A few years ago I had the pleasure of hearing Jim Rohn, an international motivational speaker, speak at a sales conference in Calgary. One of his many suggestions was to be guided in life, and in sales, by the Law of Ten Options. His point is this: with a cancellation or postponement of an event, there are always ten other options—ten alternatives to consider. For example: if you and your spouse had planned an evening out with the Jones but at the last minute they gracefully declined due to sickness, you now have ten options to consider—go see a movie, see a play, visit other friends, clean the garage, read a book and so on. All is not lost because of a sudden change in plans. The first five or six options may present themselves quite readily, whereas the final three or four may require some creative thinking—perhaps even some alternatives outside your comfort zone. It works well. My wife and I often discuss our ten options and frequently come up with options that are as enjoyable or more enjoyable than the original cancelled event.
Rohn's law can be applied to all situations and it can be particularly useful in pursuing the spirit of creative negotiation. Have some fun with it. Anyone with teenagers will immediately understand how effective it can be—teenagers exercise the Law of Ten Options on a daily basis.
Negotiation is not a game with a single objective but rather one step in building effective long-term relationships. It is only one of the ten steps in your Sequential Model but it can be the pivotal point in your relationship and your success. During negotiation you forge an agreement—like taking the relationship from a courtship to a marriage. "Will you marry me?" may not be your actual request but your final confirmation (the five magic words) certainly suggests the commitment and responsibilities of a marriage.
One of the surest ways to successful negotiation is to be well prepared. It's essential, but planning is often overlooked in the excitement of approaching the finish line. It's like training and conditioning to run a marathon but then running out of steam at the 24-mile mark. So many salespeople come close to the finish line but fail to complete the race because of a lack of training and preparation. We cannot afford to ignore the dire consequences of inadequate preparation. Planning is not an isolated step of your Sequential Model but is a prerequisite to successful graduation of each and every step—including creative negotiation.
The skills outlined in this chapter will help you to build confidence and reach your business and personal objectives. Understand not only how to negotiate, but when. Review the five principles regularly and continue to fuel your confidence to not only run a good marathon, but to finish it.
Low of 10 Options
Language of Negotiation
The following terms should become part of every sales entrepreneur's vocabulary.
- Concessions. Giving in to a customer's request without asking for anything in return. Concessions are central to creative negotiation. They are the backbone to a mutually accepted outcome as they acknowledge the other party and communicate sensitivity to his or her issues and demands. Initial concessions can be effective—they communicate that you are willing and that your intentions are honorable. Many authors suggest that negotiation involves a "progression of concessions." Once again, your min-max points must be clearly defined prior to giving concessions. Know your parameters and don't give away the farm. Begin the negotiation by offering small concessions. Concede the items or issues to which you attach little importance. The sooner you demonstrate your willingness to negotiate, the sooner the customer will respond in kind. Don't give away big concessions too early. Use them to respond to a customer's concession or to secure the deal: "Can we confirm the deal, if I give you XX?" However, you need to draw the line when your min-point is being compromised.
- Trade-Offs. Give customers what they want in return for something of comparable value. Value is perception. The item may not be equal in monetary terms, but it may be equal in perceived value. As you've heard before, "One man's garbage is another man's treasure." Once again, know your must-have issues and your min-max points before determining what you are willing to trade. The power of trade-offs is enormous and can have a tremendous impact on your productivity. By asking for a trade-off you elevate the value of your concession. It also stops the grinding process. Marry your concession to a trade-off, otherwise your customer will continue to make demands. You might as well say, "Sure, here you go, it's yours for the asking." A confident negotiator exercises give (concessions) and take (trade-offs) throughout the negotiation process, moving the dialogue toward a win-win-win-win solution. However, the rule of thumb is to stay flexible—there is always a way.
- Walk-Point. The point where you walk away from the deal because your minimum must-have issues are not being met. If through trade-offs and concessions you are unable to reach an agreement that satisfies your predetermined parameters, your only option may be to walk. However, walking may only be a temporary solution. Both parties may be receptive to a recess, a cooling-off period. In the interest of an agreement, you may both agree to revisit your parameters and get together again tomorrow, next week, or next month. Although both parties may privately wish there were some way to get back together, they usually don't know how to arrange a reconciliation. Open and honest communication, coupled with an attitude of win-win-win-win, is your key to avoiding an impass.
