The Art of Negotiation

At what point in a negotiation do you show your hand? Most people believe if they know what their prospective client is thinking it will give them an advantage. So they wait to quote a price. They do their homework. They look for clues. Sometimes they just come right out and ask: "What's your budget? Are you looking for great quality, a fast turnaround, or do you plan to go with the cheapest option? What number are you thinking of?"

About the Author

 

Mike Michalowicz is the author of "The Toilet Paper Entrepreneur." He is an advocate of a business philosophy by the same name, believing the greatest business successes come from underfunded, inexperienced entrepreneurs. His website is www.ToiletPaperEntrepreneur.com.

Big mistake.

If you want to come out on top, use this simple shortcut: Be first. No dancing around the issue. No hemming and hawing. Just give them a number right off the bat. In doing so, you'll set the starting point for the discussion, from which all further discussions will stem.

If you quote, say, $8,000 to complete a project, your prospective client may want to negotiate the price or other parameters of the deal, but all negotiations will start at $8,000. You may come down a bit in price, or agree to different payment or delivery terms, but if she hires you, you'll get a number close to $8,000. On the other hand, if you wait for her to tell you she expects to pay $2,000 for a project, you may be able to negotiate an extra thousand or two, but you're never going to get the $8,000 you feel you deserve.

Everett Collection Inc.

But what if she can't afford to pay more than $2,000? Well, can you do the work for $2,000 and still buy groceries? Probably not. (Ramen noodles don't count.) So what difference does it make if you scared her away with your reasonable price?

Divergence is a huge time waster. If a prospect can't—or won't—pay a fair price, why would you spend one more second trying to land her as a client? Even if you lose the deal because your price is too high, you still come out on top because you haven't invested much time trying to win her business.

Another common mistake is to do "the range thing," which is to ask prospects to tell you the range they are willing to spend, or for you to give them a range they can expect to spend. For example, say your prospect needs a new phone system for his office. You do the dance, avoid the giant dollar sign in the room and eventually say, "This will cost you somewhere between $100 and $400 per phone." "Great," your prospect says, thinking he's getting a new phone system for only $100 per phone. "Great," you say, thinking you're getting $400 per phone. From that moment on, no one is happy. When your prospect sees the written quote, which of course reflects the price you expect to get, he'll grumble. He heard $100, you heard $400, and now you're both frustrated. Even worse, you probably won't get the deal you desire.

CONCLUSION

How many times have you entered into a deal that you later regretted? When you try to read a prospect's mind or wait for the person to reveal what he or she expects, you invariably end up doing more work at a discounted rate. How are you going to make it using this old negotiation strategy? (Hint: You won't.)

Be first. When I started applying this negotiation shortcut, I was able to increase my prices by nearly 50% and filter out prospects who were not a good fit. No more laboring over proposals for people who couldn't afford my services. No more playing guessing games with myself, trying to figure out what my prospects wanted. No more saying yes to low-ball deals that kept me working 100-hour weeks just to get by.

When it comes to successful negotiations, the single most important matter isn't what your prospect is thinking. It's how fast can you get your number on the table. The person who goes first wins. Period.

The Most Effective Way To Win A Negotiation

The sales-negotiator will go in saying exactly what they want and then get blindsided with the other sides proposed alternatives. The more sophisticated negotiator will start with the “best case scenario” and be willing to compromise to a less then perfect, but still good position. The master negotiator will start with the best case scenario and then negotiate a solution that is both better for them and the other side.

Here are many more strategies for negotiating big wins for everyone.

1. Quick Negotiation Tip

Negotiate like a rubber band: Be willing to stretch, but also be financially and mentally prepared to “snap” the offer, if you have to bend too far.

 

2. Repeat!

Want them to lower the price? Just repeat it back to them.”…and the price for that is $2,997.”  Pause like you are thinking. Then repeat the price and wait. “$2,997?” Do not talk; just wait.  Many times, they will lower the price right there.

 

3. Negotiate Value, Not Price

I find it’s best to start negotiations at the exact price you want. Be firm, and negotiate added value instead. Can you include a free e-book? A gift bag? Delivery service? Negotiate little things that cost little or nothing to provide, but add a whole lot of value for the other person.

