Alison Edgar writes about how negotiation is one her favourite subjects, she says that its "probably because it’s really at the heart of business. It is the nitty-gritty of the actual transaction between customer and business. Yet strangely enough, it’s something that most sales people and business owners alike try to avoid".
So why do people not negotiate?
I negotiate on everything, except at Tesco’s where I think I might get a few funny looks from the checkout assistant! I think the main reason that so many people are afraid to negotiate is because they don’t know how.
Why should you negotiate?
Well, why wouldn’t you? Saving money is as good as making money if you are an entrepreneur or someone who has been working hard all day. Why wouldn’t you want to get more for your hard-earned cash?
Two sides to every story
There are two sides to negotiating and you have to be prepared to be on both. You could be the person making the purchase or the person selling, it doesn’t matter which side you are on, you are always going to want value for money. If you’re buying car insurance, you want the best insurance at the best price, if you’re selling your car you want as much money as you can get whilst knowing you have sold someone a safe and reliable vehicle they can use to get them from A to B.
The best negotiations are when both sides win.
Negotiating as the customer
If you’re the customer trying to get the best deal, there are a few things you can do. The first thing I do is ask for the ‘best price’ this can be a great line for opening the negotiation and is less abrupt than asking ‘can you give me a bit of discount’. The second thing you can do is find the added value, for example, if you’re buying a house, can you get new carpets for free? Can you upgrade from the basic kitchen design? If you can’t get a better price, start looking for better value.
Don’t waste your time, before you start any negotiations make sure the person you’re dealing with has the authority to make decisions on price and can give you those added values. If they don’t, you’re wasting your time. Someone in a sales role usually has a certain amount of leeway to ensure they can provide the customer with the best offer and close the deal.
Negotiating as the seller
Now this is where we get down to the real nitty-gritty business. You know how to get the best deal as the customer, but how do you get the best deal as the supplier? I cannot stress how valuable this information is for business owners and entrepreneurs.
The key to negotiating is knowing your numbers:
- What is your price point?
- What is your break even?
- What is your cost of sale?
The bottom line is to know what things cost. This tells you how much it cost to open the doors. When I managed hotels, it was about calculating room occupancy and the average room rate. As a sales training provider, I need to consider delivery time, preparation and travel.
You can always negotiate down but you can never negotiate up!
Once you know how much it costs to open the doors, you can work out how low you can go. Know your lowest price and don’t ever go below it. A model that I use to help with pricing is the Rule of Thirds. This will help you put in your starting offer, for example, if you’re lowest price if £150 go in at £175. This gives them room to knock you down and ensures you still get paid enough to cover your costs and make a profit, leaving both parties happy and satisfied.
Remember how I told you about looking for the added value as a customer, well as a supplier you want to do the same. The ideal situation would be to offer added value instead of negating price. But be careful what you offer, if you’re a service try avoiding offering extra time, your time is valuable and chargeable. I have created things specifically to give to my customers as added value offer, something like a handbook or guide works quite well. If you’re a product-based business, something like warranty, insurance, or branded items make good added values.
You want the customer to walk away happy, we all know that happy people love to talk. If you’re offering them an added value make sure it actually adds value, a chocolate teapot is useless but a handbook on SEO could be invaluable. When both parties are happy, this is the best kind of negotiation.
Sometimes in business, you have to be ballsy. After all, fortune favours the brave.
If you feel like you’re being screwed over because you’ve let someone drive the price down too low, you’re going to feel devalued and won’t deliver to a high quality. In a case like this, no one wins. Okay, the customer got a low price, but they got a shoddy service. Remember it’s all about the win-win.
If you are in a situation where someone is playing hardball, you need to deliver your price confidently and SHUT UP. Don’t say anything else, the first person to talk loses. Know your numbers, negotiate with confidence and you’ll be onto a winner.
A great example of this is when I negotiated 6 free tickets to Australia. When I married my amazing husband, Neil in Jamaica, the plan was to fly home and a day later have our wedding reception. To cut a long story short, the plane had a mechanical failure and we were delayed for 36 hours. This means that the only people not at our wedding reception was us, but don’t worry I hear it was a great party. Like any person in my position, I was upset and angry, so I decided to act and call the airline. Being an experienced sales person and negotiator I had an objective in sight. First, I asked to speak to the CEO and got through to the CEO’s PA, I could tell she was Green (if you don’t know what I mean by this you should attend my Easy Peasy Sales course), I knew exactly how to handle this conversation, by appealing to her emotions instead of getting angry. I negotiated from an initial offer of two free European flights, to six free flights to Australia in Business class during the Christmas period.
Negotiating over the phone can be difficult, but I understand behaviours and I know sales, so I was able to do this and gain an effective outcome. If you can, I would always recommend trying negotiating in person. It’s a lot harder for someone to hide their ‘poker face’ when you’re face-to-face with them.
Negotiation skills as an essential part of business and when you know how they can help you, whether you’re the customer or seller get the best of every transaction.
I will leave you with this quote from Dr. Chester L. Karass “In business as in life, you don’t get what you deserve you get what you negotiate.”