- Impass/Deadlock. Where communication no longer moves the agreement forward and conversation seems to go in circles. There is nothing wrong with deadlock—either party has the right to prefer no deal to one that falls short of their min-point. How do we break an impass? Change the negotiators, change the parameters, call a third party to mediate, change the shape of money (larger deposit, different terms, cash versus credit), or consider changing venues. These tactics can help create a climate in which new alternatives can be developed. There is always a way.
- Agree to Disagree. Both parties may agree to disagree rather than reaching an agreement that compromises both parties, leaving each resentful and disappointed. If your agreement is undermined you may lack the commitment necessary to carry it out. Once again, this could be a temporary situation. Negotiation might be better served two or three months down the road. This tactic can be effective in personal relationships as well. It can even work with your spouse!
- Confessions. Not only are confessions good for the soul, but they can be a good tactic for negotiators. Confessing— telling all you know, revealing your motives and needs—can be a good way to gain empathy. People tend to be more charitable to someone who tells all. You also demonstrate honesty and a sincere desire to do business. However, no need to share your personal net worth or your most recent sexual fantasy.
Principle #4: Negotiate Price, Don't Sell It
Is price the most important aspect of the sale? No. Never has been, never will be. Customers have never based their buying decisions solely on price and I doubt they ever will. However, salespeople convince themselves that price is the number one motivator to purchase. Studies show that salespeople bring up price before the customer does 60% of the time. Why? I'm not sure but I suppose salespeople feel obligated to bring it up, or perhaps they have been trained to do so. It could even be lack of confidence or corporate self-esteem.
Many salespeople violate the sales process by introducing price too soon. Ideally, price should not be discussed until after your initial confirmation. During the call you need to focus on selling value and benefits to the customer. Don't mention price unless the customer asks or you are negotiating. I realize this concept may seem somewhat manipulative and irresponsible, but it isn't. I have confirmed several deals without the customer or me mentioning price. I think it's part of the rapport and trust issue I spoke of earlier. If a customer trusts you and feels comfortable with you, price is not an important issue. There is an implied understanding that your price will be competitive, otherwise you wouldn't be in business.
By shifting the conversation to price prior to initial confirmation, the salesperson has invited the customer to openly challenge the price. Some salespeople are convinced the customer's mandate is to hammer the salesperson into submission, finally succumbing to a rock-bottom price. Classic tactic of a C account. How to negotiate against price and discount pressure is a common challenge among sales professionals. You've probably heard it before, "Your price is too high. You'll just have to do better," or "It's a competitive market. Your competitors can beat that price," or "You'll have to show more flexibility on your discounting," and so it goes. When salespeople concede too quickly in these situations they not only reduce profitability, but also devalue their customers' perceptions of the product or service. Don't respond by asking, "What's the price they're offering you?" or "What price do I have to beat?" This is a common mistake because it shifts the focus to pure price and discount levels. Experienced negotiators shift the focus to value comparisons versus price comparisons.
When dealing with the price issue, be guided by knowing your min-max points. If you have price or discount flexibility, do not give it all away at once. Instead, concede slowly and reluctantly. Also, consider trading price concessions for major commitments. It could sound like this: "If I give you X price, will you give me net 10-day terms (or COD terms)?" If the customer is insistent on a discounted price don't hesitate to ask for something from them that makes the deal a win-win-win-win.
Acknowledge the customer's curiosity about price, but don't get sucked into a price debate prior to initial confirmation. For example, when you ask for their business using the five magic words in, your customers may inquire about your price. Simply say, "Yes, I'm sure we both recognize that price is important, but at this point can we agree to do business together based on the benefits discussed, as long as I can give you a competitive price?" If the customer says yes to your initial confirmation, you now have a willing party with whom to negotiate. Consider the initial confirmation as a conditional sale; conditional upon working out terms and conditions supported by a competitive price. What salespeople need to realize is that if a fair price cannot be worked out then there is no deal. Final confirmation is conditional upon successful negotiation. However, don't negotiate all aspects of the deal and then focus separately on price. Make sure price or discount is part of the whole package, not a separate negotiation.
During negotiation be cognizant of your customer's behavioral style, and adapt. If you are selling to a Director and she wants to know the price prior to initial confirmation, I would be inclined to acknowledge the request and offer a price range. Don't be exact with your answer.
