Improve Your Negotiations With The 5 Golden Rules.   LEARN THEM

A successful business colleague recently lost a seven figure deal due to being 1% more expensive than a competitor. That’s $20,000 on a $2 million deal. My colleague was obviously disappointed. But critically, he was searching for lessons he could learn from that negotiation so it would not happen again. Here are a few:

1)      Explore and satisfy your counterpart’s critical needs

Bestselling author and business expert Harvey Mackay in 1959 bought an insolvent company with 12 employees, three 28-year-old outdated envelope folding machines and one printing press. Today his thriving business can produce over 25 million envelopes a day.

According to his website, “personal, quality service is the main reason that in 45-plus years of doing business, the company has never lost a major account.” Bottom line – Mackay hired and trained sales and service folks who fully explored and understood his customers’ personal and business needs and went the extra mile – and sometimes many extra miles – to completely satisfy them.

2)      Push back on the commodity notion

Sometimes buyers in negotiations will set up reverse auctions – where buyers ask possible sellers to bid for their business in an auction environment – and consciously create the impression amongst possible sellers that they are a commodity and the only differentiator amongst them is price.

This usually makes sense leverage-wise from a buyer’s perspective, as if sellers believe this they have a huge incentive to lower their price to the bare bones. If they don’t, the buyers suggest, the possible seller will completely lose out on their business.

The problem with this notion is that individuals and businesses are not commodities. In fact, each of us is unique in some way, even if we sell a commodity. And it’s our uniqueness that differentiates us from our competitors and provides us with the leverage to push back on this notion.

I recently bought a new Hyundai and set up a reverse auction among four different Hyundai dealers that had the car I wanted. Since I didn’t care much about service as we would be using the car several hundred miles away at our vacation home, I indicated the major difference I cared about was price.

Surprisingly, I ended up buying from a dealer that was not the low price bidder. Why? That dealer fought back against the idea that it was a commodity by including a lifetime powertrain warranty on all its vehicles. It was a compelling value proposition.

3)      Highlight your unique qualities

My business colleague truly understood the fundamental needs of the customer he lost. He knew that quality and timely service on the product he sold was crucial to their success.

And he more than satisfied their needs. One of my colleague’s unique qualities, like Mackay’s, is the extraordinary service he provides purchasers of his main product, a product also sold by his competitors. But the manufacturer required that he service that product even if it was sold by his competitors. So his unique value proposition in a reverse auction was seemingly neutered.

I suggested he highlight his uniqueness by offering two levels of service: a) general service he provided those who purchased products from his competitors, and b) a special premium level of service he only provided his own customers.

In effect, I suggested he change his value proposition to distinguish his unique service capabilities versus his competition.

I would bet good money a super premium level of service to a big customer is almost always worth more than 1% of the price.

Published June 1, 2012 The Arizona Republic

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