Practical Guide To Any Negotiation
SO WHAT IS NEGOTIATION?
To me, it is to bargain to reach an agreement – ideally acceptable to both (or all) parties. The harder you negotiate, the more likely it is that you will tip the scales in your favour.
What you need to beware of is pushing so far that the other person doesn’t want to play any more. In this case you have failed to create or, indeed, develop any long-term relationship. When trading one-off deals with shops this may not necessarily be a high a priority to you, but you never know when you may return – I will leave that to your judgement.
However, if you can justify what you are offering and make the other person feel happy with their lot (although maybe not skipping out of the room!), then you have not only created an effective deal for yourself, you may also be able to create bigger and better deals in the future. This is especially true when it comes to negotiating in shops or staying in hotels which you regularly visit.
It is possible to have a win-win negotiation. You get the price you want and, as an example, a hotel manager sells his room and gains new customers.
But often people feel embarrassed at the very thought of negotiating.
THE EMBARRASSMENT MYTH
In many countries it is deemed rude not to negotiate! Bartering is something that is expected and enjoyed in bazaars around the world, and the market traders are the best around. I remember in Turkey being welcomed into a shop, introduced to a fine array of clothing, sat down and treated to a cup of tea whilst two gentleman eagerly punched in various numbers on a calculator, playing good cop, bad cop until eventually I was charmed into buying lovely jackets for myself and my wife, having negotiated down to almost half the asking price. Both parties parted happy with the deal, and I had had a really enjoyable hour (this was close to midnight!)
And in the world of big business, too, negotiation is the rule, rather than the exception. Bear in mind that the corporations you purchase items from have negotiated deals with suppliers to get the products on the shelves in the first place. For example: a cup of coffee, from farm to cup goes through several negotiation stages. The farmer sells to local traders, and then the coffee in its original form goes to a central location before being sent to a cleaning station. The beans will often go to government auction and are then shipped to a roasting company. Then they are packaged, exported and sent to the stores themselves. The price has changed significantly since it has left the farmer (depending upon where you buy the coffee, the farmer usually gets between one and ten percent of the final price sold). Why should the process of negotiation stop there? I am not necessarily suggesting you barter for your mocha cappuccino when you next go to your coffee shop, but you get my drift! The same theory applies to many products.
OK, so you shouldn’t be embarrassed about negotiation, but people often think it’s a tough thing to do.
THE ‘NEGOTIATION IS TOUGH’ MYTH
Catching a ball is tough unless you practise. Both negotiation and catching a ball become easier when you give them a go and learn from your experiences. If you make negotiation habitual then you will do it without thinking about it. The beauty of it is that it presents itself to us almost every day, so we have plenty of opportunities to practise.
Is there a process to negotiation?
Yes there is.
Negotiation courses talk about their own versions of this, and often add in one or two areas for good measure, but to me, this is what it boils down to: a simple five-stage process.
Whether you are in business or not, this works extremely effectively; however, it is also combined with a softer skill that can be nurtured to great effect, and that is how you communicate.
We cover this in the next chapter.
As you read the book you will notice how much emphasis is put on preparation. Preparation can account for up to 70% of a negotiation and affects four out of five of the stages: from understanding what it is you want to buy; researching into the range of prices companies charge; to deciding on a price range that you are happy to pay and on an alternative idea if that price isn’t reached. This is the centre of your wheel: without it you are not going to get very far.
Without sufficient preparation, you are relying too heavily on your sales patter, and, if you are exposed, your lack of background information and defined pricing parameters could get you a deal that’s not right for you, or worse still, no deal at all. On the other hand, too much information could get you confused. A balance is right: if you feel you are getting too bogged down, cut out the bogged-down bits, and create a crib sheet of information. Clear and concise points that are in logical order will give you all the salient reasons needed to get the price you want.
You need to decide how much time it’s worth spending on this. Let’s look at negotiation from the perspective of being employed and what hourly rate would be acceptable. For example, if you are only saving £5 on an MP3 player, think of the saving as wages earned: £5 equals, say, 20 minutes’ work. However, when it comes to saving money on buying a new car that may save you up to £1,500, it’s more likely to be worth spending around three or four days on preparation.
