10 negotiation tips

8. Dezember 2011

English, Management, Strategie

10 negotiation tips, techniques and principles

First and most importantly, positioning is everything in negotiation. The way that the situation is initially approached, and when, are more influential on outcomes than all of the other negotiating tactics and techniques combined.

Rules 1 and 2 are absolutely critical even before you start a negotiation.

1. have an alternative – negotiate with freedom of choice

If selling be unique, and have lots of other potential customers, and so be able to walk away; if buying definitely be able to walk away.

Whether you are buying or selling, if you can’t walk away because you need the deal so badly or because the other side is the only game in town, then you are at a serious disadvantage. If the other side believes you are the only game in town then you have the advantage. No other factor is so important: the more you need to secure the deal, the weaker your position, so avoid negotiating when you need the business badly (for the same reason, never find a new house and fall in love with it before you sell your own). The same will apply to your customer, which is why buyers almost always give you the impression that they can go somewhere else – even if they can’t or don’t want to.

This also means that when selling you must create an impression that there is no alternative comparable supplier. You have to create the impression that your product or service is unique, and that the other person has nowhere else to go. The way you sell yourself and your product must convince the other person that he has nowhere else to go, and that he cannot afford to walk away.

This positioning of uniqueness is the most important tactic, and it comes into play before you even start to negotiate.

If your product offer is not unique remember that you are part of it. You can still create a unique position for yourself by the way that you conduct yourself, build trust, rapport, and empathy with the other person.

Establishing a position (or impression) of uniqueness is the singlemost effective technique when you are selling, whereas denying uniqueness is the most powerful tactic of the buyer.

2. negotiate when the sale is conditionally agreed, not before (if buying the opposite applies)

Negotiate when the sale is conditionally agreed, and no sooner (buyers tend to try to negotiate before giving you any commitment – don’t let them)

Or, put another way, don’t get drawn into negotiating until you’ve got agreement in principle to do business.

If you start to negotiate before receiving this commitment you’ll concede ground and the customer will attain a better starting point. This would put pressure on you to find more concessions later, and ensure a better finishing point for the customer.

If you are not sure that the customer is conditionally committed to the sale, then ask (a conditional closing question), eg „If we can agree the details will you go ahead?“

If you’re buying, then the opposite applies: start to negotiate for concessions before agreeing you want to buy (try this when you next buy something – you’ll be amazed at what you can secure without giving any commitment in return).

3. aim high

Aim for the best outcome (buyers aim low, and they tend not to go first either)

(If you’re buying, aim very – even ridiculously – low – but do it politely.) Whatever you’re doing, your first stake in the sand sets the limit on your best possible outcome. There’s no moving it closer to where you want to go; it’ll only move the other way. Your opening position also fixes the other person’s minimum expectation, and the closer your start point is to the eventual finishing point the more difficult it is to give the other person concessions along the way and ultimately arrive at a win-win outcome.

Many negotiations are little more than a split-the-difference exercise. They shouldn’t be, but that’s often the underlying psychology and expectation. So it’s logical that to achieve the best possible finishing position you should start as ambitiously as you can (without losing credibility of course).

If you have the option to hear the other person’s offer first, then do so. It’s a fact that whoever makes the opening offer is at a disadvantage. If you go first, the other person can choose to disregard it and ask for a better offer. And the other person avoids the risk of making an offer themselves that is more beneficial than you would have been prepared to accept. It’s amazing how often a buyer is prepared to pay more than an asking price, but avoids having to do so because they keep quiet and let the seller go first.

Vice-versa, the seller can often achieve a higher selling price than he anticipates if he hears what the buyer is prepared to offer first.

4. let the other side go first

Try to avoid ‚going first‘ on price if you can. (Buyers will often be trying the same tactic.)

If you know the other person’s starting point before you have to give your own, then this is clearly an advantage to you. For example, if selling, ask the other side if they have an ‚outline budget‘.

Sometimes you will be pleasantly surprised at what the other side expects to pay (or sell at), which obviously enables you to adjust your aim. Letting the other side go first is a simple and effective tactic that is often overlooked.

Letting the other side go first on price or cost also enables you to use another tactic, whereby you refuse to even accept the invitation to start negotiating, which you should do if the price or cost point is completely unacceptable or a ’silly offer‘. This then forces the other side to ‚go again‘ or at least re-think their expectations or stance, which can amount to a huge movement in your favour, before you have even started.

