‘Negotiation’ is usually boxed into the loosely linked group of “Sales and Marketing”. This often means that people have one of three reactions they hear the word ‘negotiation’ –
- Love it, want it, get it around me;
- Unfortunate chore that has to be done at times;
- That thing that scumbags do when they’re not off kicking puppies in dark alleys.
Admittedly, I spent a good deal of my ‘career’ in category two. I never liked the confrontation in talking about money, and I avoided promotion reviews like dog shit on a footpath. When I started my first business, I’d make my client an offer (sometimes), and if I got anything but a direct “YES PLEASE”, I’d suggest that there’s “no rush” and to “give me a call” if they changed their mind.
In hindsight, that wasn’t a very successful business.
In fact not learning the basics of negotiation probably cost me far more than I could accurately measure. Better jobs, promotions, customers, partnership opportunities – personal relationships…
It wasn’t until I had my first mentor / business advisor that I understood what I was missing. Learning how to negotiate agreements using key principles of ‘mutual fairness’, ‘win/win/WINS’, and ‘creative dealmaking’ changed the way I did everything in my businesses. Pretty soon, my advisory board included world famous negotiators including the foremost thought leader on staff engagement and culture, a strategic business shark with a hollywood cult following, and a buyer psychology trailblazer who wrote the book on modern marketing.
(RELATED: Check out our Ultimate Guide to Handling Objections and learn how to elegantly turn customer objections into selling opportunities. Use these simple techniques to build trust in the first few words after you get the next objection. Download it here.)
Since then, I’ve learned a lot about negotiation and how to use it. So what are the most valuable lessons I learned from the world’s top negotiators?
Lesson #1: Every business leader must learn negotiation
Fair to say that my perspective on negotiation has changed dramatically. Our sales and negotiation workshops have dramatically improved our students’ businesses all over the world for over a decade. Why has my perspective changed? Because I’ve reframed the meaning of negotiation, and what it means to my business:
“Negotiation is a powerful tool to better serve my customers by helping them get what they want, what their customers need, subsequently and fairly growing the value of my own business resources.”
There are a couple of critical insights here that every business owner (or company leader, team manger etc) must understand:
Negotiation is a tool to serve people better. Often times the solution that you have IS in fact the best thing for the customer to have. If you cannot negotiate or create a deal which makes it easy for them to have your solution, you’re actually doing them a disservice.
Negotiation must be fair. Our brains are wired to reject unfairness (see study: “Monkeys Reject Unequal Pay”, 2003). If your customer feels that a deal that’s being offered is not fair, they will often not only reject it – but take strong offence to it. A reputation for being a fair dealmaker, will certainly make you a more effective leader and negotiator.
Negotiation must be win/win/WIN. Once you’ve learned the mechanics of negotiation, it’s easy for two people to get in a room and thrash out a deal that creates value. But the BEST negotiations are concluded when EVERYONE in the deal benefits significantly, if not equally. Unfortunately, this process often leaves out a key stakeholder who is affected – your customer’s customer. Who hasn’t heard about a situation when ‘senior management’ negotiate a deal that benefits all of ‘management’ but leaves more work for ‘front-line’ employees?
Learning to negotiate well benefits EVERYONE in the organisation.
Lesson #2: You should [almost] never negotiate your prices
-> People never buy because of price, they buy because of value.<-
Another way of saying this is that if the COST of having your solution is less than the cost of NOT having your solution – the customer buys every time.
Problem: Not understanding my tax deductions and opportunities
Cost: $20k – $40k in lost deductions
Solution: Work with ABC accountancy firm who is current with all reforms and consequences
Likely result -> buy.
The problem is when ABC firm seems to offer the same service as XYZ firm, but at $4k. So what options is the owner of ABC left with?
Solution 1: The owner of ABC discounts their rates to be competitive, but has to drop some of the extra benefits to do so. Now ABC no longer has any unique selling proposition (USP) and therefore not competitive in terms of customer experience. Alternatively, the discount comes straight from the profit line, which means now they are working for free or far less. They have also shown the customer that they are ‘flexible’ on price which will likely cost them again in the future, even if they do decide to work with ABC. Worst case, the customer actually feels that if the price was so easily adjusted, perhaps it was set unfairly in the first place – creating a monkey-like aversion to ever working with you in the future.
NOTE: When there is no USP, the customer can only decide on price.
But you own ABC and you KNOW that your price is fair (see lesson #1), so what ‘moving parts of the deal’ do you need to bring to the negotiation table to help your customer choose you?
