A business partner once asked me How would you have dealt with the following situation? “A client of yours starts telling you that they are very concerned about the quality and not looking for the cheapest deal. That, they would prefer to pay a higher price and get better quality and service. What if you had already told them that you are not only sell on price, but also on service and quality. And that, although we have said that, your client keeps telling you that your price is too high, and that they have not made their final decision yet, and Instead they will open their search to other suppliers!”
Well, tough negotiations are normal when doing business, sometimes they are trying to squeeze you. Thus, first understand what kind of negotiation you are facing, in this case I believe you are in the face of a bargain deal! Your client is trying to create a price war between you and a second (imaginary or real) party. Although I have seen this kind of argumentation more in a one-time deal, this also happens when negotiating with a client/supplier/partner with whom you have been working with for years. In that sense, I believe that the following process will help you sorting out what kind of negotiation you are facing and give you possible ways of handling it.
Step 1: Understand what is at stake by asking yourself the following questions: what are you negotiating? what is the value of what you are negotiating? what is the strategic importance of that deal or that company to your business?
Step 2: Question yourself if you have the right info about the other party and about the deal in itself. If not do your homework first. If you have already negotiated with this party and have not reach a deal, try to understand if the presented arguments are true and reasonable. Ah, key to the negotiation process is also putting yourself on the other party shoes. Is it a one-time deal? Why this behavior? Hostile or friendly? Decide if it is worthwhile to continue doing business with this company! If yes continue the process.
Step 3: Define your limits regarding this negotiation (e.g.: max price to sell…) and do not disclose it to the other party. Understand if you are entering in a price war, and move away from it (except in a one-time deal).
Step 4: Schedule a new meeting. Listen more than talk and regarding talking ask questions to understand what is the other party’s limits for this deal. Along with that extract as much info as possible (info that helps you closing the deal in a better position). Never disclose your limits (values) on the deal. Ah, and again: Listen more than talk!
Step 5: Regarding your diagnosis on this deal act like accordingly this two steps
A) Move away if the other party’s conditions are not within your pre-defined limits – step 3. Even if it is a strategic client to your business and company, be careful. By redoing your limits you can end up with a bigger problem, never forget that the deal conditions are also a signal to the market. Be sure that you are sending the right signals to the market, that the signal is aligned with your strategy and client value proposition.
Or, B) If you can believe that your client is willing to negotiate and that the deal is within your limits or worthwhile, negotiate with them. Move away from one-item negotiation by introducing a package deal with a list of items to be negotiated. Like for instance: cross and up-sale, delivery deadlines, minimum quantities, packaging formats, discounts, etc. This will bring you negotiation power and can help you balancing your final result.
* Do not feel uncomfortable postponing the negotiation! Do never start a negotiation without info or pressured, therefore be highly prepared, and get as much info as possible on the deal, client, and understand strategic value of the deal.
* Do not “fight” for a client just because you want to win it. Put a lifetime value on it and try to understand why you should, or shouldn’t, do business with it. Define also a maximum or minimum value that you are willing to go for and never disclose it to the other party.
* Move away from a one-item negotiation, and find a list of negotiable items in order to negotiate on a package deal. Why? Because you will be able to increase “the pie” (increase the value of the overall business) and consequently being able to exchange one item for another creating more opportunities to reach a good deal for both parties. Good deal = deal where both parties gain.
* Tough negotiations happen, so do not be the first to speak unless you have a good piece of intelligence, otherwise wait for the other party to do it. When moving forward in a negotiation you are disclosing information that can be used “against” you.
* Last but not least, never forget the 20/80 rule! 20% of a company’s clients bring lost. Work with other departments in order to profile your client and what kind of solutions you can present and negotiate (help building a good list of items to be negotiated in order to reach a package deal).