One of the biggest mistakes sales people often make is confusing ‘negotiations’ with ‘discounts’. Offering discounts is fine, so long as you know you are giving money away. Negotiation is about give and take…on both sides.
Thousands of articles and books have been written on negotiation, and it’s impossible to cover this immense topic in a few lines. So this is a collection of thoughts that I hope give you an edge.
People usually associate ‘negotiation’ with ‘discount’, and it’s true that price and in particular a reduced price often form a key part of most negotiations. But if you are going to negotiate away the price, decide what you want in return. For example, for a lower price, you might ask the customer to commit to a larger order, get them to collect the goods rather than you shipping, pay up front, be a reference site for you or whatever. That’s negotiation. Make sure your team is clear on the points they can negotiate on.
You may decide after all that that your only option is to drop your price. If you do, be clear within your team that this is what you are doing, and don’t fool yourselves by calling it ‘negotiation’! One of my clients now uses the term ‘give away’ internally if they are in fact giving discounts away. It’s a good idea, as otherwise the negotiation / discounting confusion creeps back in.
If you have looked at the previous articles in this series on ‘Competing on price?’ you will have done lots of the work that shows you where you and your customer stand. By now you should have a clear view on how and why you are better than the competition, and how important you are to your customer. The better a job you do at understanding your customer, the more they will want to work with you. If you understand what options they have, you will find yourself in a stronger negotiating position. The good negotiator is clear on what alternatives they and their customer have.
A great tip I always share with my clients is to ensure the other person is investing more time and effort into the deal than you are. For every action you commit to as part of the negotiation, give him two to do. That way, it makes it harder for them to walk away from the deal because they have skin in the game.
Another point is not to give anything away up front. Discounts that are included in an initial bid are soon forgotten when it comes to sealing the deal. Some people refer to this as ‘keeping their powder dry’.
Take action: Be clear on what you and your team can negotiate on. What do you want in return? Make sure you have options, and be aware of the alternatives your customer has.