The Art of Negotiation

Simply put, “negotiatingThe act of discussing an issue between two or more parties with competing interests with the aim of coming to an agreement. is the act of discussing an issue between two or more parties with competing interests with the aim of coming to an agreement.”“Negotiation,” Entrepreneur, http://www.entrepreneur.com/encyclopedia/term/82556.html (accessed November 20, 2009). While that might sound like an impossible task, it is not as difficult as you might think. Even people with differing positions or points of view share a common interest, which becomes the basis for finding common ground. It’s these common interests—security, economic health, personal recognition, control—that motivate people. If you take the time to understand your prospect’s interests in a negotiation, you can successfully collaborate and find a solution that supports the interests of all parties.Stephanie Mojica, “The Art of Sale Negotiation Skills,” Associated Content, December 26, 2008, http://www.associatedcontent.com/article/1313361/the_art_of_sale_negotiation_skills.html?cat=35 (accessed November 19, 2009).

Figure 12.3

A successful negotiation ends with all parties agreeing to a compromise that is mutually beneficial.

© 2010 Jupiterimages Corporation

It is negotiating that provides profit for organizations. The collaboration between parties is what provides companies the opportunity to exchange goods and services for money.

Figure 12.4

Negotiating is the process of understanding interests and motivations, which can be like the portion of the iceberg that is below the surface.

© 2010 Jupiterimages Corporation

It might be helpful to think about a negotiation like an iceberg. Although you can see the tip of the iceberg, it can be deceiving because it does not tell the entire story. The same is true when you are negotiating; your prospect may say something that appears to be obvious but really wants to achieve other things that are hidden below the surface. Using the process of negotiation to learn more about your prospect’s motivations and interests, you can understand what is below the tip of the iceberg. It’s usually the part of the iceberg that you can’t see that is more substantial and has more impact that the portion that is visible. When you come prepared, listen, and probe during the negotiation process, you can learn a lot about what lies below the tip of the iceberg and use this information to collaborate and eventually reach a common ground on the issues. For example, assume you are selling advertising space for a men’s magazine to the hottest new beer company. Your contact at the beer company wants to get the word out about this new brand but has a very small budget, so he doesn’t want to pay the full published rate for the ads. You don’t want to sell at less than the published rate because that will lower the value of your ad space. The tip of the iceberg shows that this is a price negotiation. However, if you ask the right questions and listen more, you will learn that his ultimate objective is to get people to taste the beer because that is the best way to get new customers. If he can get a major sampling opportunity, then he can use it to go to other media partners to get other sampling campaigns. Now you have gotten below the surface of the iceberg and understand his motivations. With this additional information that wasn’t readily visible on the surface, you can offer him an advertising package that includes ads in the magazine in addition to sampling opportunities at three upcoming national events that the magazine sponsors. Now the negotiation is focused on all parties winning by getting something they want, rather than simply negotiating on price. Getting below the surface provides valuable information and insights for negotiating.

Negotiate to Win-Win-Win

A successful negotiation can be measured by its ability to deliver a mutually beneficial solution to all parties. Some people believe that negotiation is an act that yields a “win” for one side and therefore a “lose” for the other side. The win-lose approach usually ends up in a lose-lose deal that doesn’t work for anyone.Robert J. McGarvey, “Covering the Bases,” Entrepreneur, June 1997, http://www.entrepreneur.com/magazine/entrepreneur/1997/june/14260.html (accessed November 20, 2009). This philosophy of negotiating is selfish and short term. In addition, this approach implies that negotiation includes some kind of confrontation or manipulation to “trick” one side into doing something that it doesn’t want to do. This is an unethical approach to negotiating which doesn’t have a place in the business world.Daniel Roach, “5 Simple Rules for Unbeatable Sales Negotiation,” Associated Content, September 29, 2008, http://www.associatedcontent.com/article/1047808/5_simple_rules_for_unbeatable_sales.html?cat=3 (accessed November 19, 2009).

