Negotiating - The Myths and Realities
We have all been there at some stage in our business lives - the dreaded negotiation with your most awkward client. He regularly screws you to the floor each year on price and everything else you have to offer! Pretty quickly you see every negotiation as a battle and all your self confidence goes.
There are a lot of myths surrounding negotiating which don't help if you are faced with handling such a session for the first time. But as with any myth, there is usually a very different reality.
Myth: It can be a daunting ordeal
You mention to your trusted partner or member of staff that you are off to negotiate next year's big contract. What do they say? "Good luck!" The majority of people think that negotiating is a dirty and tough task, a necessary evil.
Reality: Not if you plan
As with all things in life, we fear the unknown, especially if we are unprepared. The reality of negotiating is that with adequate preparation comes confidence. Before your meeting sit down and ask yourself the following questions:
- what do you want out of this negotiation?
- what is your lowest, acceptable and best price?
- what are you prepared to 'give away' if necessary?
- what do you know about the other company's position in the deal?
- if you don't know much, what questions can you ask to improve your understanding?
Thorough preparation is a great confidence booster. See the negotiation as a presentation and plan your approach and questions before hand.
Myth: Negotiators are born
There is such a mystic surrounding negotiation and the skills needed to be good at it, that most people think you either have it at birth or you don't!
Reality: Negotiators can be made
Like any skill in business, negotiation skills can be learnt and put into practice. There are lots of books, tapes and seminars you can attend on this subject. Negotiation is a structured process and once you understand how it all works the task becomes easier. But as with any new skill you have to practice, practice, practice and this is where most people fall down. Having acquired a new skill you have put in the training but it can be done!
Myth: To strike a deal you have to concede on price
The perception is that many negotiations end up with one of the parties always having to concede on price just to secure the deal.
Reality: There are other items you can concede on
The reality in any negotiation is that price is not always the deciding factor. There is usually something else that the other party wants in addition to, or instead of, a lower price. It could be that they need the product or service quickly and may be prepared to pay a premium for a fast delivery. They may want the product changed slightly to meet their specifications. They may like some on-site support for implementation.
In your research and questioning it's up to you to find out what they really want. Dig deep and find it because every part of the deal is negotiable, not just the price. Once you have hit upon it, before conceding on price, throw it into the pot. Remember, this could be something which means very little to you but a lot to them.
Myth: If their first offer is what you want, say yes
After your sales pitch your client comes back and immediately offers exactly what you wanted. Wow, what a great outcome! He's got what he wants and so do you. Deal done!
Reality: Always counter the first offer
If you accept immediately there are two problems:
- your customer will think he has had a bad deal, "He accepted straight away! I could have had a much better deal. I'm sure I went in too high." With these thoughts going through his mind he won't feel totally happy with the deal and the chance of cancellation or no future business is higher
- it's likely that this your customer's opening bid. Opening bids are usually on the low side and used as a starting point. Accepting now, even if it's what you were looking for, could mean you throwing away a higher price
There are instances where the customer will say "I don't negotiate. This is the price I'm prepared to pay." He has set the rules, so as long as you are happy with the price, go for it!
Myth: Negotiating is a competition with only one winner
If you have a competitive streak this is how you will see a negotiation - something to win or lose. Non-competitive people who believe this myth automatically lower their defences and quickly cave in to the 'stronger' player.
Reality: There should be two winners
Negotiation is not a competition. The ideal outcome should be win-win, where both sides feel they achieved something out of the whole process - one got a sale at a price he wanted and the other got a purchase at a price he wanted.
Win-win outcomes leave the door open for building strong relationships which will lead to more business in the future. Win-lose outcomes mean that one side will be reluctant to deal again. If, by your very nature, you are a competitive person, temper this and accept the reality that the negotiation process has to have two winners, not just you!
Myth: If you walk away, that's it
You have found the perfect product but you don't get the price or deal you are looking for. However, you are afraid about loosing the opportunity so you decide to go for it anyway, at any price.
Reality: Opportunities often come around again
Accepting a deal through fear is not a position you want to be in. You will always have a nagging doubt that you paid too much or gave away something which you should not have. Be strong enough to walk away from a deal if it's not what you are after.
You have to learn to detach yourself from the underlying deal and avoid getting emotionally involved with the product or service. Just concentrate on getting the best result. Being emotionally detached means you can walk away with no doubts. You may find that a few days later the seller will be back banging on your door with another offer. Remember that opportunities always pop up and walking away is not a failure!
So take a fresh look at negotiating. Are you clinging onto old myths about how negotiating should be done? Accept that the reality can be very different!
By Robert Warlow
Small Business Success
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