Principle #5: Negotiate the Issues, not the Personalities
Often, what causes you to become frustrated or angry in a negotiation is not the topic or issue, but your customer's personality traits. By putting emotional distance between yourself and the negotiation you gain a tremendous advantage. Negotiations often unleash emotions that short-circuit rational processes. We sometimes abandon our carefully designed strategy and resort to a flight or fight response. The key to effective, win-win negotiation is to react unemotionally.
From time to time you may find yourself dealing with an individual you do not particularly care for. Chances are you wouldn't invite him to go camping with you, but he may represent an A account and a sizeable business opportunity. Experienced negotiators understand that professionalism requires the ability to distance oneself from any emotional distractions. These may include biases, perceptions, values, fear of being exploited, egos, feelings, moods, stress, and so on. Parties can get too caught up in the emotions of negotiation. They become too close to the deal and overlook important facts that may help move the deal forward. In spite of all your efforts to build a personal relationship you may find yourself dealing with just a corporate relationship. You can both still benefit by simply doing business together and nothing else. Don't entangle relationship challenges within the negotiating process.
For most salespeople, the major barrier is simply the fear of negotiation. The very thought sends paralyzing shivers up their spines. The toughest hurdle is learning to be confident enough to stand up to the challenge. This means developing the ability to comfortably express a position without hurting anyone or being hurt. Many people find the straightforward, aggressive, business dialogue of negotiation intimidating. It's the same challenge with confirming: the fear of rejection or perhaps sounding too aggressive. Our natural human tendencies prevail—in our adolescent years we were taught that it was polite not to ask for things and never to be confrontational.
The best approach to dealing with the emotional aspect of negotiation is the pause button. Pushing the pause button means putting the negotiation on hold while you take a break to reevaluate the situation. This may be for a few minutes or an hour or after you have slept on it. Michael and Mini Donaldson offer this explanation in their book, Negotiation for Dummies:
Knowing when and how to push the pause button not only endows you with an aura of composure and confidence, but also gives you control over all the critical points of the negotiation.
They go on to say:
No single skill can be as helpful to you as the pause button in any situation laden with heavy emotional overtones. Almost by definition, you cannot fully prepare ahead of time for these situations. Your judicious use of the pause button can compensate. Pushing the pause button produces better results... or at least results that you feel better about.
The message is clear: don't be afraid to utilize your pause button. Use it to re-evaluate your position. Perhaps in the interest of flexibility it can become an opportunity to reconsider your must-have issues and your min-max points. Remember, with two willing parties, there is always a way.
Five Principles of Creative Negotiation
Dealing with conflict and differences is rarely an easy task. Barriers to creative negotiation can be numerous and are often the saboteurs of a potential sale. Remember: your goal is to reach win-win-win-win settlements with qualified customers. To that end, I offer these five principles of creative sales negotiation:
Principle #1: Attitude First
Are you a good negotiator? Your answer reflects your level of confidence in your negotiation skills. Creating a positive mindset involves basic attitudinal characteristics, which become the building blocks for successful negotiation. Attitudes and skills must work in harmony. Attitudinal characteristics of negotiation include self-awareness, self-belief, and an openness to other viewpoints. Salespeople frequently overlook the importance of preparing themselves mentally. Attitude—how we deal with others when negotiating—drives the relationship. Develop a win-win-win-win attitude toward negotiation, and don't be satisfied until all parties are pleased with the solution.
Principle #2: Planning and Preparation
For many of us, planning is boring and tedious, easily put off in favor of leaping into action quickly. However, devoting insufficient time to planning frequently results in failure to negotiate a mutually beneficial agreement, and raises feelings of hostility and frustration.
The cornerstone to effective, creative negotiation is a carefully designed blueprint outlining specifically desired results for both you and your customer. The first step is to clearly articulate your position—know what your objectives are. Know the issues that are not negotiable and the issues that are negotiable. I refer to them as your "must-have" and "nice-to-have" issues. Must-have issues are predetermined prior to negotiation and are essential to a satisfactory agreement. They are simply not negotiable. Your nice-to-have issues are negotiable. Although they would be nice to have, they are not essential to the agreement. They are issues you are prepared to concede or use as trade-offs in the interest of concluding the agreement or maintaining the relationship.
Your window of flexibility is guided by your predetermined min-max points—min being your lowest acceptable point and max being your best, most ideal position. So, in the interests of creative negotiation, each of your must-have issues should be accompanied by a window of flexibility—your min-max points. Let's look at the example below.