In selling, negotiating and closing go hand-in-hand. Just as closing is not a one-time event, negotiating is a process that has both short-term and long-term impacts.“Negotiating to Win-Win,” Selling Power Sales Management eNewsletter, January 6, 2003, http://www.sellingpower.com/content/newsletter/issue.php?pc=248 (accessed March 16, 2010). The best negotiations are collaborative in nature and focus on delivering mutual satisfaction. According to Leigh Steinberg, lawyer and sports agent, “The goal is not to destroy the other side. The goal is to find the most profitable way to complete a deal that works for both sides.”Alan M. Webber, “How to Get Them to Show You the Money,” Fast Company, October 31, 1998, http://www.fastcompany.com/magazine/19/showmoney.html (accessed November 19, 2009). Effective negotiating is based on respect and is seeded with open communication. Collaborative negotiating is dependent on the following three elements:Herb Cohen, You Can Negotiate Anything (New York: McGraw-Hill, 1980), 163.

1. Building trust.Herb Cohen, You Can Negotiate Anything (New York: McGraw-Hill, 1980), 163. You’ve already learned in Chapter 3 "The Power of Building Relationships: Putting Adaptive Selling to Work" that establishing and building trust is key to relationship building. Negotiating is the ultimate extension of a relationship because you and your customer are agreeing to concede on some points to make the relationship go even farther. If your prospect signs a contract with your company for products or services, you are now even more dependent on each other to make the relationship work. It is the true win-win-win relationship. But if your prospect doesn’t trust you, or you don’t trust her, it will be difficult to enter into a negotiation that will work for both of you and both of your companies. Building trust is the precursor to all business transactions, especially negotiating and closing.

The best way to build trust during the negotiation process is to gain trust before the formal negotiation. And then, during the formal negotiation, focus on the ends rather than the means.Herb Cohen, You Can Negotiate Anything (New York: McGraw-Hill, 1980), 163. In other words, instead of focusing on going head to head on each issue to be negotiated, concentrate on keeping the end goal in mind. Take the time to listen and understand exactly what is motivating your prospect so you can deliver what is important to her. “Negotiation is needs based,” according to the online Selling Power Sales Management Newsletter. Understanding what is important to you and to your prospect drives your negotiation.“Negotiating to Win-Win,” Selling Power Sales Management eNewsletter, January 6, 2003, http://www.sellingpower.com/content/newsletter/issue.php?pc=248 (accessed March 16, 2010).

2. Gaining commitment.Herb Cohen, You Can Negotiate Anything (New York: McGraw-Hill, 1980), 163. Part of the process of closing is gaining commitment on every specific element of the sale. To do that effectively, strive to gain commitment long before you begin the formal negotiation. That means using every touch point you have at the company to help you. While you might think it is impossible to enlist others in your prospect’s company to help you sell, consider the creativity of Art Fry, the creator of 3M Post-it notes. Fry stumbled upon the semisticky adhesive years before the product was introduced after creating the first version of the product as a way to mark hymns in his hymnal at church, he started giving his new invention to secretaries and coworkers at 3M. Soon secretaries were taking the pilgrimage between buildings on the 3M corporate campus just to get more of the sticky note pads. It was the demand from the people who used the product that ultimately generated interest in marketing the product to consumers. Fry successfully gained commitment from others in the company as a way to “sell” his new invention as a marketable product.Greg Beato, “Twenty-Five Years of Post-it Notes,” March 24, 2005, http://archives.secretsofthecity.com/magazine/reporting/features/twenty-five-years-post-it-notes-0 (accessed November 20, 2009).

3. Managing opposition.Herb Cohen, You Can Negotiate Anything (New York: McGraw-Hill, 1980), 183. It’s true that although a negotiation is a collaborative effort, it is inherently a situation that addresses opposing views. The best way to manage this is to be prepared and know what’s important to you and your prospect.

The Three Elements of Negotiation

Every negotiation, whether it is in business, politics, or your personal life, includes three critical elements. Understanding the role of these elements can help make you a better negotiator.

Figure 12.5

Put time on your side by avoiding negotiations when you’re in a hurry or under pressure because of a deadline.