 

4. Be Willing To Walk Away From The Deal

If you aren’t willing to walk away from the deal, you lose 50% of your negotiating strength. Don’t fall prey to the myth that something is a “Once in a lifetime” deal because 99% of the time, it’s not. Okay, maybe getting to go on the first jet to the moon is a once-in-a-lifetime deal, but business deals, relationships and all that? They’re like buses and trains. If you miss one, wait around. There will be another one in 15 minutes. Know what what your deal breaker is and be willing to walk.

 

5. The Power Of Asking

First learn about what it is they want to accomplish, then I look at how you can help them, and then ask questions and do lots of research on the company. This will allow you to put together a strategy that is a win win for both.Remember, today its about integrity and what we can do for them – its not about us.

 

6. Give Reason

People don’t mind giving a little ground if they know why you are willing to give a certain figure. If they think you are trying to screw them over, they are going to get defensive and be harder to work with. If they know the situation and the reasoning behind your offer, they are more likely to work with you in any way that they can. By helping them understand, you help them talk themselves into helping you.

 

7. Negotiate To Win

I don’t believe one party should win and the other lose. I think each should have a win-win. If you find out what is most important to the other party and try to get as close to it as possible, it works. Also, if you give in on things not important to you, very often the other party gives in on others. There’s nothing wrong in taking a hard stand on things, but always be reasonable.

 

8. Negotiating Using A Magicians’ Misdirection

A magician uses misdirection to make you pay attention to wherever his sleight-of-hand is not going on. Negotiators can do the same thing. You can appear to be someone with no backbone. Let the other side run over you — as they see it. Suppose $250K is a great deal for you. So you say: “The CEO really wants $400K for this, but honestly, I don’t even think it’s worth that. Maybe $325K at best.” You then let them “beat you down” to $275K. Use apparent weakness as strength.

 

9. Give In To Win

My best strategy is to give in to what they want so that I can capture what I need. As a husband I want to have peace so I make sure the little things are done like cleaning up and taking out the trash so there won’t be no arguing later on.

 

10. Never Say No

Be open to No and adjust your solution accordingly. Of course, if you had executed your sales process flawlessly and invested the time to ensure no changes had taken place prior to the presentation of your solution (proposal), your negotiation would be around delivery and not price.

 

11. Honesty With A Capital H

Honesty is my best negotiating tactic. I think it is important to put your cards on the table and appeal to the opposite side with a straightforward and transparent deal. Everyone appreciates honesty-the more you project an honest persona, the more likely your potential customer/buyer will trust you and your business.

 

12. Listen And Do Your Homework

The best negotiating tip is simply listening to the other person to get a feel for what’s possible. Never offer any kind of financial commitment until you have a good sense of where the other person is at. You need to ask questions and listen. Once you have a sense of what they want, it’s often best to let them play their hand first. But sometimes you will actually want to come in with your offer first to set the stage as to what is acceptable. Listen and do your homework ahead of time!

 

13. Are You A Winner At Negotiation

To be able to negotiate you must first have something that the company you are working with wants or wants for their customer. If they do not want the item/service negotiation rarely works. If you are trying to negotiate a price, for example, the other side wants the highest dollar amount they can obtain. While you, other the other hand, may want a lower price or lowest price. To come to a settlement, negotiate around value not price.

 

 14. Be Willing To Give Something Up

Many times people present a solution or proposal without any wiggle room. So during a negotiation, present the ideal solution or proposal with all the bells and whistles and include features or item that you are willing to give up (like giving a discount) or add to sweeten the pot (provide extra training at no cost). The customer feels like they got something out of the deal and you still end with a great deal because you built in wiggle room.

 

15. Understand Their Need

If you understand the nature of their need and understand the importance of your participation, you may leverage them to giving you a number first. All other negotiations now are based on that number and gives you room to improve from there.

 

16. Promise For More

I tackle all my negotiations by promising more business (volume/ quantity or warm referrals) for great performance on good price OR a bulk purchase split-able amongst different buyers/users. For e.g, I recently negotiated super cheap radio ad spots by buying bulk spots for a full year, if radio were flexible that the ads played will be of 4 different companies. Radio agreed & all my clients and I are happy with the price we got because we could have never got that price individually. Win-Win-Win

 

17. Sell Yourself – Cheap

Most negotiations that go in my favor start with research. What is normal? What would I want if I were them? Then I consider, what else can I put in the pot? In negotiating a salary once, I agreed to a lower starting pay with a review one week later. I told her I’d be worth it and I proved it. The excellent working relationship was well worth one week at a lower salary.

