15 Simple Rules for Customer Negotiations
Even after you've closed a deal, there's often an all-important last step: negotiating the final terms. With a simple purchase, it's a formality, but when it comes to something complex, like a real-life solution to a complex problem, the negotiating can sometimes be the longest step in the sales cycle. With that in mind, here are 15 easy rules to ensure that negotiations work to both your advantage and that of your customers:
Before the negotiation starts:
- Rule #1: Establish your credibility. Help the customer to clarify needs, define solutions, and winnow those down to the single best one. Then, the customer will be reluctant to walk away from the final deal, even if the terms aren't entirely favorable.
- Rule #2: Develop multiple contacts. Multiple contacts provide a clearer understanding what's negotiable and what's not. Warning: Do this early in the sales cycle or your primary contact might see it as threat.
- Rule #3: Neutralize the competition. A customer can only threaten to go to a competitor if the competitor represents a viable option. Before negotiating, convince the customer that your offering is the only one that can adequately meet her needs.
- Rule #4: Prepare thoroughly. Collect and evaluate information on leverage, values, sale prices, competition, and other factors that are likely to have an effect upon the negotiation.
- Rule #5: Develop realistic expectations. Temper your aspirations with "feasibility" based upon what your counterpart has in mind, and reassess your expectations as the negotiating progresses.
- Rule #6: Know your pricing parameters. When it comes to price, know the deal you want and can justify as being realistic. Never offer a discount without some other concession to counterbalance it.
- Rule #7: Decide whether to "go first" or not. If you put your own number on the table, you put your counterpart into your ballpark. But, beware, you might accidentally low-ball.
- Rule #8: Give yourself room to maneuver. Leave yourself some bargaining room, but make sure that you have a plausible rationale for any positions that you take.
During the negotiation:
- Rule #9: Don't compete with the customer. Negotiations are attempts to reach an agreement, not a contest to see who can win. Make the relationship so important that it’s worth the extra effort, on both sides, to make reasonable concessions.
- Rule #10: Don't chicken out. Customers will sometimes take negotiating positions that simply do not make any sense for your firm. When this happens, you’d be crazy to give in, even if standing firm kills the deal.
- Rule #11: Manage the concession process. Let your counterpart know that every concession is meaningful and don't let your counterpart think that holding out will reap big rewards.
- Rule #12: Sustain your credibility. Buttress any positions that you take with appropriate rationales. Be specific about your facts and (this is important!) stay detached from the emotion of the negotiations.
- Rule #13: Know when it's time to stop. If the negotiation is going well and you've got most of what you want, don't keep negotiating. If you're 90 percent there, you're done.
- Rule #14: Never agree to last-minute demands. Those little "gotchas" may sound like deal-killers, but they're actually how the customer tests you to see whether the negotiated deal is fair. Give in, you're telling the customer that you were about to screw them.
- Rule #15: Negotiate until the contract is signed. Don't relax once there's a meeting of the minds because until the contract is actually signed by both parties, it's just so much moonshine.
GEOFFREY JAMES | Columnist
Geoffrey James is an author, speaker, and award-winning blogger. Originally a system architect, brand manager, and industry analyst inside two Fortune 100 companies, he's interviewed over a thousand successful executives, managers, entrepreneurs, and gurus to discover how business really works. His most recent book is Business Without the Bullsh*t: 49 Secrets and Shortcuts You Need to Know.