Negotiations--real ones, at least--are always between two parties with more or less equal power. When there's a big power differential, negotiation is impossible. The stronger party simply dictates terms.

For example, Walmart simply tells wholesalers what Walmart is willing to pay for their products. Because Walmart is such a huge market, the wholesalers need Walmart more than Walmart needs them.

Many people who must sell as part of their job (including some professional salespeople, BTW) approach price negotiations from a position of weakness. They assume that because the buyer has the money, he or she holds all the cards.

That situation only happens, though, when you fail to accumulate negotiating power throughout the sales engagement. Here's how:

1. Develop multiple customer contacts.

If your counterpart is a gatekeeper who's your only access to the customer firm, you have no way of knowing whether a negotiating position is a bluff or a real deal-stopper. While you should avoid looking as if you're going "over the head" of your contact (that makes an enemy), it's both appropriate and smart to talk with other stakeholders.

Example: If you'll eventually be negotiating with the CIO on price, take the time to build relationships with the CFO, the CMO, and the IT directors who might be affected by the purchase of your product. That way, when you finally negotiate price, the CIO will sense that there's consensus among the firm's other decision makers that buying your offering makes good business sense.

2. Emphasize what's unique about your solution.

Solution selling methodologies always emphasize the need to differentiate your offering in a way that locks out the competition.  This works as a negotiating tactic because when you're the only vendor that has what the customer truly wants, you have the upper hand.

Example: "We're the only supplier that has a warehouse less than an hour's drive away, so only we can absolutely guarantee you've have the part when you need it. Yes, our price is higher, but it's far less than the financial loss you take every time you can't get a part you need."

3. Position yourself as a unique resource.

You'll have more negotiating power if you move beyond your firm's area of expertise and help customers in other areas of their business. The more ways you can help your customer, the more likely the customer is to view you as an integral part of its success. (My mom used this technique to become one of the top salespeople at Bristol-Myers.)

Example: "We can not only supply your high-quality widgets, but I can show you how to arrange your shelf space so that you make more sales overall in this product category, even for the products that compete with our product."

4. Stand firm behind a reasonable price.

You create additional credibility (and therefore increase your negotiating power) when you stick to your guns when it comes to company policy and, especially, when it comes to price. By contrast, when you approach a negotiation from an "everything is on the table" perspective, you can seem like a weakling who can be pushed around.

Example: The customer asks for a "silver-level" price for "gold-level" service or else "the deal is off." Rather than cave, you say, "I'm sorry, but we never discount gold level, because it makes the arrangement unprofitable for us, which is ultimately a bad thing for you too."

 

Published on: Feb 1, 2015
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