 

18. The Willingness To Walk Away

Before negotiating, know your walk away boundaries. What’s the most or least you’ll accept, or you walk. Besides money, what are your boundaries in terms of payments, quantity, quality, color, delivery, storage, insurance, warranty, guarantee, training, referrals, etc.? Consider every possible thing that can be negotiated. Then create a list of things you can offer to the other side that they may not have thought of, things that will make them want to seal the deal, and have a win/win.

 

19. Play Your Opponent, Not The Cards.

Instead of negotiating your price down, negotiate your value up. Here is how it works. If you pitch a project for 50k, stick to your guns. Instead of taking a cut in your paycheck, add value to the services you offer. In our case, I will add conversion rate optimization, or PPC campaigns to the SEO proposal. That way, people think they are getting a better value for their money, I still walk away with my full 50k.

 

20. What Is Your Budget

I try to get as much information in the beginning. One of the first questions I ask is what is your budget? What are you willing to live with and what is your bottom line? Asking those questions can start the negotiations going in your favor, this will help you get a leg up and let you know where you are in the ball park.

 

21. Look ‘Em In The Eye And Tell ‘Em The Truth!

My best strategy has always been to look the person with whom I’m negotiating straight in the eye and tell the absolute truth.

To begin with, the endeavor must be worthwhile for both parties. When that is the case and I enter into a negotiation, I find abject honesty is the best policy. The end result has not always been exactly what I had in mind, but it has always been a win-win compromise.
Novel idea? NO! Most popular approach? NO! Simplest approach? YES! Best approach? ALWAYS!

 

22. Say What You Want, Then Zip It!

My best tip for winning any negotiation? Figure out what you want before you go to the table (or get on the phone). Then when you get into the negotiation, say what you want and ZIP IT! Shut your mouth and keep it shut! Whoever speaks next loses. If you are on the phone, pop a lollipop in your mouth so you stay quiet. In person, just breathe and count sheep in your head. (Not aloud, please.)
Oh, and NEVER negotiate by email–You need to have a conversation in person or on the phone!

 

23. Ask This Question.

I always ask the other party what they need to make the deal work. Often the answer is not what you might be expecting. Then figure out what you need in order to give them what they asked for. If you ask the right questions and display flexibility and reason its easier than you think to find the middle.

 

24. Silence Kill Them!

People are extremely uncomfortable with silence. The more of it they get, the more nervous and restless they usually become. This state of mind leads them to make bad decisions; good decisions if you take into account the decision is to my benefit.

 

25. Anchor An Idea

Cognitive Science researchers have shown that people tend to rely too heavily (or “anchor”) a past reference when making decisions. Use your opening in a negotiation to put a very high number or very low number into the mind of your opponent. The power of that suggestion may surprise you.

 

26. Provide Value Added Benefit

When negotiating, we don’t provide a fluffed quote, we provide the bottom line and utilize our credentials to win our bids as no one else in our geographical area can compete with us. However we know it takes some extras to make things happen, sometimes it’s a limo, sometimes dessert, sometimes more, but we add value to our services to win our bids.

 

27. Use Your But

That’s right! I said but as in “but for”. When negotiating, those two words can make a deal come through. You see when you introduce those words you are overcoming some one else’s doubts and fears. So think of your prospects fears, doubts and concerns and turn them around in a positive way by addressing them by starting by saying “but for” and introduce the solution you have to offer right after those two words.

 

28. Be Honest, Be Prepared

Honesty is in short supply these days. I’m not sure when it became okay to hide what you want when negotiating, but it really upsets me when I think I’m making progress with someone, only to find I’ve essentially spent an hour chasing them around a table because they weren’t open with what they wanted.

Just remember to also be prepared, and know what you’re willing to give up. Otherwise you might sound like a spoiled kid – demanding a new toy and then throwing a tantrum when they don’t get it.

 

29. Always Be Willing To Walk Away – Even When You Can’t

It sounds contradictory, although if the party you are negotiating with knows you can’t walk away you have no negotiating power. Always let the other party believe you can walk away – and do yourself a favor and have yourself convinced of that before you walk into the negotiation.

