Are You a Better Negotiator than a 5th Grader

Where do kids learn to negotiate? I don’t see it listed anywhere in my town’s elementary school curriculum, but it seems that everything is a negotiation with my 6- and 10-year-old boys.

• Can I skip brushing my teeth tonight because my brother skipped last night?
• Can I just eat two more bites of broccoli because I ate all my chicken?
• Can I have extra time on the computer tonight since its Friday?

I’ve had to sharpen my skills over the past few years just to stay even with my boys to ensure I don’t lose every battle and have to play the “Daddy said so” card, because that’s lame.

Webster defines negotiation as “a formal discussion between people who are trying to reach an agreement.” In practical terms, negotiation to a salesperson is frequently one of the last steps in closing a sale. Customers, relationships and profits are won or lost in the negotiation process. You may have been through formal negotiation training, which can be helpful. But frequently, negotiation can be minimized or even eliminated if we simply execute the fundamentals of the effective sales call. So before you enter the difficult scenario where you are forced to give something up or make hard choices, let’s ask a few questions. Have you done your homework and are you following a good discovery process with the customer, and have you proposed a fair solution that is valuable to the customer? If so, you can minimize the need to ‘sharpen your pencil’ and throw away margin and commission by eliminating the need for negotiating to happen. To do so, you’ll need to understand WHY the customer is negotiating.

There are five reasons potential customers push back on your proposal, and only one of them will require you to give away money. The trick is to determine which one is their reason and then respond accordingly.

1. Some people always ask for a lower price. Their philosophy is, “If you don’t ask, the answer is no.” They are just asking and they are okay with a “no” answer. Do they ask in a nervous way? Do they hesitate? Before this negotiation, did it sound like they were sold? If so, a little resistance might be all that is necessary. “Can you do a little better?” “I’ve done my best to put a fair proposal in front of you? Do you think it’s fair?” As with any of these steps. Let them talk. Be brief and let them respond. Prospects in this category will back off quickly. You don’t want to draw a hard line in the sand “I’m at the best I can do.” You’ll lose credibility for the future if you ever have to change – meaning that it wasn’t really the best. I recently sold a piece of furniture on Craigslist. The customer said “this will be perfect.” Which means they are planning to take it home. They awkwardly stopped and asked “Any chance I could get it for $75” (vs. my $100 listing). I just said “I just listed it and really don’t want to discount it yet.” They said, “OK, it’s still a fair price.” They handed me cash and became a happy customer. Sometimes I am in this category as a customer working with contractors that want to provide a service to me at home. I think the price can be discounted, so I ask. I’m amazed how easily some of them lower their price significantly. If they pushed back, often I’ll still buy anyway, but I wanted to at least ask.
2. It’s all about winning. So let them ‘win’ something else without changing price. If they start to communicate, “This is a big deal” they might be trying to tell you that you are winning something big and they want to win something as well. Something extra. What can you suggest? You can commit to meeting a certain deadline. You can offer some of your time as an extra for training. You can promise to schedule the most veteran engineer to do the installation. You may even be able to adjust payment terms without upsetting the finance department much. Making an effort to give them something extra as a thank you will typically go a long way with these customers.
3. They don’t want to communicate it’s over budget. They have someone to answer to. When they walk in to inform them they’ll be over budget it won’t be fun, and it will be their fault. At this point, you should understand their decision process. So you ask them “what will your boss say when you talk to him/her?” See what they say. If it’s going to be an issue, offer to help, or communicate the price yourself. At a minimum, you’ll need to arm them with a way to justify the price with some detail. If they can make a good argument with your help, they’ll shine in the eyes of the DM, and then be able to close the sale with you.
4. They can get an equal solution somewhere else. Explain what’s included in the price. Maybe it’s shipping, maybe it’s no minimum order size, or maybe it’s a short lead-time. If they really need to have your price be the same or closer to their other option, you may want to unbundle. You can lower the price if you remove some of the things it includes. Or, take contract length, add a commitment to finish the project in a shorter timeframe. In other words, don’t just give money away, but trade-out something of value that will lower the comparative price. If you have to lower the dollar amount, try to avoid changing the ‘line-item’ price of any one product or service. Once you lower the price of something, you’ll be committed to that in the future and it will be hard to raise. Instead, offer an initial one-time discount percentage on the whole order or project as an initial courtesy. It will keep the value of each thing in task. You could offer a lower price for a short period of time as an incentive to start working with you, but be clear in writing that it’s a trial period and the price will return to ‘normal’ at a future date. If your products and services are as good as you think they are, they’ll usually pay the ‘normal’ rate when the time comes. Also, if you do change your price, never do it too quickly. If it’s very easy to knock 10% of the price immediately, it will seem like you priced it high to begin with and the customer was almost ready to pay too much. Lowering your price is painful to you. Do it slowly.
5. They really can’t afford the price. If it’s simply above their budget, the best option is to reduce the scope of work first. Instead of changing the price for a specific line item, reduce the number of line items. Make the total number lower by changing the amount of work, not the price of anyone one part, product, or service. If you think it’s worth lowering the price, follow the steps from above – one-time discount percentage, etc. Only you can decide when you are willing to walk away and say no. Sometimes that’s the best approach.

Hopefully on your next deal, you’ll be able to look at this list and determine where the customer is so you can respond accordingly and end with a better, more profitable customer that you and your organization will enjoy serving for years to come. You may have noticed the first situation is the easiest, and the scenarios get more difficult as you move down the list. Depending on your industry, you may have more customers in #4 or #5, but at least you’ll be equipped to better handle any that are not.

Fortunately, my kids mostly stick to #1 and sometimes #2. I let them win sometimes, it’s good for everyone. Someday, I’ll show them this cheat sheet, but for now, I could use the extra help.