© 2010 Jupiterimages Corporation

1. Information. When you do your homework, research, and ask questions about what is important to your prospect, you may be able to avoid negotiating on price all together. If you have information, and share information at the appropriate time, you can make a negotiation a huge win for everyone.Herb Cohen, You Can Negotiate Anything (New York: McGraw-Hill, 1980), 19.
2. Power. According to Herb Cohen, known as the world’s best negotiator, power is based on perception. If you perceive you have the power to influence your situation, you do (conversely, if you don’t believe you have the power, you don’t).Herb Cohen, You Can Negotiate Anything (New York: McGraw-Hill, 1980), 20.
3. Time. Time is the great negotiator. Ninety percent of all negotiating occurs during the last 10 percent of the set time frame. Deadlines force decisions to be made and negotiations to come to fruition. Use time to your advantage by never revealing your deadline. Don’t negotiate when you’re in a hurry; chances are you won’t get the result you want.RCM Staff Report, “27 Principles of Negotiating with a Meeting Facility,” MeetingsNet, February 1, 2003, http://meetingsnet.com/ar/meetings_principles_negotiating (accessed November 19, 2009).

Everything Is Negotiable

Many salespeople are afraid of negotiating. They are worried that they won’t be up to the challenge to persuade someone to do what they want or to pay their price. Confidence and preparation go a long way to achieving a satisfactory result on both sides. Negotiating and closing are ways of gaining agreement. The old saying goes, “Everything is negotiable,” and it’s true. Your prospect believes the same thing so be prepared to negotiate about virtually every aspect of the sale. For less complex sales, the close might come as a result of a simple question at the end of the presentation. However, for more complex sales, there are various elements of the sale that must be agreed upon to close the sale. Elements such as price, length of contract, service, terms, and options are common points to be negotiated as part of the close.

Many salespeople are concerned about negotiating price. They think that lowering the price will make the sale. In fact, price is rarely the motivating factor behind any purchase. That’s not to say that price isn’t important, but customers buy value, not price. If price were always the determining factor in purchases, premium brand such as Porsche, Apple, and Neiman Marcus would not exist. If you’ve ever shopped at Nordstrom, Banana Republic, or Abercrombie & Fitch, you decided that those retailers offered more value than Old Navy, eBay, or Wal-Mart for the item you bought. Price is a part of the value equation but not all of it. According to author Kelley Robertson, “Everything you say and do from the first contact with a prospect affects the value of your product or service in their mind.”Kelley Robertson, “Let’s Make a Deal: Negotiating Techniques,” The EyesOnSales Blog, January 18, 2008, http://www.eyesonsales.com/content/article/lets_make_a_deal_negotiating_techniques (accessed November 19, 2009). That means establishing value with your presentation, demonstration, testimonials, follow-up, and everything that comes before the actual negotiation. How is your product or service different? What advantage does it offer? What is the most important problem it will solve for your prospect?Kelley Robertson, “Let’s Make a Deal: Negotiating Techniques,” The EyesOnSales Blog, January 18, 2008, http://www.eyesonsales.com/content/article/lets_make_a_deal_negotiating_techniques (accessed November 19, 2009).

If your prospect wants to negotiate on price, use your creative problem solving skills to get to the end that will work for all parties. Use concessionsA point on which you are willing to compromise., something that you are willing to compromise, to create value during the negotiation. For example, use length of the contract, payment terms, service, delivery date, training, or other elements to demonstrate to your prospect that you are willing to work with him and give him something that has value to him.

The following is another example:

The bottom line is that it’s best not to make a concession without getting a concession. In these examples, the salesperson always used another part of the deal to give something and get something in return. This win-win-win approach helps reach common ground and close the sale faster.RCM Staff Report, “27 Principles of Negotiating with a Meeting Facility,” MeetingsNet, February 1, 2003, http://meetingsnet.com/ar/meetings_principles_negotiating (accessed November 19, 2009).

Steps of the Negotiation Process

While negotiation has some elements of being an art, there are three specific steps that can be followed to help ensure success with each negotiation.