|Win/Win Sales Negotiations - Myths and Realities
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.
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.
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.
About The Author
Michael Schatzki © 2005. All rights reserved
Michael Schatzki is a master negotiator who, for over 20 years, has provided sales negotiation training and coaching for thousands of people in the U.S. and globally. More than 75% of Mike's programs are for satisfied, repeat customers. The Negotiation Dynamics system really works. Find out more at http://www.NegotiationDynamics.com.