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Careful What You Cut!
Enhance your negotiation skills to keep afloat in tough times
The current difficult economic climate adds even more pressure to those who have to achieve sales or generate business for their organisations. The challenge of finding customers who need your product, have money to spend and will do so can appear daunting. The danger is that when you do find someone who might be a potential customer, you can become too eager to get the business and will do anything to achieve this! The present climate, with budget and target pressures on all, can lead many sellers to put all of the power in the hands of those who are in a buying position. To be fair, many of the potential buyers will presume that they have this anyway! This can mean that they will approach situations with something closer to a "win-lose" outcome rather than a "win-win" – although they might claim that this is not the case. As sellers, you need to be very aware of the importance of precedent in any sale or negotiation. Deals done now will set the baseline for any future business with the prospect. Do not be duped by the "just make it a special deal this time"! This article encourages you to think about how you can approach sales meetings in the future and avoid giving away large slices of your profit. Getting sales is vital to all businesses, but you do need to make money. With your prospects putting you under pressure to reduce prices, you need to develop more flexibility in your approach in order to preserve your margin. You may agree to give something, and it does not always have to be by cutting your price.
Pressure on sellers comes from various sources. Whether part of a sales team or a business owner you will have some form of target to achieve. This does not go away and many prospects are aware of this and use it to get better deals. Other creators of pressure can be bosses or other stakeholders. Sometimes they can be a negative influence in the way they transmit the pressure to generate business. As sellers, you have to learn to deal with this in a positive way so that it does not hamper your performance. Customers will be a constant source of pressure too, for reasons mentioned earlier. They will let you know that they have choice – and past loyalty may not hold up for the future! Competitors can provide pressure too. Their approach to the marketplace, their strategy for winning or retaining business and their attitude to pricing will impact on your sales.
How can you prevent these pressures from eroding your turnover and profitability? On a purely pragmatic basis, you can’t prevent it totally. What you can do is minimise their impact. A key part of prevention is to invest time and effort into your planning and preparation. Claims that you are too busy do not stand up, especially if you want to find and keep profitable business. There are a number of elements to cover in your planning and preparation, only a few of which we look at here. Examine your current customer base and prospect list. Are you putting too many eggs into the one basket, either with existing business or on what you hope might happen? Remember, your customers and prospects are under pressure too – and they may have to cut their spending or even stop! Ensure you are looking to find new business as well as spending time on managing the relationships with existing customers. Before making sales visits qualify the organisation and the person or people you will be seeing. Is the organisation using your products or services? Can they benefit from doing so? How is their business performing? (Will they be able to pay you?) Where is your contact within the DMU? (Decision Making Unit) Can they make a decision or do they influence it? Who else do you need to meet or develop relationships with? In these difficult economic times, many organisations are pushing decisions up the line to more senior managers. When you have a clearer understanding of the organisation and the people, think about assessing "The Balance of Power". Remember, the other party has pressures on them as well, you are not alone!
If you do this, you will find that the lists are remarkably similar – and the "buyer" often has more pressures on their side. Yet, how do they act in a sales or negotiation meeting? Do this exercise and you will realise that you do have power in these meetings. Understanding this, and the pressures the other side may be under, can help you recognise where you might have "leverage". This can work wonders for your confidence!
How well do you know what you have available to trade with? What are the variables you can use during the negotiation, the things you might be able to offer or the items you can ask for from the other side? (Variables, tradables, currencies – whatever name works for you.) These are critical for effective negotiations. The better you know these, the stronger your defence of your price. When preparing before meetings, check your list and put together your "package". Within your package, look to include as many options as you can. What is your "best deal" and what is your "worst deal"? Your best deal is your ideal price and gives away as little as possible. The worst deal is the lowest price you will go to and a list of the variables you will give – plus a list of the variables you want from the other party. You have to be clear about this range before going to any meeting!
In case you do get tempted to move to the "worst deal" position and beyond plan a warming sign for yourself! In the heat of the moment it is too easy to give that extra bit! Remember, what you are giving is coming out of your margin! Some of you might have heard about knowing your BATNA – or Best Alternative to a Negotiated Agreement. If you cannot reach a deal what are your options? My view is that your best BATNA is to have more prospects in your pipeline and not allowing a few to become too powerful in their contribution to your business.
When you have done your preparation you are ready for the face to face phase. You can now feel confident as you approach it. This is important. Managing your own mindset can make a huge difference to the final outcome. Giving signs of under-confidence or doubt about your position can provide an experienced negotiator with just the opening they want! In the early stage, as you are developing rapport and moving towards the "real" business conversation a degree of "signalling" will occur. Some of this might be deliberate and some accidental.
"Signals" are clues or hints. Make sure you are listening closely to pick up any which are offered, eg "We’re under pressure to make a decision.", or "We have to get this underway by the end of next month". More worryingly – "The new manager needs to approve everything.", or "The new manager wants us to look at a couple of other suppliers." Do take care about what you say too! Not only your full statements, beware the "little" words which might slip in! "We’re under pressure to get business" is not helpful to your cause. Nor is, "I’m finding it tough at the moment" or "We’ve had a couple of clients go down owing us money"!!
As you move through the early stages and through the sharing of aims and outcomes you get closer to what most think of as real negotiation – bargaining time.
Bargain: To exchange, to arrive at an agreement. (C14 from Old French bargaignier to trade)
Your attitude to this will strongly influence your approach and ability to deal with it positively and to achieve the outcomes you want. If your preparation has been thorough and you have identified the variables you can use and ask for, you will be able to be flexible yet firm. Keep a couple of thoughts clear in your mind:
* Be proud of your price! (If you don’t believe in it, why should anyone else?)
* Package and price are inseparable (Any change in price has to mean a change in the package – which is where the variable are used.)
You need to make sure that every time something is going to be discussed or traded you use the "bargaining formula". "If you ….(STATE THE CONDITION YOU WANT) .. then we can/might …(CONCESSION YOU MIGHT MAKE)" It has to be this way round – reverse it and a shrewd negotiator will take what you are offering without agreeing to give you what you want. Remember, a lot of the concessions you make can be on elements other than price. Think about what is on your variables list and consider what you could offer. If you are being pressed to reduce the price, make sure that the condition you are demanding is of value to you. (Faster payments, part payment with order, increased volume or size of order are just some examples.)
When you have finished the bargaining and arrived at an agreement which is within your range summarise the details of the deal and timescales etc. Then, make sure you confirm this in writing as soon as possible. Some experienced negotiators could come back to you and try to change the deal slightly, in their favour naturally! They work on the basis that a lot of people will accept these changes rather than risk losing the deal. By acting first, you can prevent this happening. Once all is settled, record the details on your customer database so that you have the information for next time. As you do this, take a few minutes to go over the process in your mind and identify what went well and what lessons you have learned.
To avoid giving away too much in these difficult times, remember to take a few simple steps to any sales or negotiation meeting. Make time to do your planning and preparation thoroughly. This will help you to go to the face to face meeting with confidence and yet have some flexibility in your approach. Keep in mind that there are many things to talk about and not just price! If you do start cutting your price – you are cutting your profit. So, look for options for both parties and use the bargaining formula to get better deals for your business. Remember, once you have given something or cut your price – it is very difficult to get it back!
What's your opinion?
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