside his house watching Game of Thrones. According to The New York Times, Zuckerberg and Instagram CEO Kevin Systrom negotiated one-on-one while they ate steak and ice cream outside. At its closing, the $1 billion deal instantly made Systrom rich, but in the years since has been viewed as a colossal coup for Zuckerberg.
What can be learned from Zuckerberg’s style? Make whoever you’re negotiating with feel at ease. Negotiate in a non-traditional setting when you can. And frame each deal as a win-win – with each side leaving satisfied.
It’s that last point that experts believe is the real key to successful negotiation, especially for salespeople. If you’re always trying to come out on top – by asking for favors and concessions – you’ll likely wind up with fewer good deals in the long run. So how can you help orchestrate fair deals that consistently earn you excellent outcomes? Turn the page to get expert advice as you go inside the minds of top negotiators.
Set Goals & Understand Concessions
It was a $50,000 order he didn’t want.
Sounds ridiculous, right? What distributor wouldn’t desire such a sizable deal? Look a little closer and you get your answer: Despite the five-figure tally, the sales pro working on the order stood to earn only about $1,500. “The risk associated with the order far outweighed the reward,” says David Blaise, co-founder of consultancy Blaise Drake & Co.
Blaise, who recently related the above story, says the slim-margin, high-risk deal is the kind of debacle that can happen when distributors, desperate for business, get anxious in negotiations and agree to terms they should never accept.
To avoid getting caught in such snares, it’s essential to clearly define what constitutes success for you before each negotiation. You then must wed this with an understanding of how you can deliver significant value to the person with whom you are negotiating. “Consider what perceived wins you can provide that allow the opposing party to see you as a means of accomplishing their objective,” says negotiation expert Frank Spano.
Also as part of negotiation goal setting, determine a definitive bottom floor on discounts, add-ons, freebies and other potential concessions – and then don’t dip into the basement if bargaining begins. “You have to know what you’re comfortable with – what you’re willing to work for,” says Blaise.
If a prospect insists on terms that are more than you can concede, then it’s time to walk away. “In our experience, prospects who shop you really hard will always do so, and they’re the most difficult to deal with,” says Renya Nelson, founder of Brand+Aid (asi/145193).
Quote Above Your Bottom Floor
Nervous they’ll get beat on price, novice sales professionals sometimes offer lowball quotes that leave them with virtually no margin. But doing this puts you in an impossible position if price negotiations begin – and leaves you with little net even if you get the business.
Instead, says Blaise, provide quotes that exceed what you’re willing to take, while keeping them in the realm of reasonable cost-competiveness. Sometimes, buyers bite. Other times, they may contest the price, but now you at least have room to come down a bit and still earn a commission with which you’ll be pleased.
While leaving yourself wiggle room is wise, you shouldn’t automatically retreat on price. Be proactive and engage clients in meaningful discussions that illustrate how the solution and services you’re offering will benefit them. “We emphasize our service, the creative ideas we bring to the table and how we’re going to be there for them every step of the way to make sure everything is done exactly the way they want it,” says Nelson.
Make Negotiations Collaborations
Vladimir Gendelman’s negotiation strategy sounds a bit like a Zen koan.
“The most important rule in negotiation is that you must never think of it as negotiation,” says the CEO of Company Folders and Printwand (asi/287795). “Instead, think of it as collaboration.”
To reframe the negotiation as a collaboration, don’t go on the offensive. Rather, redouble your efforts to better understand the other person’s needs and wants through open-ended questions, good listening and insightful responses. “When they see you’ve taken a genuine interest in them,” says Gendelman, “their comfort level will go up, making them more likely to reach a mutually agreeable decision.”
For example, Gendelman was recently trying to complete a sale of presentation folders to an ophthalmology office. The purchasing manager, however, said she had found folders for a lower price from another vendor. Rather than bash the competitor or simply drop his price, Gendelman asked more questions of the buyer to determine exactly what she wanted the folders to do for her office. He then demonstrated how his solution was best-suited to facilitate those uses, even though his price was a smidge higher.
“Because I cared enough to invest time in understanding her needs,” says Gendelman, “the purchasing manager chose my product over the cheaper one.”
Analyze The Counteroffer
These days, most of Nina Shatz’s price negotiations begin with an all-too-common question from buyers. “I found this cheaper online. Can you beat this price?”
While the query can be vexing, Shatz implements a calm negotiating strategy that includes analyzing the online competitor’s offer to see if it’s really all it’s cracked up to be.
A short while ago, Shatz received an email from an event planner. It contained a link to an online vendor selling beanies at a price that would have left Shatz, a brand development director at HALO Branded Solutions (asi/356000), with no margin. Still, Shatz investigated and found that the buyer would only get the low price if she ordered at least 96 beanies with a logo that required 5,000 or fewer stitches. Shatz knew that the logo the planner would need stitched for her end-client far exceeded that stitch count – 19,000 stitches, in fact. Plus, she knew the planner only required about 50 beanies. Once the lower-volume order and high stitch count were accounted for, the online competitor’s charge skyrocketed. “The website was going to ding them with a great deal of charges for what they needed,” says Shatz.