As a sales entrepreneur, your must-have issue is making a profit. To do this, you are guided by the flexibility of your predetermined min-max points. As in Figure 10.1, the ideal situation is a max-point of $150 whereas your min-point is $100. Any price lower than your min-point is unacceptable—you may have to entertain other avenues, such as concessions or tradeoffs, to secure the deal. The wider the spread between your min-max points, the more flexibility you have to negotiate. Otherwise, you may become too rigid and inflexible, deadlocking the negotiation. In terms of your nice-to-have issues, I suggest there are no min-max points. These issues are subject to negotiation and may be used as concessions to advance the deal. The key to creative negotiation is knowing your parameters prior to negotiation. Whenever possible, plan your strategy beforehand. It's tough to negotiate creatively if you don't know the parameters of your destination. In creative negotiation, those who ask for more typically get more ... and those with low targets typically underachieve.
Also, consider whether negotiation is appropriate at all. It may be a C account or a C opportunity. In some sales situations negotiation can take place spontaneously, so be aware of the status of the opportunity: A, B, or C. You may have to respond on the fly so be sure to have the complete account file with you at the call for quick reference to previous discussions.
The second step in negotiation planning is to define the issues worthy of negotiation. Refer to all your notes and assemble all the issues, yours and your customer's, into a comprehensive list. Some issues may have been resolved prior to the negotiation, which is fine, but be sure to identify any outstanding issues. It can be frustrating and costly—in terms of time and success—if the customer calls you just prior to inking the deal with an unresolved issue. After the issues are assembled, the next step is to prioritize them. By sharing the list with your customer, you continue to build trust and confidence as you work through it together. Extract relevant information from your notes to enhance your position. A comment in your notes from six months ago may be a valuable piece of information. Salespeople often compensate for inadequate planning by conceding more than necessary. This shortcut can be very costly.
Sales entrepreneurs cannot afford to be quick and clever during the give and take of negotiation. Planning increases your negotiation success substantially and helps you achieve solutions that you never thought possible. Invest the time and energy (during janitorial hours) to prepare a strategy in line with your customer's behavioral style. Your strategy will help you relax, face fewer unknowns, and reduce stress.
Principle #3: Know the Lingo
The negotiation arena has a language of its own. I have seen many negotiation sessions fail simply due to not understanding the language of negotiation. My objective here is not to provide you with an in-depth study of all the nuances of negotiation but to create a mindset, an awareness, and an overview of the logistics of creative sales negotiation. I suggest you augment your negotiation skills and confidence by considering other publications on the subject. Consider this chapter as your springboard to further study.
When Do We Negotiate?
Almost anything can be negotiated with the application of sound principles. The biggest misunderstanding is not so much how to negotiate, but when. Salespeople eager to do the deal often initiate premature negotiation, trying to negotiate before the time is right.
So, when is the best time to negotiate? In the majority of sales situations, salespeople attempt to enter into negotiation before the customer has agreed to do business. There is a better, more productive approach.
Sales professionals engage in negotiation when a customer has expressed an interest to do business. We negotiate after the confirmation step, after the customer has agreed to do business with you.
Upon initial reflection this concept may seem bizarre and contrary to traditional sales techniques, but that's only because you've done it that way for years. Although it may have worked for you in the past, it's not a very smooth or fluid approach.
Confirmation has two aspects: initial confirmation, where the customer is in agreement and willingly moves into the negotiation phase; and final confirmation, where the customer has accepted all the terms and conditions of your solution, including price. Initial confirmation may sound like this: "If we can work out a competitive price, may I have your business?" If the customer is in agreement, you now have earned the right to negotiate. It's much easier to negotiate terms, conditions, and price once you have a willing party. Your next step is final confirmation: "Now that we have agreed on a competitive price may I have your business?" It doesn't need to get any more complicated than that.
In our two-day sales negotiation seminar, salespeople are often shocked to learn that price should not be part of the sale. It's a separate discussion that takes place as part of negotiating final confirmation. It's no different than buying a house. You decide on location, size, number of bedrooms, and other features. After you pick a home you make an offer, which means you are now negotiating. The offer goes back and forth as both parties negotiate all the details, including price. In most cases the negotiating goes smoothly because there are two willing parties, a seller and a buyer. Use the same advantage in sales, by using your Sequential Model to create a willing buyer.