Solution 2: The owner of ABC negotiates on “Everything But Money” and creates even more distance between themselves and their competitors. More uniqueness, more customers, more value, more money – happy monkeys.
RULE: The single most important rule to becoming an expert negotiator:
Always try to negotiate in elements of high value to you, and low value to them.
Always try to concede elements of low value to you, and high value to them.
If all other elements of ‘moving parts of the deal’ have been exhausted, then sometimes there is a case to negotiate on price – but only after all other elements have been explored.
NOTE: Price concessions reduce the perceived value of your product at best, and your brand integrity at worst. NEVER EVER make a price concession without asking for a concession in return.
So what else can you negotiate that’s not money?
Lesson #3: Use “Everything But Money” Elements to Create Useful Concessions
Negotiation is about having range – the more you have, the better you’re likelihood of success. If your entire negotiation range is limited to a price discount, you will almost definitely be out-negotiated.
Below is an extremely useful list of things that you can negotiate that have massive value, that aren’t money.
- Time. Time is often a far more valuable resource than money. What elements will increase in value by adding or removing time? Can you perform the task in less time if the client agrees today? What window will close by not moving quickly (end of financial year, upcoming election, changing currency price etc.)
- Exposure. Due to an extensive network of students and clients, we will often leverage our reach or exposure when working with new clients. (i.e. future referrals, connection to high-profile partners / brands, be part of an acquisition or business restructure etc.)
- Payment Plans. People will often resist a new high-value concept, purely because of an invisible ‘set-point’ for financial decisions. i.e. If you’ve never spent more than $400 on end of year tax, spending $4k for a yearly financial strategy package might seem a huge sum (even if it will return you $10k). Creating a $400 per month plan will not only yield more customer (typically 30% – 70% more), it also makes you more money over the term!
- Future Value. If you’re customer signs now, what future bonuses and value can you add? Eg. our Mass Persuasion Online Sales Trainings comes with free future content updates for our students which means that they will always have the most effective business sales tools at their disposal.
- Association. A common strategy at exhibitions is to sell stands near well-known brands for a premium. What association or links to other important market leaders can you offer / gain as part of your negotiation?
- Fun. Never underestimate the value of fun! In a company I worked for in my early career, the staff were paid very close to minimum wage to work very long hours doing extremely difficult work. However there was always a line of people waiting to work for the company because of it’s reputation for being the very best place to work in all of Australia.
- Rights. Rights of ownership are of increasing negotiation value, in the new marketplace of customer databases. In our marketing agency, we will often charge customers significantly less for full or partial rights to remarked to any customer database collected during the engagement.
- Volume. If they pay more now, can you guarantee exponential volume (or vice-versa)? Try to determine if cost of sale is affected by volume which means you can pass on or share any discount you might get from suppliers.
- Return Policy. Return policies and guarantees are very effective negotiation points for customers with high ‘action thresholds’. People who have been burnt before may know they want / need your solution, but are limited by a natural aversion to being burnt again. In this case, giving a clean ‘out’ solution can be enough to close the deal.
- Quality / Attention / Expertise. What can you add to the deliverable itself that will create more value for your customer?
- All other ‘moving parts to the deal’
(Adapted from “The Bryan Franklin Method – repatterining for success” program)
(RELATED: Need a presentation or sales pitch training for your high-value products and services? Check out the ‘Million Dollar Sales Pitch’ Video Masterclass and learn to design and deliver a perfectly structured pitch that creates instant positive response from your customers in any industry niche.)
Lesson #4: Use Different Types of Negotiations for Different Outcomes
For the sake of recognisability, we can divide all negotiations into two types: Tactical Negotiations and Relationship Negotiations.
A Tactical Negotiation is where you have a specific outcome that you’re trying to achieve, and you’re goal is to get as close to that outcome as possible. This type of negotiation is typically used when there is no intention for an ongoing relationship with the customer.
In one of our sales companies, we help our clients selling solar systems to both businesses and residential properties. As part of the tactical negotiations, the consultants have a specific outcome for a specific price point that they cannot change. To address this, they have a series of upgrades and bonus features that they can throw into a solar system deal to build additional value for the customer. While the company will likely remarket to that customer in the future (battery solutions, panel upgrades), this is not considered a relationship negotiation as the main outcome can only really be ‘sale’ or a ‘no sale’.
A Relationship Negotiation is where you are focused on the experience of all parties in the negotiation (win/win/win). This is the negotiation type for ongoing relations (professional services, consultants, coaching, consumables etc).