True numbers in hand, Shatz explained everything to the event planner. The planner, in turn, explained it to her client, who needed the beanies. In the end, with the help of a supplier who offered competitive pricing on the item, Shatz got the order. Grateful and loyal to Shatz, the planner soon placed an additional four orders with the HALO rep. “In 2016,” says Shatz, “a big part of negotiations is taking the extra step – doing the legwork to understand what you’re up against and how you can help clients.”
When the discussion turns to price and discounts, inexperienced sales professionals can paint themselves into a corner by offering ranges.
Think about it: If you admit you can probably knock “5% to 10%” off a price, what buyer isn’t going to push for the 10%? Similarly, providing “ballpark figures” about how much a project might cost based on vague information from a client is unwise. Once you do, you risk tying yourself to that range, even if the client’s actual desired solution warrants a steeper charge.
Stay out of the range trap – and in a strong negotiating position – by bargaining with solid, realistic numbers.
Present Multiple Solutions
Jennifer Powell believes in the “rule of three.”
By this, the senior account manager at InkHead Promotional Products (asi/231159) means presenting prospects with at least three potential solutions during a negotiation process – options that will be beneficial for them and her.
A prospect, for instance, might want a particular item with a full-color imprint, but the InkHead rep knows it would be impossible to complete the order in the tight timeframe the would-be buyer is demanding. Instead of turning the prospect away, Powell presents three alternatives, striving to negotiate a remedy that will work for the buyer and allow her to fulfill the order.
In such a scenario, the options could be: offering to provide the product in question with a one-color print by the asked-for date, perhaps with rush charges included; delivering the desired product in full color as close as possible to the stated date; or even suggesting a similar product that could be completed with full-color imprinting in a timeframe that’s closer to what the buyer wants. “Typically, we get a good response and come to a workable solution,” says Powell.
Presenting options can be wise when prospects contest price, too. You could, says Blaise, show less expensive comparable products. Even better, get the prospect to buy more of the items if doing so will lead to a bulk discount that lowers the per-item cost. To accomplish the latter feat, suggest novel ways clients can use the product to promote their brand beyond what they initially imagined.
“Maybe they want 300 of something for a trade show, but you can tell them how by ordering more they’ll get a discount and also get to use the product in direct mail campaigns and give them to their salespeople to hand out on calls,” says Blaise. “That increases the value of their investment, brings the unit cost down and earns you a larger sale.”
Be Quiet After Achieving Your Aim
Sometimes, silence really is golden – or green, as the case may be.
Linda Swindling, a negotiation/communication strategist, says that once you bring the negotiation to a successful conclusion, be careful not to talk your way back into the mire. “If you have achieved your objective in a negotiation, then be quiet,” says Swindling, author of “Negotiate Like A CEO.”
Swindling encourages salespeople to resist the urge to let off steam and make small talk. “It’s important to be quiet because anything you say can cause the other party to change their mind,” she says. “Politely part company, leave the room or end the phone conversation. Being quiet keeps the relationship positive, with both parties happy and in agreement at the end.”
Follow-Up Politely After A Fail
You know that saying, “You can’t win them all”? Boy, does it ever apply to negotiations.
Sometimes, for instance, a buyer is going to go in a different direction despite your best efforts. But rather than writing the relationship off, Shatz says you should follow up with a polite email or handwritten note. Tell the prospect you’d love the opportunity to work with them in the future. Say you hope everything went well on the order.
“People don’t expect you to be positive to them in that situation, but when you are it can re-open the door and help you get business down the line,” she says. “There’s even a percentage of the time that you find something went wrong and the buyer says, ‘I should have gone with you.’ Now you have a chance to build the relationship and be their hero on the next order.”
Bonus Strategy: Offer Suppliers Something In Return
Need to negotiate pricing with suppliers? Be a true partner and give in order to receive.
That’s the approach Josh Frey takes. If the veteran distributor asks a vendor for pricing help that will allow him to better compete for coveted business, he is sure to offer something in return. For example, he might propose to run special promotions on suppliers’ products, a tactic that generates business for the vendors, helping them make up revenue they may have lost as a result of the price concession for which Frey asked. “My golden rule is to make it a win-win,” says Frey, founder of the Swag Coach Program, an industry model that teaches others how to start a distributorship.
Of course, it’s important to build relationships with suppliers before asking them to move on pricing – something that helps significantly come negotiation time. One creative approach Frey has taken to cultivate goodwill is to hold sales contests in conjunction with vendors. He challenges his sales team to see who can sell the most from a supplier’s line during a set period. Last summer, a contest generated $85,000 worth of sales for a supplier. Not long after, Frey had an opportunity to secure a lucrative apparel order from a professional sports team. To win the business and still make a margin in a cost-competitive environment, he needed the same supplier to give him great pricing beyond its listed charges. Because of the amity and hard cash generated by the sales contest, the supplier was willing to help. “We got the business,” says Frey.