An example crib sheet is detailed at the end of this chapter.
The best way to prepare is to ask yourself the following questions.
Are there any current events that may affect the negotiation?
It’s amazing what you can hear on the news, read in the paper or stumble upon on the internet that would indicate the state of a particular market or client. This can be very obvious: for example, a headline stating that some travel agents are dramatically reducing package holiday prices due to the unusually hot weather we are having in our own country, along with the fact that people are embracing ‘dynamic packaging’ (booking individual elements of their holidays mainly via the internet) will tell you that there are great deals to be had.
There can also be other, less obvious, implications of a news item like this. Hot weather tends to drive people to beaches and parks – and away from the high street. So stores that sell televisions and DVDs, for example, will have less foot-fall, and are more likely to be willing to negotiate on price. But it can work the other way too: it’ll be harder to get good deals on barbecues and garden furniture, for example, during the same period of hot weather. So, think about what you are hearing, reading or seeing, and take a view on the impact of this on what you intend to purchase.
What can you find out about the company you are going to negotiate with that will help you get the best deal?
So much information is available on most companies and, again, it depends on how detailed you need or want to be. Company websites are often a good place to start. Would a company prospectus be handy to view before you trade with them? These can often give you information on mission statements, profit and loss, areas of growth, etc.
Have there been any recent special offers that you are aware of? How can you find out?
Being aware that a hotel has recently been doing a three-nights-for-the-price-of-two promotion, or a telecom company has been offering a free internet phone if you subscribe for 18 months, can help. Although that deal may not still be on, you realise that the company is promotion-led, and offering value is part of their strategy. Although the deal is not currently available, why not ask for it anyway, stating you know it was relevant two weeks ago? Many companies create regular offers to entice new customers and just package them up in different ways – one time it may be £10 off and other times a free bottle of wine.
Do you know anyone who has bought from this company before?
Friends or colleagues who have had previous experiences can often help you. For example, your friends Hailey and Luke have recently stayed in a hotel you are thinking of visiting. They noticed at breakfast that there were very few people there and trade was very quiet. This could help you weigh up the likelihood of the hotelier offering you a discount on the advertised rate. Or Amanda had bought a new car and got the navigation system included despite it not being included in the brochure price. These examples make you aware of demand and willingness to trade.
What are their competitors currently offering?
A competitor’s deals/offers can influence a company. No-one likes losing business; however, losing it to a rival is even worse, especially if there is a deal that could have been done.
What about the competitors’ websites? These can be good to look at for alternative ideas if you didn’t reach an agreement with your first choice (an alternative possibility is known as a BATNA: Best Alternative to a Negotiated Agreement).
However, understanding the competition and their offers will also potentially give you the opportunity of negotiating a better rate with your original choice.
For example: purchasing a barbecue in your favourite hardware store.
‘I do like this barbecue; however, flat4u are offering a similar one with a gas cylinder and an under-tray as well, and it’s £10 less. Price is important to me, and if you can beat their price, I am in a position to buy now.’
How keen are they to trade at the moment? How can you find that out?
All of these questions help you calculate the keenness to trade, but is there anything else that could influence this? The more indications you have, the better your chances of gaining a reduction in price or getting added value. For example, a summer sale on its last day – are the retailers wanting to clear all the sale items off the stock so that they can make room for the autumn fashion?
Where can you get all this information?
Today we have a plethora of information-gathering locations. The internet, television, papers, magazines, company sites/prospectuses and speaking to people are six great starting points.
A rapidly growing arena for consumer thoughts can be found in the shape of blogs. A blog is an on-line journal, and there are tens of millions of them. Subjects are varied, and it is highly likely you will find a product you wish to buy being discussed by some happy (and unhappy) purchasers. Plenty of good information can be found from these sites, and can help you to establish the strengths and weaknesses of a potential purchase.
What questions do you want to ask the salesperson?
There may be more you want to know about the product. Will they offer you a discount if you buy two items? What price could they offer if you wanted extras added on? If a competitor offers you a better price, is it worth coming back to see if they will match/beat it? What questions could you ask that will help you get a better deal than the price offered?
