Smart buyers will always ask for a better price. Unfortunately, too many sales people and business owners automatically think that reducing their price is the most effective way to respond to this request.

However, negotiating is not always about price. Although price is a factor in virtually every sale it is not usually the primary or motivating factor. Everything you say and do from the first contact with a prospect affects the value of your product or service in their mind. That’s why I believe it is important to look at the negotiating process differently in order to achieve better results.

First of all, invest time gathering information about your prospective customer, his needs, situation, and buying motives. The more information you have the more prepared you will be to negotiate later in the sales process. Regardless of what you sell, and to whom, information will help you negotiate more effectively. Many of my clients tell me that their customers care only about price, but upon further exploration, other issues usually arise. Uncovering the key issues your customer is facing is critical to your negotiating success.

The second most important step is to establish the value of your product or service to your customer. Positioning is an important factor and will affect the price your customer is willing to pay. What pain does your product or service eliminate? How does it solve a problem they are experiencing? How do your products and service differ from your competitors? Most of my clients sell premium products at a premium price. In exchange, their customers receive better than average service, faster response times, or higher quality products. What is your leverage and how can you use it to increase the value of what you sell?

You have executed the above steps but price is still an issue for your customer. What do you do now? Instead of conceding to their request and giving them a discount, focus on creating a trade. This means you should ask for something in exchange for making a concession. What can you trade or ask for? Almost anything!

A longer contract, a bigger order, more add-on items, an introduction to another key decision-maker in the company, access to their mailing list or client database, or payment terms. You can negotiate for products and services that the other person or company offers such as consulting, office equipment, computers, furniture, business services, etc. I once worked for an electronics company and my boss offered a big-screen as payment for services to a potential vendor. I was shocked when the vendor eagerly accepted because I always had the impression that business people focused strictly on cash.

Here are a few ways you can effectively position this request.

“If I could do that price for you would you be willing to extend the length of the contract for an additional three months?”

“If I could work that out would you be prepared to give me advertising space?”

“The only way I could give you that is if you add one more line of products.”

“Let’s put that aside for the time being. Would you be able to give a similar amount of…in exchange for that concession?”

The key here is to think outside the box and explore other options available to you.

I recall speaking to a prospective client about a training workshop and was asked to make a concession that amounted to a fifteen percent discount. I was not comfortable with this so I asked my prospect if he would be willing to give me a comparable amount of his product instead. He did not have the authority to make such a decision but spoke to someone who did. My request was eventually denied so my client conceded to my initial offer.

Another effective approach is to make the concession but take something away from the initial offer. For example, you could say, “I can do that. However, I will have to charge you for…” or “I can do that. Do you want free delivery or after-hours service taken out of the contract?”

Most people will expect you to keep all the conditions “as is” but they will want the lower price. By demonstrating how much the concession is worth you can reduce the effectiveness of their request.

Finally, another strategy is to always ask for something in return for making a concession even if you don’t need it. I have been surprised how many times I have gotten something extra simply by asking. Plus, it often prevents the other person from asking for an additional concession because they know you will ask for something in return.

Remember, your ultimate goal is to give away as little as possible in order to close the sale. Every time you discount your product or service you discount yourself and eat away your profits.

© Copyright 2004 Kelley Robertson

The hardest and most important part of any negotiation is knowing when to walk away.

Few things are sweeter than a successful negotiation session where both parties leave the table with a winning solution. That’s because the stakes are high: Negotiate too hard and you lose the deal; be too timid and you may not get what you want.

The three most important concerns in any negotiation are the relationship, the risk, and the value–the real decision criteria underlying any future business transactions. So whether you’re negotiating a salary increase with your board or a contract with a vendor, before beginning the process it’s critical for you to cross three essential mental bridges:

1. Clarify the relationship. “What is the current real and perceived business and personal relationship, and what is its true value to my credit union’s future?” Far too often people hold on to the past not realizing that they need to let go to be free to reach out for something better.

Carefully consider what could be lost in this negotiation, but also what new doors may open should there be successful negotiation. Too many business leaders continue with existing relationships beyond their prime simply because it’s easier and more comfortable than striking out to develop a new relationship that better suits their organization’s future.

2. Clearly structure the outcome both parties desire. Very often, people enter a negotiation with the drive to win, but they never commit to paper beforehand precisely what that means. Yes, they have a general idea (to place the contract at the best price or cost); however, they haven’t defined the optimal combination of price/cost and all other terms that reflect both parties’ best long-term interests.

Identify what it will take for all parties to believe they’ve been treated fairly. Outlining what each party should view as a “great deal” often leads to the optimum win-win agreement. After all, negotiating is merely a more formalized variation of common marketplace bartering. It’s all about give and take and each party’s perceptions of value. You offer. They counter. You respond. And so it goes.

3. Determine your walk-away point. The hardest and most important part of any negotiation is knowing when to walk away. Decide when you’ll walk away from the deal before the negotiation process, because it’s difficult to identify it in the heat of the negotiation.

It’s important to approach your walk away point calmly, as negotiators truly need to understand what each side requires to make it a “great win-win” agreement. Then, if the other side becomes unreasonable and prevents your desired outcome from happening, weigh the predetermined value you placed on the relationship as well as ask the question, “Do we really have a mutual relationship or merely one party taking undue advantage of the other?”

Once you’ve laid out the previous three steps you can begin negotiation, realizing that at times the process requires the patience and confidence to be still. For example, if the other party precipitates a long silence then wait, say nothing, and let the other party break the silence.

While it’s important to hold out firmly for your high priority/risk issues, holding out for a lost cause isn’t in your best interest. Know when to give in on a point. If it’s not a walk away issue, then concede and negotiate onward.
Most important, realize when you’re approaching the walk away point. That will help you try and steer the negotiations away from falling unnecessarily into a downward spiral, where relationships deteriorate and from which it’s often impossible to recover.

Copyright 2005 by John Di Frances.