Negotiate after initial confirmation.
Ask: Have I earned the right to negotiate?
Now it's in each party's best interests to negotiate a win-win-win-win solution. The four winners are your customer and his or her company, and you and your company. With two willing parties there is always a way, in spite of initial barriers and disagreements. Details can be worked out when both parties are motivated to do so. If not, details can easily undermine a possible solution. It's not a good deal if one of the four wins is missing or compromised. The idea is to reach mutually beneficial agreements that resolve inconveniences or dissatisfaction and solidify long-term relationships.
Trust plays a major role in successful negotiation. Although there is no guarantee that trust will lead to collaboration, mistrust will inhibit collaboration. When people trust one another, they are more likely to communicate openly and honestly. In contrast, if people do not trust you they are more likely to withdraw and be less cooperative. Acting in a trusting manner throughout the relationship serves as an invitation to others to be trustworthy, especially if your trusting manner is consistent. Each negotiator must believe that both parties choose to behave in a cooperative manner. Trust is not a one-time, singular event. It is established over time by demonstrating professionalism, honesty, integrity, consistency, and cooperation and by following through on promises and commitments. Cooperative behavior is a signal of honesty, openness, and a shared commitment to a joint solution. Take advantage of the trust engineered throughout the first seven steps of the model. Remember, people judge us by our actions, not by our intentions.
Approaches to negotiation tend to reflect personal experiences, biases, and perceptions of the individuals involved. They are often reflected in one of two ways: flight or fight. People who take the flight approach are uncomfortable with conflict and try to avoid possible rejection, frustration, and anger associated with negotiation. They become masters at avoidance and readily prefer to take flight rather than experience any degree of conflict. Relaters tend to take the flight approach.
The fight approach is supported by a mindset of, "Only the strong survive," and "Do unto others before they do unto you." Directors tend to favor this approach. It's a classic win-lose scenario. Bargaining and compromise are two components of fight. Bargaining is where you have a predetermined position and you haggle back and forth, working hard, grinding your opponent down. You pursue this approach until you are victorious. Compromise occurs when both sides give in and split the difference, settling for half a loaf. Compromise may satisfy both parties, but only to a limited extent. Of course, half a loaf in a highly competitive arena may be viewed as better than none but if it becomes normal practice the results may be less than desirable for both sides.
A more effective approach, one that fosters long-term relationships, is creative negotiation. Creative negotiation is defined as: "Both parties seek to resolve their differences by working synergistically to create a higher quality, value-added solution. Both parties acknowledge the need to reach agreement, working amicably and creatively toward a solution that satisfies each."
Read More..
Creative Negotiation: There is Always a Way
Children are accomplished negotiators. If they need extra allowance, a later bedtime, a sleepover, they usually get it. Children can be relentless in their pursuit of what they want. Familiarity gives them the advantage of knowing what parental hot-buttons to push. They are the best examples of ideal negotiators. Then they grow up and abandon the natural negotiating talents they learned instinctively.
Like selling, negotiation is something we use in every facet of our lives. I am often entertained just watching my three teenagers negotiate the use of one car. Amazingly, it usually works out. I think most of us are better negotiators than we give ourselves credit for. Negotiation is one of those transparent, interpersonal skills we use unconsciously. Negotiation is really a relationship skill used by people to deal with their conflicts and differences. Throughout this chapter, my goal is to leverage existing negotiation skills to build confidence and an awareness of long-forgotten negotiation principles and tactics.
Unfortunately, the very thought of negotiation conveys negative connotations, striking fear in the souls of most salespeople. Often the outcome of negotiation leaves people feeling dissatisfied, worn out, or alienated. A win-lose mindset has prevailed for decades. The negotiator (customer or salesperson) attempts to win important concessions and thus triumph over the opponent. It resembles the outcome of most sports: winner-loser. Not all successful salespeople are good negotiators. Most salespeople are not adequately trained in the art of negotiation and don't understand its many nuances. The necessary traits for successful negotiation vary somewhat, but some characteristics are universal, including patience, persistence, stamina, and confidence. Each negotiation is situational, with both sides discussing the points over which disagreement exists. In reality, no single negotiation session covers exactly the same issues or demands.
The modul of Creative Negotiation:
When Do We Negotiate?
Five Principles of Creative Negotiation
Language of Negotiation
Low of 10 Options