Who is the person that will most likely offer me a deal?
More often than not, I would say that this needs to be a decision-maker: for example, the manager or owner. Often, sales assistants will not be able to make discount decisions, and will go and ask the manager on your behalf. In most cases they will just put the bare facts, and not add in the parts that you have tirelessly established during your preparation which will help you gain a better rate. Wherever possible, speak to the person who can influence the deal. In cases where the value being negotiated is high, it may be worth ringing ahead to see if they are in.
Once you have done your research, it may be an idea to write down the key points and read through them, so you have an understanding of information that will help you in your negotiation. If the negotiation is going to be by telephone, then it’s easy to have it by your side when you’re talking.
This is where you set out your stall and get the final snippets of information that will help you decide what price you will be happy with.
Whether by phone, face-to-face or by email, this is where you ask your prepared questions. Meeting face-to-face is much better for reading the salesperson, as body language, pace and tonality account for over 90% of the real meaning behind what is being said (see Chapter 3).
When discussing things with the salesperson, have two questions in mind:
‘What can I get from this conversation that will help me get a good deal?’
This can include whether you get a discount for volume, for buying with another product, for deciding upon a specific type of wine to go with your wedding meal, or for buying now as opposed to next month.
‘What would help them to give me a better deal?’
The second one is important, as ‘what’s in it for them’ certainly helps to get them on your side and potentially more inclined to trade off the full-rate.
Are the shops/showrooms on a specific profit margin on their products?
Profit margins vary, and not all shops work on the same amounts. Some outlets work on a flat percentage profit on all items and are marked up accordingly; at others it varies. Equally, they may have specific products that they need to push and sell and will be incentivised accordingly; this can vary and does not necessarily remain the same week in and week out. Knowing this can help you understand the margins that you may be talking about when negotiating. For example, if all products carry a 10% profit for the store, it’s unlikely you would be able to negotiate a discount of 11%. Also, asking where their pressure points are and finding out whether some items/brands have more leverage for negotiation may help you in your quest.
If you get on well with the salesperson and gain rapport (see Chapter 3), then you could be in a better position to ask this sort of question. Understanding ‘what’s in it for them’ can really help you move forward a deal, as, if you match what they want to sell with what you want to buy, then you have more chance to get the offer you want.
Establish their commission structure
Knowing if they are on a bonus system or not can help you understand the salesperson’s motivation to trade with you.
This is where business and consumer markets often differ. In the business world, I would usually make the initial proposal, thus allowing me to be in control of the negotiation from the outset. Alongside my proposal, I would also have thought out my rationale as to the price offered and explained this to the customer. From here, the offer might change, as we bargained and I compromised; however, my justifications would remain the same.
But as a consumer, I would probably prefer to hear their offer first, since I could be pleasantly surprised if it is better than the price I might have suggested (though I will give examples of both approaches throughout the book).
Before they propose, though, you need to make a statement that will encourage them to offer you a better deal than the one on the price tag. Preparation again is the key, so ask yourself the question:
‘What can I say (given all the information I have found out during my preparation)that will persuade the salesperson to offer me a great deal?’
This will allow you to be in control of the negotiation without offering a price. The statement needs to have something in it that will catch the attention of the salesperson. Depending on the circumstances, that could be your intention to buy now, in the next day or so, or your offer to buy three or four things if the price is right.
In the case of volume deals, it may be worth lowering their expectations first, and then building on them to gain extra value. For example: start off by saying you are in a position to buy 6 cases of wine, gaining a quote, and then increase the amount of cases if they offer a better price. We will address that in the bargaining part of this chapter.
Even though they will have proposed a price, you should still have several justifications as to why it should be lower. Prepare your justifications beforehand – first stage preparation helps you do this.
One thing to have in mind at the proposal stage is your three outcomes. Again, this is something you can prepare.
Make sure you think of three outcomes.
Firstly, your ideal outcome: a great deal for you, everything you want with all the bells and whistles. However, you need justifiable reasons as to why this price is fair.
Secondly, a good deal: OK, you haven’t got everything, but you have come out well enough to be happy with the deal you have struck.