Around 40% of our business comes from our training and coaching company, primarily with large and well known enterprise brands. Almost all of that business comes from referral or repeat business. THIS IS 100% A RELATIONSHIP NEGOTIATION ENVIRONMENT. Every time we’re sitting with the CEO or relevant decision maker in that business, we have to consider not only the deal at hand, but every other potential referred deal that will come on the back of the next engagement.
REMEMBER: If the client doesn’t feel like they’ve got a fair deal – before, during or after the engagement – they may still go ahead, but will be highly unlikely to work with you again. More than 85% of our sales and leadership training becomes repeat business, so any mistake here would be critical.
An advanced negotiation term that is often used is “Push/Pull” negotiation. Push/pull refers to the negotiator swapping between tactical and relationship negotiation. This strategy is the hybrid of the above two, and a strategic approach to negotiating for the best outcome, while maintaining a long and healthy relationship.
Understanding the difference and usage of the negotiation types here is very useful to have more more options in high-value conversations.
Lesson #5: The SOS Assessment
If you find yourself in ‘tactical negotiation’ mode – either because the sale type calls for it, or you find yourself push/pulling – it’s valuable to know what the best negotiation tactics are. In part two of this article, I’m going to share the ’24 Best Negotiation Tactics I Learned From the World’s Top Negotiators’ (and how to protect yourself from them).
But the best negotiations occur when you have time to do a bit of planning. The most useful preparation I learned is called the Self / Others / Situational (SOS) Assessment before the negotiation phase begins.
Self Assessment is being able to clearly articulate what the number is that you’re targeting, and what is your ‘minimum-before-walk’ number. The second part to the self assessment is your ‘best alternative to a negotiated agreement’ (BATNA). This is what you will do if the negotiation fails to come to an acceptable conclusion. It is extremely important to know your BATNA, both for leverage and to avoid ‘the bad stuff realisations’ happening mid-negotiation.
Knowing these and having the discipline to stick to them removes much of the emotions and pressure in the moment which is the ultimate objective for this preparation.
Others Assessment starts with researching (or guessing) the other party’s BATNA. What are their alternatives to getting an agreed outcome with you? Secondly, you will ideally know what Tony Robbins calls this NWWAM – what are their Needs, Wants, Wounds, Authority and Money situations. This part of the assessment is focused on understanding what’s most important to them.
NOTE: If the negotiation is the natural progression of a sales process (i.e. the customer has agreed to your product or service, now you are just negotiating the details), then you will already know their NWWAM clearly as it’s part of the qualification and discovery techniques used in your sales pitch.
Situational Assessment refers to ‘ecosystems’ or other dependant variables that will be affected by the parties’ decision. Again, this is incredibly important to understand both for leverage, and to be sure that your negotiated outcome really is the best fit for EVERYONE involved in the negotiation.
Hopefully this article has started to demystify the concept of negotiation, and provide some practical tools that you can start using in your business right away. And while you may not want to dedicate an entire business division to researching and delivering negotiation workshops like we have, you may just find that you like developing this muscle a little more than you expected.
And remember, learning to negotiate isn’t mandatory. Not everyone is supposed to be an influencer.
Have an awesome weekend!
(RELATED: Want to become a master at handling buyer resistance? Download our Ultimate Guide to Handling Objections and learn how to uncover the real reason they’re resisting so you can design your conversation to speak to their fears, desires and reasons to buy now. Download it here.)
Question, query, comment?
You have some options…
Option #1 – SHARE THE LOVE! You’ll notice a share bar on the left of your screen. Click on the icon of your preferred platform to share this article with your friends.
Option #2 – COME JOIN OUR FB PAGE! We’ve just moved our Facebook Community home to a new page. Come find us, like us and make sure you click the ‘Get Notifications’ options. And be sure to leave your questions and comments about this article or your current business focus.
Want to contribute to Discover Coaching?
Drop us a line if you’d like to write a guest post about anything to do with persuasion, negotiation, leadership, management, entrepreneurship, digital strategy or coaching. Submit your topic ideas with your details and our team will get started working with you.
Discover Coaching Coaching Programs are tailored to each individual and align tactical, strategic and visionary leadership styles to reach both Professional and Personal milestones. DC is fully certified for the use of both proprietary (Neuro Linguistic Programming, TimeLine Therapy ®, Straight Line System) and authored custom programs (How to Boil an Egg, Million Dollar Sales Pitch, Mass Persuasion – Complete Sales Mastery, Coaches Collection).
David Cervelli is a certified NLP Master Practitioner and Coach with the ABNLP and ABH.