Taking a fresh approach to negotiation can help you cut costs and increase profit for your organization. On a personal level, it could also help you earn more, have more free time, and enjoy better relationships, said Derek Arden, a UK-based author and specialist trainer in negotiation skills.
Expert negotiators draw on a raft of skills, from pitching to rapport-building and influencing, conflict management, and most importantly, listening.
But thorough preparation builds confidence and is the foundation of a successful negotiation.
You need to calculate what the other party’s best, target, and walkaway positions might be, so you can identify the zone where a potential agreement could be reached
Many people fail to make three crucial calculations in advance of any deal talks, Arden said. For a clear picture of what you want to achieve from the negotiation, calculate:
- your ideal price for the product or service
- your realistic target price (which would give you a nice profit but is market-based and covers all your costs), and
- your walkaway position
You also need to consider what would happen if you fail to come to an agreement. What are you going to do with the people and resources that would otherwise have gone into this project?
For instance, any layoff costs resulting from a lost bid could change your marginal costs. Analyzing the costs of this alternative scenario is a good way of checking your walkaway position, Arden said.
You also need to calculate what the other party’s best, target, and walkaway positions might be, so you can identify the zone where a potential agreement could be reached. Try to understand any constraints that might affect the negotiation, such as whether the other party is under pressure to complete the project in a particular time frame.
Knowing your industry, what the competition charges, the competition’s standards of service, and so on can help you make that judgement. The company website and social media feeds, annual reports, and financial statements all provide an insight into its strategy, pressures, and priorities.
While the background above provides a helpful guide, Arden’s No. 1 piece of advice is: “Never assume where the other side is coming from.”
Ask the right questions during the meeting. What do you want out of this deal? What offers have you had from the competition? Then listen carefully to the answers.
Know your negotiable variables. The key rule of haggling is trading concessions, Arden said. To do this successfully, you need to have identified your negotiable variables in advance.
These are items that cost very little to concede, but are valuable to the other side. They might include different payment terms, advice, or expertise you could provide on a problem the organization is facing, or guarantees on service response, for example.
Know who you are negotiating with. Before the meeting, find out who will be attending and learn what you can about them (you could look them up on LinkedIn, for example). That information can help you build rapport with them or give you a sense of what to expect.
Set the agenda. Setting a meeting agenda and sending it to the other side in advance can help you gain control of the situation, Arden suggested. By asking your counterparts to flag any points they would like to add, you can identify their priorities and prepare accordingly.
The first couple of points on the agenda should be things both parties are likely to agree on. This builds trust and momentum.
During the negotiation
Arden has suggestions on what to do when you are in actual negotiations. Among them:
Body language. Always try to conduct negotiations face-to-face, as you can pick up on vital clues in your counterpart’s body language. This shows what the person is thinking, which is not necessarily the same as what they are saying.
Your own body language also provides clues to the other party, beginning with your handshake when you greet them at the start of the meeting. Adopt a neutral, confident pose, keep your hands open on the table, sit up straight, look interested, listen and nod.
In his coaching practice, Arden films participants as they role-play a negotiation, to show them how their gestures come across to others and what they may reveal.
If you do have to negotiate over the phone, give the conversation your full attention. Switch off any potential distractions such as email alerts.
If there is little separating rival bids, “people are going to buy from the most enthusiastic person who wants their business, rather than the cheapest”
Take a colleague with you. When faced with an important negotiation, take a colleague to the meeting with you. They may notice something you missed and can provide an excuse to take a break from long or intense discussions and clear your head.
Arden suggested the following phrase: “We’ve made a lot of progress here. Do you mind if we take a few minutes out to have a chat?”
Step out of the room, and ask your colleague what they observed. For example, “When we asked them if they had received a better offer, did you notice any clues in the other party’s body language?”
Don’t accept unrealistic deadlines. If, during the talks, you need to discuss with your CEO the potential implications of a particular scenario being proposed, you could opt for a “soft walkaway”.
For instance, saying “that’s the best I can do today” buys you time. A soft walkaway can also give you time to recalculate figures.
Show enthusiasm. Demonstrate to the other party that you are keen to work with them. If there is little separating rival bids, “people are going to buy from the most enthusiastic person who wants their business, rather than the cheapest,” Arden said.
“It comes down to who they trust, who they like, who has given them their mobile number so they can get in touch immediately if any issues crop up.”
Look for a win-win outcome. Helping the other party meet their objectives for the deal helps build long and fruitful relationships, Arden said.
Existing customers take much less effort to sell to than new prospects, and if you help them get what they want and they trust you, they will be willing to buy from you in the future, and at premium prices. They will also be more inclined to refer their contacts to you.
About the Author
Samantha White is a Senior Editor at CGMA Magazine, a publication of the Association of International Certified Professional Accountants, which offers the Chartered Global Management Accountant (CGMA) professional designation. The association is a joint venture of AICPA in the US and CIMA in the UK. Click here to subscribe to the weekly newsletter CGMA Magazine Update.
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