The core of any successful business is satisfied customers and clients. However, all clients are alike in the fact that they want maximum value for minimum cost. Meeting these expectations is the main challenge for any business, no matter how big or how small. Clients’ valuation of a service or product almost always seems to be lower than the business’s expectations. This is where negotiations come into play. During negotiations, businesses and clients are expected to find a position or agreement that suits them both. Unfortunately, all businesses, entrepreneurs, and client servicing personnel don’t excel at negotiations.
Negotiating is considered to be an art form the world over. It is an art form because a successful negotiation means that both parties are happy with their lot. Invariably, the opposite of this happens where both parties are unhappy. For a business, nothing is more important than keeping a client interested and happy during negotiations. It’s much more difficult to achieve than it seems initially. This is why we’ve put together a few negotiation tips that should help you make the difference.
Negotiation Tips #1: Never See the Other Party as Your Opponents
Many people believe that a successful negotiation is one where both parties are unhappy. This isn’t true. You just need to ask a hostage negotiator who is responsible for so many lives in every negotiation. For a hostage negotiator, leaving the job unhappy or making the other party unhappy is simply not an option. Generally, this applies in business too. For instance, as a business owner or business development professional, are you ever happy with a deal with minimalistic margins? As an entrepreneur, it means that your business earns less and as a business development professional it means lower incentives.
If both parties in a negotiation are unhappy, then the negotiation is not successful because neither party is completely invested in the engagement. These types of mutually unsatisfying agreements only occur when the two parties view each other as opponents. The negotiation game turns into “get more from the other guy” rather than “get the best for my needs” in such scenarios. Therefore, the trick to a successful negotiation is to not view the other party as your opponents. Instead, viewing them as partners trying to solve a common problem is more productive.
Negotiation Tips #2: Establish A Reservation Price and Stick to It
What is a reservation price? Reservation price is an economic term that applies to both the buyer and the seller. For the buyer, it is the maximum that he’s willing to pay for a product or service. For the seller, it is the minimum that he’s going to sell his product or service for. Since we’re talking about the provider in this post, the latter definition applies. Practically speaking, the reservation price will be the price at which the deal becomes unattractive for your business. It is the point at which you no longer feel excited about honouring the agreement.
Most businesses make the mistake of going for quantity instead of quality. They look to get as many deals across the line as they can so that volume will make them sustainable instead of getting deals with the right value. The result is a number of engagements that are valued at or below the reservation price as well as many more failed negotiations.
To ensure a deal that is beneficial for your business, you need to set a reservation price for your products or services and stick to it in negotiations. You need to treat the reservation price as the absolute floor of your acceptable price range and reject any proposal that falls below it.
Negotiation Tips #3: Present Value As Opposed To Economy
Negotiation, as mentioned, is the art of getting the best possible deal for everyone involved. Since you’re providing products and services, money is your measure. For the buyer, the measure is the product or service itself. In other words, for the other party, the measure is value. Resultantly, the value should be the crux of the entire negotiation rather than the economy.
The buyer will always try to move the discussion on to the price but you need to resist that and redirect the discussion back to quality and value for best results. Furthermore, when they ask for discounts, you should instead try to add features to the product or service being offered to make the deal more attractive to them. The bottom line is that you should shy away from negotiations on price and focus on what is being offered.
Negotiation Tips #5: Ask them to Solve the Problem
The tone of what you say during negotiation will have a huge impact on how the entire discussion proceeds. The traditional wisdom is to be aggressive during negotiations so as to put the other party on the back foot. While this works in some scenarios, it isn’t suitable for all of them. A more conducive and successful strategy is to behave as if you’re on the same team. One of the ways to do this is to show the other party your problem and ask them to solve it for you. For instance, if the other party’s quotation is a $1 million, the easiest way to respond would be to say, “I don’t have this kind of funding but I want to work with you, can you help me?”
Such a statement will immediately make the other party feel like they’re in the driving seat and they will try their level best to accommodate your business requirements while trying to keep your supposed financial limitations in mind. If you were to follow only one of all the negotiation tips we’ve listed here, then asking them to solve the problem has to be the one.
Negotiation Tips #4: Avoid Negotiating With Yourself
While facing a seasoned negotiator, you’re likely to be put in the position mentioned in the previous point. They may push you into solving their problem. In such a scenario, you’ll feel the need to help which may push you into cutting your expectations. The simple solution is, don’t. Unless the other party gives you a counter offer, you shouldn’t reduce your expectations. If you do this, you would be negotiating with yourself.
You should channel your need to help when someone asks you to solve their problem. Instead of reducing what you’re asking for, you should try to expand the products or services you’re offering. You can include small add-ons to try to cater to their problem better or even modify your offer to be more suitable. This way, you make the other party think that you’re going out of your way to help and you won’t even have to reduce your demand.
Negotiation Tips #6: Upsell, Side-Sell, Behind-Sell and All Other Types of “Sells”
Adding new goods and services to the already offered package is a good way to show the client that you really do care about their wellbeing. There’s another side to this, however. You can add new goods and services to also boost your returns from the agreement. This is called upselling and while we’ve mentioned other types of “selling” in the subtitle, that’s a little tongue-in-cheek. Upselling is basically selling other things along with your primary product or service to improve your income.
The best example of upselling is Apple the world over. You’d be surprised to know that Apple stores in most countries don’t get the majority of their returns from iPhones, iPads, or Macs. Instead, the biggest chunk of their profits (think much higher than 50%) comes from selling peripherals to go with those primary products. The logic is simple. If you’re going to buy an iPhone, you’re not really going to cut costs on the speaker or the car kit. You’ll go for the real thing from Apple.
Therefore, whatever your primary product or service is, we’re sure you can find complementing product or service with much higher margins. You focus on this and you’ve got yourself a winner of a deal.