I once got a phone call from someone responsible for sales
training at a large company. She said to me, “Mike, we need
negotiation training for our sales force.” I said, “Great,
you've come to the right place.” Then she said, “But do you
teach that win/win negotiating where you build really good
relationships but give away the store?”
False choice. It is not either you negotiate a good deal OR
you build good relationships with your customers. You can
have BOTH.
The Automatic Side of Win/Win
There are two pieces to the win-win puzzle. The first is what I
call the automatic win-win. The win-win is automatic because,
when a sale closes, both you and your customer are always better
off than you were when you started to negotiate.
Let’s say that you sell a niche software program for engineering
consultants. The price of the software is $15,000 for a site
license up to ten users (the bulk of your customers for this
product are small shops with 10 or fewer engineers). Although
there are no competitive commercial products, your real
competitors are the work-around solutions that the engineers
cobble together themselves from other software that they already
have.
For this reason, your company sometimes has to be aggressive on
price and, if you have to, you are able to go as low as $9,000
for a site licence. But $9,000 is the last stop. At $9,000 it
is still a win for you. At any price below that you do not make
enough profit and you are better off walking away.
Now let’s look at a potential customer. They are a small
firm with eight engineers and they really like your software.
Unfortunately, things are a bit tight right now and they only
have $12,000 left in their budget for software. They know that
there is sometimes lots of flexibility in software pricing so
they will start out low but, if they absolutely have to, they
will pay the full $12,000 left in their budget. Thus, $12,000
is their last stop. Even at that price, they are still better
off buying the software then they would be walking away.
So how many places can we have a win-win? Anywhere between
$9,000 and $12,000. Anywhere in that space, both parties are
better off than they would have been had they walked away. But,
the space between $9,000 and $12,000 is also the ONLY space in
which the parties can make a deal. Any deal must be between
$9,000 and $12,000 since above or below those numbers, one party
will have to walk away.
Thus, no matter how tough the price negotiation was, when the
sale closes, both you and your customer will automatically win
because both of you are better off than when the negotiation
started.
Feelings Count
However, in order to have a truly robust win-win negotiation,
there's a second piece to this puzzle that we have to focus on.
That involves the customer’s feelings. Let's pretend for a
minute that you are the buyer in this case and I am the sales
person.
We are on the phone and you say to me, “Mike, we like your
software but it is a nice-to-have item, not a necessity, since
we get the work done just fine with what we have put together
ourselves. If you want to make this sale, you will have to
come down to $9,000 for the site license.”
$9,000 is my bottom line. I pause a moment. Then I say,
“Well, that's an awfully low price. However, it’s the end of
the month, so, ok, I think we can do that. Cut me a purchase
order for $9,000 and we’ll do it.
What is your reaction as the buyer? Do you feel like you just
won? Or instead do you start thinking things like:
- “Boy, was he ever planning to rip me off at his $15,000 list
price if he can really go all the way down to $9,000."
- Or even worse, “Oh my goodness, why didn't I say $7,000 in
the first place? I probably could have gotten him even
lower.”
Negotiation is about paradoxes. By jumping all the way down to
my bottom line of $9,000 in one shot, I made it appear that it
wasn't a win-win because first, you will now feel that my initial
prices weren't reasonable, and second, you fear that you still
left money on the table. So in the end, you are not a happy
customer. You are an unhappy customer who is going to be an
even tougher negotiator the next time you buy software.
Everybody has strong feelings about the outcome. Everybody
wants to feel like they won. But it's not the actual numbers on
the deal that count as much as the customer’s feeling that they
didn't leave any money on the table. No matter how low a price
they get, they will feel badly if they feel that they left money
on the table. No matter how much they paid, they will still
feel good if they believe that they got the best possible deal.
Relationships
Now, imagine a situation where you've reached agreement and
you've shaken hands on that deal. Unfortunately, you wish you
never had to see that customer again as long as you live. Do
you know any customers like that? Does that take away from the
feeling of win-win? Of course it does.
The second key component of the feeling side of win-win has to do
with something you do naturally, which is to build relationships,
make people glad that they did business with you, and all the
other things that involve those people skills that you are so
adept at. Customers will feel that it is a win if they like
you and enjoy working with you.
Trust, Credibility and Ethics
And finally, have you ever shaken hands on that deal with
someone who you felt was a little sleazy? Does that take away
from the feeling of win-win? Absolutely. The third component
of the feeling side of win/win has to do with the way you do
business, your ethics, your credibility and how trustworthy
you are. Customers will feel that it is a win if they are
comfortable with the way that you do business.
A Real Win-Win Negotiation
And so you can really negotiate hard over money and other issues
because, when the sale closes, you know that they are better off
than if they had walked away. Therefore, it is automatically a
win for them. What you need to focus on is their feelings. Make
sure that your customer feels like they got the best possible
deal, that they like you and like doing business with you, and
that you are an ethical, trustworthy person to do business with.
If you focus on the feeling side of win-win, the automatic side
will take care of itself and you can come out with both a good
deal and a happy customer who feels that they were involved in
a real win-win negotiation.
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