Negotiation Skills | 8 Basic Rules Of Negotiation
The art of negotiation is not exact science, so there’s no proven formula for success. Having said that, negotiating is a tad like chess. There are rules to follow.
The foundation principles below have served me well in past and current negotiation situations:
- Discounting or dropping your price should be the LAST resort, not your first tactic. The price should be the last thing you negotiate on, not the first. Negotiating is not about price alone. If it is then you are simply ‘haggling’, which is a very high-risk strategy that will not help you build a long-term relationship with the person you are interacting with. If your customer is putting you under pressure to drop your price however, consider the following:
- Successful negotiation is a process of addition NOT subtraction (see ‘haggling’ above). Many people believe that in order to demonstrate good negotiation skills, they need to be flexible on price or commercials. Trained negotiators often use this perception to their advantage, by heaping more and more pressure on the sales person to drop the price until they reach their bottom line. Make sure you have a selection of ‘options’ to take into your negotiation to help move you from “no” to “yes”. As an example, a far more powerful approach is to consider:
- Instead of lowering the price, what can we add into the deal that will help us reach an agreement?
- What can I vary (payment terms, timescales, volumes etc.)?
- Is there anything else can I ask for?
- What else can I offer to sweeten the deal?
- Negotiating is not about you ‘winning’. If it is, they lose. It also can’t about them ‘winning’, because then you lose. Successful negotiation is where both parties strive to reach an agreement where both parties benefit. Make this your objective for every negotiation.
- Look for creative, third way alternatives to reach a wise agreement that everyone is happy with. Successful negotiators understand that nothing is off the table. Everything and anything is negotiable. When selling to a potential or an existing customer, consider how you can broaden the relationship to give you more power to move the negotiation forward.
- Understand the reasons and thinking behind the other parties requests or demands, since it provides greater opportunity to come up with creative options to move the dialogue towards a positive outcome.
- Have a plan to handle any emotion (yours and theirs) that may arise in your negotiation, as this can derail constructive dialogue.
- Think of what you can introduce into the negotiation to bridge the gap … What can you vary? Is there anything you can you ask for? What can you offer?
- Finally, always have a backup plan in case you can’t reach a good agreement. This would help prevent you from agreeing to something you should walk away from.
Consider the following checklist:
- What else could you introduce into the proposal that would persuade the customer to say yes?
- Use LI-LOs: What could you give away that means LITTLE to you but LOTS to the customer? It also works well in reverse: What could you ask for from the customer that means LITTLE to them but LOTS to you?
- Rather than discounting, ask the customer which element(s) of your proposal would they sacrifice to help reduce the cost.
- Find opportunities to increase the size or scope of the deal. If the deal can be made bigger the ‘unit cost’ may be lower.
Expect the customer to negotiate on price and
make sure you are prepared.