140: Real World Business Negotiating - a podcast by Dr. Greg Story

We have many images of negotiation thanks to the media.  It could be movie scenes of tough negotiators or reports on political negotiations with lunatic led rogue states.  Most of these representations however have very little relevance in the real world of business.  A lot of the work done on negotiations focuses on “tactics”.  This is completely understandable for any transactional based negotiations.  Those are usually one off deals, where there is no great likelihood of any on-going relationship continuing between buyer and seller. This is false flag. 

 

The aim of sales is not a sale.  The aim is repeat orders.  If you want to be permanently in 100% prospecting mode, then transactional selling is fine.  That gets tiring and is tough, as you have to spend all of your time hunting because you can’t farm.  Now there will be some cases with buyers, where that is how it rolls and there is not much you can do about it.  The majority of salespeople though are trying to strike up a lifetime relationship with the buyer, so that the orders keep coming rain, hail or shine.

 

The style of negotiations for this business play are completely different to the one-off, transactional occasion.  In this world “tactics” are only partially relevant.  Going one up on the buyer, getting the better of them, isn’t sustainable in a continuing relationship.  They remember what you did to them and they definitely don’t like it. They either dump you completely as the supplier or they even it up down the road.  They don’t forget and they don’t forgive.

 

Technique has a role, in the sense that there are certain best practices in negotiating, which we should observe.  The philosophical starting point though is key.  What are we trying to do here, what is our purpose?  Are we trying to build an on-going business relationship where we become the favoured supplier or are we after a one–off smash and grab deal?  If you highly evaluate the lifetime value of the customer and this is your main consideration, then you will have a lot of commitment to win-win outcomes.

 

The consideration of the communication style of the buyer is another important negotiating consideration.  How we communicate with the buyer will vary, that is, if we know what we are doing.  Clueless salespeople will have one default mode – the way they personally like to communicate and that is all they have in their tool box. 

 

Professionals understand that if the buyer is micro focused, we go with them on facts, detail, evidence, testimonials, proof etc.  If they are the opposite, then we talk big picture and don’t get bogged down in the smaller details.  We describe what future success looks like.  If they are conservative, self-contained and skeptical, we drop the energy level to match theirs.  We don’t force the pace, we spend time having a cup of tea to build the trust in the relationship.  We mirror what they like.  If the buyer is a “time is money” hard driving, take no prisoners type, then we don’t beat around the bush.  We get straight down to business.  In rapid fire, we lay out the three key reasons they should buy, we get their order and then get out of their office pronto.

 

With this analysis in mind, we prepare for the negotiation by analyzing the buyer’s perspective.  We use what we know about them and their situation to build up a picture of what they will need from the deal we are negotiating.  We match that with what we can provide and we amplify the value we bring to the equation.  We now set out our BATNA – our “best alternative to a negotiated agreement”.  This is our walk away position. 

 

We have analysed the potential of this client, by looking at their lifetime value as a buyer.  This can have a big impact on how we see the pricing.  When negotiating with a big multi-national buyer, I had to take a painful hit on my pricing.  I only agreed to this though, because the volume in the first year was very substantial and the understanding was that this would be repeated annually.  Now, it may not become annual, who knows, but if it does, then this is a major feast of guaranteed farming that allows a better balance to all the other hunting required. 

 

In another case, I “fired” the buyer because their pricing requirement was too low. There was no prospect of any on-going business and the volume was not attractive.  When you believe you bring value, you enjoy inner confidence in your pricing.  We all have our positioning in the market. If we want to maintain that, then we have to be prepared to reject low ball offers that damage our position and our brand.  Hopefully you don’t have to do this too often, because you can convince other buyers to pay the full tariff.

 

In most cases, sales negotiating requires a holistic approach, rather than a “mechanical” tactics driven approach.  Decide what type of relationship you want with the buyer.  If it is win-win, then we are looking at trade offs for pricing against volume and repeat business.  Leave all that tricky dicky negotiating palaver to the fantasy world of Hollywood movie scripts.  Let’s negotiate in the real world.

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