5. list all of the other side’s requirements before negotiating

Get the other person’s full ’shopping list‘ before you start to negotiate (buyers usually do the opposite – they like to pick concessions up one by one – indefinitely)

Establish in your own mind what the other person needs, including personal and emotional aspects. Everything that is part of or related to a deal has a value. Everything has a cost to you or your organization, even if it’s not on the price list. Negotiation isn’t just about price and discount. It’s about everything that forms the deal. It’s about specification, colour, size, lead-time, consumables, contract length, penalty payments, get-out clauses, delivery dates, stock-holding, re-order lead-times, after-sales support product, product training, technical back-up, breakdown service, call-out costs, parts costs, parts availability, payment type, payment date, payment terms. All these and more are called variables, and each one affects the cost. Some affect the cost more than others, and buyers and sellers nearly always place a different value on each. It’s critical therefore to know exactly what your buyer wants before you start to negotiate. Get the full list of issues written down and commit him to it. This is vital if you are to keep a track on the values of the deal and the eventual outcome. You also avoid your position being eroded bit by bit by the late introduction of concessions required.

Your buyer’s personal and political requirements are important too, and the bigger the deal the more significant these factors are. You need to understand what they are, particularly the political and procedural needs within the other person’s organization or situation that affect the deal. These issues will concern the way that the organizations relate to each other; who talks to whom; how justifications and reports are prepared; arrangements for future reviews; provision of information; product development collaboration; issues involving intellectual property, future mutual business opportunities, etc.

Remember that when you sell to someone in an organization or group, your buyer is staking his personal reputation within his situation on you, and will not do so lightly, so you need to understand all of his needs and concerns.

Only then you can begin to understand what the implications, costs and perceived values are.

6. trade concessions – don’t give them away

Never give away a concession without getting something in return (buyers tend to resist giving any concessions at all)

This is a matter of discipline and control. It’s simple. Never give anything away without getting something in return. If you do you are not negotiating you are simply conceding.

A commitment from the other person can be a suitable concession to get in return for something of relatively low value. The simplest and most elegant concession to secure is agreement to proceed with the deal now – use it to close.

7. keep the whole picture in your mind

Keep the whole package in mind all of the time (buyers tend to divide and erode your position, bit by bit)

The buyer’s tactic will be to separate out single issues, or introduce new ones later. If you allow this to happen your position will be eroded.

Think about the knock-on effects to the whole situation every time a concession is requested. The overall value and profitability of a deal or contract depends on it’s component parts. When you change one element, you change the whole, so keep the whole situation in mind – keep assessing effects on the total arrangement, understand the effects, and explain how each change or demand affects the whole thing.

8. prepare and keeping looking for variables (tradable concessions for both sides)

Keep searching for variables, concessions, ‚bargaining chips‘, incentives. (Buyers will look for your concessions but will tend not to offer their own)

A variable or tradable is any factor that can be altered and which has a real or perceived value. You are not a mind-reader and the other person may not be totally open, or even fully aware of all the possible variables that are of interest, so keep looking for them.

Prepare and estimate values of real and perceived variables before the negotiation, and keep looking for new ones during the negotiation.

If the other side is cooperative involve them in looking for variables too – for both sides.

The more variables you find the less you will have to give on price, and the more added-value you can build into the deal. The buyer will not offer his own concessions normally, so you can look for his possible concessions as well as your own (ie variables within the buyer’s situation as well as your own).

9. keep accurate notes

Keep accurate notes, and show that you are doing it (the buyer stands to benefit from any lack of record, and some buyers conveniently forget things that are not in their favour, even concessions you’ve won from them)

Controlling the negotiation is vital. the other person may forget, misunderstand, or attempt to distort interpretation of what was discussed and agreed. Keeping notes shows that you are in control, professional, can’t be out-flanked, and enables you to summarise and assess continually.

10. summarise and clarify the negotiation as you go

Summarise and confirm understanding continually (see above – it’s your loss, not the buyer’s, if you allow misunderstandings to develop)

This avoids misunderstandings developing, accidentally or otherwise. Misunderstandings can be catastrophic, not so much because of the way they affect the financial structure of the unfolding deal, but because they undermine the rapport and the trust, which is critical to being able to do business in the first place.

Getting positive agreement throughout the process also is psychologically important; it strengthens trust and commitment, and helps to ease the other person into an agreeable frame of mind.

After the negotiation obviously it is essential to give the other person clear written confirmation of the deal.

see: http://www.businessballs.com/negotiation.htm

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