Negotiating

It’s time to improve your negotiating skills.

A couple of definitions

  • To confer with another or others in order to come to terms or reach an agreement
  • To arrange or settle by discussion and mutual agreement

If you can’t persuade someone to see something in the same way you do, then negotiation helps you to find a compromise acceptable to both sides.

Show Me The Money

If persuasion was focused on getting more people to say Yes, then negotiation is focused on the price and terms connected to saying Yes.

You’ll see the profitable impact of improved negotiation skills on:

  • Receiving higher prices for what you sell
  • Paying lower prices for what you buy – from suppliers and from your own team of employees.

A few words of caution.

Work done on pricing has found that taking away negotiating discretion from salespeople can increase prices and profits. This is done by making price a result of certain objective criteria.

This happens because salespeople can be over-eager to close the deal – focusing on sales  and not contribution – and flag up the opportunity for a special deal.

Look out for it when you’re buying and you’ll see what I might.

Even a simple comment like “That price sounds high. Can’t you do better.” can have the salesperson reaching to sharpen the pencil and give away profit.

If You Hate To Negotiate

Even if you decide that you won’t use these tactics in your selling – which is a waste because you can certainly use many of them ethically – you should be aware of them so you can stop buyers and sellers from taking advantage of your better nature.

A few percentage points increase on your selling prices and cost saving on your purchases can make a huge change to the overall profitability and viability of your business.

Please don’t shy away from this topic because the thought of haggling over anything is such a horrible idea.

If You Want To Go Deeper

If you want to understand more about negotiating and putting deals together, two books I recommend are:

“Secrets of Power Negotiating” by Roger Dawson

“To Be or Not To Be Intimidated?” by Robert Ringer

Everyone Is After Your Money

Robert Ringer was a real estate agent, taking a commission on a big deal between buyer and seller.

He had a hard education as he was screwed out of commissions he’d earned – at what he called his undergraduate days at Screw U.

According to him, there are only four types of people you can deal with in business – and the first three are trouble.

1 – Type Number 1 Warns You That He Is After Your Chips – and is not sorry about anything he does to get them.

This person will let you know through his words and actions that’s he’s going to push you hard to get the best deal possible for him.

2 – Type Number 2 Will Assure You he’s Not After You’re Chips But He’s Lying – it is a ploy to help you to relax.

This is the classic manipulator. The person who will say one thing and do another. Plenty of reassurances at the start about being fai and after a win-win deal but the final deal will be as one sided as possible if you give in.

3 – Type Number 3 Has The Best Of Intentions And Is Sorry He’s Grabbed Your Chips – he believes what he says but…

For a variety of reasons – from bungling to misguided standards of what is right or wrong – he’ll still take everything you’ve got. He didn’t have a choice.

Type 4 according to Robert Ringer is very rare, someone who genuinely gains as you succeed.

You may think Robert Ringer has a warped view of humanity but we saw in our marketing in Pillar 4 on generating leads, people are inherently selfish.

That “what’s in it for me” question dominates their thoughts.

Most people you deal with don’t care about you.

You’re just a means to an end.

If you don’t believe me, try this test.

I’ve shared the ideas built up from many thousands of pounds of training (well over £40,000 since 2000) and many more hours of personal study to make sense of it all  for a tiny fraction of what it’s worth to you if you take action.

If this has helped you to make money, please send me an extra payment to my PayPal account paul@plancs.co.uk.

What’s fair?

About 10% of the extra profit you’ve made?

OK how did I do?

Did you feel any temptation to send me more money?

And if that’s how you are, with your strong values of what’s right and wrong, imagine how the rest of the world thinks.

Intimidation plays a part in negotiating:

  • The most intimidated will concede on each and every point to get a YES to the deal. People like this are desperate and to a skilled negotiator, it’s like pushing against an open door.
  • Not intimidated will stand firm. That’s the deal, take it or leave it.
  • Skilled negotiators will rise to the negotiation challenge and look for ways to make the deal better.

The interesting thing is that some sales people think they are in category 3 for their hunger for the deal – and the fear of walking away with nothing – puts them in the first category.

It’s time to hone up those negotiating skills

Negotiating Rules & Guides

The aim of an effective negotiation is to have both parties believe they got the best of the deal and are therefore both happy to carry on with an ongoing relationship.

Rule 1 – Do Your Homework About The Product Or Service

I’ve been to Tunisia and Turkey and I’ve been totally psyched out by souks and bazaars. Haggling is the norm and starter prices are even shown.

I don’t want to play the game because I’m out of my depth.

I don’t have the knowledge to tell a good product from a bad one or a a fair price from one which is a total rip-off or one which is an insult to give.

I don’t know the rules and parameters and I won’t play.

So rule one is to do your research on the product or service you want to buy.

