Decreased budgets, increased expectations, pressure on margins – sound familiar?
For anyone involved in sales it will be. With increased scrutiny on any spend and more choice, customers are understandably demanding more for their money from suppliers. This certainly isn’t a new trend, and it’s unlikely to change. In fact, with procurement now involved in most business deals, negotiations are more likely to become tougher.
Successful negotiations provide a win-win situation, with both parties feeling that they have come to a mutual agreement and are comfortable with the outcome. It’s about understanding the key stages to negotiation, being prepared and having the confidence to hold a co-operative discussion with customers and above all, maintaining a positive relationship with your client. So how can you master the art of successful negotiations?
Top ten tips for successful negotiation
1. Understand what your customers really want
When entering into negotiations people often stop actively listening to the other side and can become defensive, which in turn leads to miscommunication. When customers make demands, it’s usually because something linked to that element is important to them but this may not always be clear. Stop and take the time to find out why this is such an important point, ask questions to establish their drivers and any other factors that may influence the negotiation.
2. Differentiate your offer from competitors
It’s the age old adage, but before you start negotiating, ensure the customer is completely clear on your offer and importantly, what makes it different from the competition. If possible, find out in advance who your competitors will be and evaluate your offer against theirs. Be prepared to reinforce why yours is the better offer during negotiations.
3. Understand how engaged the other side are
Ensure the other side are investing as much time and effort in this as you. Ask questions to find out whether they are truly bought in to the process, or if this is just a benchmarking process for them.
4. Be flexible on other aspects of the deal
If you’re used to trading only on price and volume then your discussions will be extremely limited. The more elements of the deal you can alter, the better for both you and your customer. List out as many variables to the deal as you can, thinking beyond volume and price, and why they may be important for the other party.
5. Define your discount limits in advance
In our enthusiasm to seal a deal it is all too easy to over negotiate, damaging margins in the process. Plan in advance your worst, target and best limit on each of your variables and don’t be afraid to walk away. Remember, once a deal is agreed, it’s extremely difficult to alter it.
6. Plan your opening offer carefully
In any negotiation, your opening offer is likely to be rejected at least in part by the other side. Whatever you propose is just a starting point and will be pushed down towards their target. Give yourself enough room to manoeuvre by making your opening offer as high as it can justifiably be without being unreasonable or coming across as ludicrously overpriced.
7. Be prepared to challenge their negotiating process
Have you ever had the feeling that the other party’s negotiation process is not working for you or them? Identify and involve all the influencers and key decision makers as early as possible. Wherever possible make sure it’s not just procurement at the table. Ask questions to challenge their process or criteria if you think it isn’t right for the forthcoming negotiation.
8. Understand your leverage
In any deal, a win-win is the best outcome. This leaves both sides feeling they did well and helps with continuing relationships. To achieve this, you must get concessions from them that they are happy to give. To each concession, there is a cost to giving and a value to receiving. Trade what is of low cost to give but will have high value to the other side, use this to obtain an important concession back.
9. Ensure you are both clear on the deal
This may seem a simple point, but it’s one easily missed. If, after the negotiation, the other side receives an agreement that is not what they believe was discussed then trust breaks down. At the end of the meeting immediately write down the key points of the agreement, read it out to all involved and email it to them. This helps to minimise any misunderstanding.
10. And most importantly, always remember that much of your negotiation success is determined early on in the process before you reach the final contract stage.
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