 

30. Set The Bar High

Start negotiating by making the first offer but with your high number and low number in mind. Many think that you shouldn’t make the first offer because the other party may offer a much better deal than what you initially throw out. But, if you gear yourself up by throwing out your best number within reason you would probably get something close to it as an end result. Research shows that the ending price in a negotiation settlement is generally closer to the first offer, largely because it sets expectation.

 

31. Perks Are Plus

If the negotiations reach a standstill you can always agree to include other items in order to break the impasse. If you are on the other side of the negotiation then you can offer to buy extras or larger quantities as well in order to keep the process going break the other sides’ resistance. The whole point of negotiating is that you are making a deal for something both parties want. And if you can sweeten the deal by bundling, oftentimes you will achieve a deal on your desired price

 

32. The Golden Rule

Silence is the golden rule and that can be applied when you are negotiating anything. Silence is a great tactic because it lets you take everything in, work out deals slowly, and it makes the other side squirm because they do not know what you are thinking. Use silence, or even a break in negotiations to convey that you have other options and are not desperate to close the deal.

How do you measure your marketing efforts : Where marketing metrics go wrong

I recently wrote about how to build a data-driven marketing team. But what metrics should that team track? There are literally hundreds if not thousands of possible marketing management metrics to choose from, and almost all of them measure something of some kind of value. The problem is that most of them relate very little to the revenue and profitability metrics that concern the CEO, CFO and the board.

Of course, it’s okay to track some of these metrics internally within your department (we call these “boiler room metrics”) if they help you make better marketing decisions. But it’s best to avoid sharing them with other executives unless you’ve previously established why they matter.

Here are the top categories of metrics to avoid.

Vanity metrics

Too often, marketers rely on “feel good” measurements to justify their marketing spend. Instead of pursuing metrics that measure business outcomes and improve marketing performance and profitability, they opt for metrics that sound good and impress people. Some common examples include press release impressions, Facebook “Likes”, and names gathered at tradeshows.

Measuring what is easy

When it is difficult to measure revenue and profit, marketers often end up using metrics that stand in for those numbers. This can be OK in some situations, but it raises the question in the mind of fellow executives whether those metrics accurately reflect the financial metrics they really want to know about. This forces the marketer to justify the relationship and can put a strain on marketing’s credibility.

Focusing on quantity, not quality

The number one metric used by lead generation marketers is lead quantity; too few companies measure lead quality. Focusing on quantity without also measuring quality can lead to programs that look good but don’t deliver profits. (To take this idea to the extreme, the phone book is an abundant source of “leads” if you only measure quantity, not quality.)

Tracking activity not results

Marketing activity is easy to see and measure (costs going out the door), but Marketing results are hard to measure. In contrast, Sales activity is hard to measure, but Sales results (revenue coming in) are easy to measure. Is it any wonder, then, that Sales tends to get the credit for revenue, but Marketing is perceived as a cost center?

Efficiency instead of effectiveness

In a related point, Kathryn Roy of Precision Thinking says, pay attention to the difference between effectiveness metrics (doing the right things) and efficiency metrics (doing – possibly the wrong – things well). Having a packed event is no good if it’s full of all the wrong people. Effectiveness convinces sales, finance and senior management that Marketing delivers quantifiable value.

Efficiency metrics are likely to produce questions from the CFO and other financially-oriented executives; they are no defense against efforts to prune your budget in difficult times.

Cost metrics

In my opinion, the worst kinds of metrics to use are “cost metrics” because they frame Marketing as cost center. If you only talk about cost and budgets, then no doubt others will associate your activities with cost. Let’s take a look at a real-life example, courtesy of the inimitable Anne Holland:
Recently, a marketer improved his lead quality and simultaneously reduced his cost-per-lead to $10. Thrilled with his results, he went to the CEO to ask for more money to spend on this highly successful program.

Did the marketer get his budget? No. The CEO decided the reduced lead cost meant Marketing could deliver the same results with fewer dollars – and so she cut the marketing budget and used the extra funds to hire new sales people. 
 

What went wrong here? The marketer performed well, but he made the mistake of not connecting his marketing results to bottom-line metrics that mattered to the CEO. By framing his results in terms of costs, he perpetuated the perception that Marketing is a cost center. Within this context, it’s only natural that the CEO would reduce costs and reallocate the extra budget to a “revenue generating” department such as sales.

[Source: Jon Miller, B2B Marketing & Sales]