If you are buying a new car, you have the list price as one benchmark and you can check on the Internet to see what special deals are around for the model you want. This information gives you confidence on what a fair price range is and what other options of supply exist.

Rule 2 – Do Your Homework On the Other Party

You can check up to see what kind of reputation the other business has.

Are they highly regarded or is the Internet full of claims of exploitation and sharp practice?

Look for things you need to be aware of and look out for.

But go further.

Try to understand what the other side wants to achieve.

What’s important to them and what do they want to avoid?

Some people are more desperate to sell than others.

For example in the 2008/9 housing problems in the USA and UK, some highly leveraged buy to let landlords were probably desperate to get out of properties while they were in the money to fund more problematic properties.

Who will be involved in any negotiations and what are their agendas? A business owner is likely to take the long term view, an employee manager might see the job as a stepping stone and want short term gains, regardless of any long term costs, because he’s not planning to be around.

Rule 3 – Know Your Target And Walkaway Numbers

Set yourself up with a target price and conditions.

You’ve researched the market and you have a good idea about where the fair value line is.

Use that to find a good price you’d be delighted to buy or sell at.

Also be clear on your walkaway terms and conditions.

Don’t get caught up in making the deal – some just aren’t meant to be made.

Rule 4 – Play At Home If You Can

Where you do the negotiating can make a big difference with home advantage giving you extra confidence.

And that’s without the sneaky intimidation tricks like the high and low chairs and other tactics to enhance your dominance.

It’s difficult to put a number on this advantage but you can see home advantage play out in many sports.

Same players but vastly different results.

Here are some statistics pulled out of the English Premier League for 2009/10 for mid table teams

  • Blackburn (10th) Home wins 10, Away wins 3
  • Stoke (11th) Home wins 7, Away wins 4
  • Fulham (12th) Home wins 11, Away wins 1
  • Sunderland (13th) Home wins 9, Away wins 2

Why think it would be different in what you do. Home advantage matters.

Rule 5 – Don’t Accept The First Offer

Remember your aim is to give the other person the feeling they’ve won while you know you’ve won.

So you can’t accept the first offer.

Imagine this.

You’re selling a car and you put a little advert on the web.

You get a phone call from someone who saw it in the first 15 minutes and they want to rush round to see it.

They love it and ask how much.

You say $10,000.

And they agree immediately. No haggling, no fuss, no indecision.

Don’t you think they might have paid $12,000 if you’d ask that?

Maybe.

It certainly looks like you could have got more money and you’re left with the feeling that they won… and you lost.

Now what happens if we reverse the offers.

Same car, same people.

But you get them to make the offer.

$12,000

You shake on it immediately.

This time they’re left wondering how low they could have gone and still got you to agree.

That roles on nicely to the next two negotiating rules

Rule 6 – Try To Get the Other Side To Make The First Offer

You may think you know what they think the deal is worth but you can’t be sure.

If they make the first offer, you may hear a better number than you expected.

Even if you don’t, it gives information and some control of the negotiations based on your response.

The money in play is governed by the first two offers and it can set up reference points.

When you hear the first offer, remember to wince.

In this game it is worse than you were expecting.

Rule 7 – If You Make The First Offer, Ask For More Than You Expect To Get

If you’re selling, price high.

If you’re buying, price low.

Do be plausible.

If you’re buying a $900,000 house, you might offer $750,000 and be taken seriously depending on market conditions. Offer $300,000 and you’re not worth listening to.

Be ready to justify your price to show that it is reasonable and if you’re pushing it, signal that you are happy to negotiate.

Rule 8 – Bracket Your Offer

If you’ve followed rules 1 and 2, you know the product and the customer so you have a good idea about what price you want to pay and the maximum you’d consider.

So you bracket the first offer with double the difference.

In the car example, if the car is offered for sale at $12,000 and you believe a good price to buy is $10,500, the difference is $1500 so you’d offer $9,000.

What you’re trying to do is to set up a split the difference deal.

Rule 8 – Never Suggest Split The Difference

It seems a nice and fair way to find a quick solution to avoid a series of rounds of haggling.

Look what happens with the car.

You – I’m asking $12,000 for the car.

Him – wince, that’s quite a lot more than I was expecting. I think $9,000 is a reasonable price based on other cars I’ve seen.

You – why don’t we split the difference – what about $10,500?

Him – $10,500? It’s still too much. I could go to $9,500 at a push.

You – I’m at $10,500, you say $9,500. What if we split the difference again and call it $10,000?

Him – No sorry, $9,750 is my absolute maximum.

You – OK, it’s a deal.

Twice you offered to split the difference, giving away half of the negotiating range in a grand throwaway gesture.

Each time you were nudged down again by someone a little more negotiation savvy than you and you can find yourself dipping below your walkaway price because you’re trying to be so nice, fair and reasonable.

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