In this blog post, we examine several tips that will help you succeed with negotiations.
1. Negotiation is more than a multiple of 5%!
How often has a customer asked you for a discount, and you've said I'm authorised to give a 5, 10, 15% or more discount? You're not alone, with most discounts being given at these percentage levels.
Successful negotiations can be sometimes just the difference between a 4% discount rather than a 5% discount. If the deal size is large, that 1% will be large. If it's small, multiply this across all the units sold throughout the year, it will soon add up.
2. Starting price is too low
Preparation is key, and you should always look to set a start price that is higher than your target price. If you start low, it is very difficult to raise the price as it is already in the customer's mind.
3. Know your pricing power
The balance of power is rarely all in the customer's hands. Remember there are switching costs to consider, the quality of your service or product, the relationship you have built with the customer (they may just like you more than a competitor sales rep!).
Therefore the power is often fairly balanced. Often the customer needs you just as much as you need them, so make sure you fully understand the value you provide and how it can be communicated.
4. Plan your concessions
Know what you want to concede first, that you don't really care about, this may be for example more flexible payment terms. Then have some key bargaining chips that you can use, but make sure you concede them reluctantly so the customer knows they are getting something important to you. Make sure you ask for something in return. Successful negotiation is always about a fair exchange.
5. Know when you're beaten
Don't concede unless you really have to. There should always be a walking away point for both sides. You'll only regret taking that deal later down the line, and it may distract your focus from more profitable customers.
Summary
- Don't always push the discount button, it harms your bottom line, and negotiation is also not always about price.
- Successful negotiation is sometimes the difference between 4% to 5% discount.
- Successful negotiation is all in the preparation.
- Plan your concessions and walk away price.