Negotiating is an art form that requires communication skills and the ability to read people. To a lesser degree, some acting skills are also necessary.
Negotiation is the movement of positions held by the parties involved from distant points of disagreement to a common point of agreement. The ideal outcome is that both parties walk away feeling they have achieved an acceptable desired outcome.
This is the proverbial win-win situation in which everyone feels comfortable with the result.
The first step in arriving at your desired outcome is to establish it firmly in your own mind. As with navigating a road map, if you do not know the intended destination, you will be hard-pressed to reach it. Negotiation then is simply navigating from disagreement to agreement.
Setting Your Price
When you enter into a negotiation, be careful not to start too low or too high. Always ask for more than you expect to get. This will require you to consider your desired outcome and set your starting price reasonably well above that. This will give the other party room to negotiate downwards towards your desired outcome.
Assume you are preparing a quote for a customer, and you expect them to haggle with you to get a lower price, and then build in the wiggle room you think is sufficient. Keep it reasonable. Let’s assume your desired outcome is that they agree on a price of £2,500. Based on competitive analysis, good judgment, and your history with the customer, you quote £3,000.
Don’t Blink First
If the customer balks at that price, do not immediately lower the quote. If you give in here, they will continue to nibble away at your quote, and nothing says they will stop at £2,500. Giving in will be a sign of insecurity, and they will not take you seriously.
Don’t ask what they are willing to pay. Business quotes are not based on what the customer wants to pay but rather on the value of supplies and labor plus a reasonable profit. When you step up to the grocery checkout, does the clerk ask what you are willing to pay for your groceries? No.
Your first response to their objection should be to ask why they feel the price is too high. Ask if you have included work they didn’t ask for or if it’s possible you overestimated their desire for top-quality results.
Restate Your Position
By countering their objection in this way, you place them on the defensive. You are asking if they are willing to sacrifice quality for the price. You are also opening the door to learning what their price position is. Ask questions that you know they will answer yes to –
“You did say this was an urgent job, didn’t you?”
“You wanted the best elements on the market, right?”
“Quality is important, not only to you but to your family, isn’t it?”
“You have been happy with my work in the past, haven’t you?”
These kinds of questions lead the customer back towards a position of agreeing. Explain why you quoted £3,000, going over each item in the quote and getting their agreement on each item.
“So, you can see how I arrived at the price of £3,000 based on your needs, correct?”
Listen for the True Objection
Ask if there is anything they are willing to leave out. Then, stop! Don’t say another word! Be silent until they answer. The rule here is Whoever Speaks First, Loses! Look them in the eye, and do not look away. You don’t want to menace them with a glare, but by maintaining eye contact,, you apply subtle pressure and let them know you are not trying to be deceptive. Again, in a perfect world, they would either agree to the quote or tell you what price they have in mind.
Offering a Concession
If they come forward with a counteroffer, then start the negotiation by offering a small concession. Let’s say they are willing to give you the job at £2,000. From a predetermined set of concessions, offer the smallest first. Perhaps you could eliminate the disposal fee or offer free shipping. Concessions should come from tangible items, never from profit. When you advise a customer, you are willing to sacrifice your profit, the reason you are in business, you lose credibility and appear weak. It may well be the case that you are indeed slashing your gross profit, but that is not for the customer to know.
If they seem unwilling to discuss the price, you must be prepared to walk away. Graciously thank them for allowing you to quote them. Express regret that you cannot help them this time. Walk away.
They may stop you and reopen the discussion, or they may call you later and apologize and reopen the matter then. Keep in mind, they may let you walk. You may lose the order. This is something you have to have already decided before offering the quote.
By Alisha Webb. Alisha is a content writer for The Gap Partnership AU – Negotiation experts offering training in business negotiations.