Thirdly, the bare minimum: what I call ‘the walk-away rate’.
Is that the offered price, or do they have to move away from that in order for you to buy? Effective buyers or sellers will often see signs that you will pay the full rate, which is why it is good to understand both the verbal and non-verbal clues that are often given away by both parties (Chapter 3).
Sometimes price is not the only variable, as added extras can help to make a deal great, and it’s important to be aware of what else could be included or taken away in order to get the package you want.
Apart from price, variables are some things that can be included within a deal, but are not necessarily vital. They are often things that are ‘nice-to-have’ rather than ‘must-haves’.
When it comes to bargaining, these can help to close a deal.
For example, variables when buying a car could be a GPS system, DVD screens in the back for the children, and car mats. Variables when joining a gym could be free towels or additional guest passes.
These are things that you could have already included in your deal or have up your sleeve to add in when the price is not changing. What is important is that you have prepared (there’s that word again!) your list beforehand.
This is the haggling stage. This has hopefully already begun, as your opening statement has gained you a better deal than the asking price.
Believe it or not, it may be as simple as asking for a discount and repeatedly saying:
‘Oh come on, do it for £150... What about £160 then?’
and waiting for them to say yes.
Sometimes, I have actually seen this work: when a buyer has looked at someone with puppy dog eyes and begged for a discount, pleading ‘Oh, go on’. In a moment of weakness, the off-guard salesperson has crumbled under the strain of such emotional appeal, and knocked off a few pounds, as they feel that saying no would be akin to Scrooge denying Tiny Tim that wholesome meal he so desperately needed in A Christmas Carol.
However, as this only has a limited effect, saving the odd pound rather than significant amounts (which is the intention of this book), let’s assume that a more considered approach is needed.
The question you need to ask yourself at this stage is:
‘What more can I do or offer to influence this deal?’
You have three outcomes and your variables. These, combined with knowing ‘what’s in it for them’, give you all the information you need to negotiate a deal. As a reminder, ‘what’s in it for them’ includes their motivation to negotiate: this was discussed in the preparation stage of this chapter and includes benefits both to the individual salesperson and the company.
The value of ‘if and then’
Asking an ‘if and then’ question is often a valuable negotiation tool in business and in life.
Taking into consideration your outcomes, variables and ‘what’s in it for them?’ an example might be:
‘I can always do with extra wine if we don’t use it for the party. If you let me pay £60 per case then I will buy ten cases instead of six, giving you £600 instead of £360 – nearly 70% more’
This is known as a conditional offer. The amount of money offered is only applicable if the wine seller accepts the specific deal. If they do, then great; if not, another offer can be suggested.
Do not be afraid to change your variables when taking into consideration the salesperson’s response. For example: if you initially put a £300 GPS system into your proposal to buy a new car, but the salesperson suggests a slightly cheaper model to incorporate your suggestion, you can always try and change the variable to make sure you still get the car you want – for example, by asking for car mats and a tank of petrol instead of the GPS.
Bargaining can have several rounds to it, so it’s important to begin with your ideal outcome and come down from there if necessary.
This should be the quickest stage. What is worth doing is summarising the agreement, preferably in writing (unless of course you are buying the product immediately). This avoids any unnecessary misunderstandings.
Equally, if you are unsure about whether they have agreed to your terms, it is good to ask one of two types of questions.
- 1.A pre-close question: this is when you ask them something trivial that will establish whether a deal has been done. For example:
‘That’s great. Do you offer a free packaging service?’
‘OK. Can the membership start tonight as I see you have a Pilates class at 7?’
If you are still unsure...
- 2.An assumptive close: this is when you ask a question that assumes a deal has been done. For example:
‘Who do I make the cheque payable to?’
‘Do you accept Visa?’
If you get the right answers to these, you are aware that the deal has been done.
If the above does not work, it is likely that you have not agreed and you may need to go back to the bargaining area to see if any adjustments need to be made.
This has hopefully given you a good understanding of the process of negotiation. Like catching a ball, it will only become a natural skill if you put it into practice.
Also, a good proportion of negotiation is decided upon not just by process, but how you communicate with the salespeople, and the next chapter will help you with this.