Clients Want a Good Deal; some want too good of a deal.
This economy is really shaking things up and rattling a lot of vendors. I experienced this myself this week, when a current client who has two of our general laborers onsite, called in asking for a plumber. I said, “we have such a worker available and he is a licensed journeyman (someone who can pull all his own permits) and he would be billed at $13/hour”. The client was surprised that we would charge more for a plumber, than for our general laborers. To him a laborer is a laborer. I asked him what he felt was a fair price and he replies, "$8.75". The fact that he is getting laborers from us at $8.75 is an amazing deal, almost too amazing. It was a deal that was set-up before I started with the company. Even knowing that, I was not willing to send out a worker with his experience at such a low rate. The client feels he has the upper hand knowing that business is down, and his opinion is that we should be grateful to get any order at all. In fact, as a power move he threatens to release the two workers we currently have out at his company. So what's the next move?
Know the Behaviors of a Good Negotiator
1. Planning- You should know your product/service well and the costs involved in providing the product/service. You should also know as much about the client as possible, like what is it that they do and who is their customer? Also what is the personality of the decision maker/negotiator?
When the other party is more prepared than you, you're likely to get steamrolled and you will not have the confidence to convey your position. I know it’s painful, but ROLE-PLAY! Go to a teammate or better your boss, by role-playing with a person of higher authority you will gain knowledge of how much flexibility you will be allowed to work with the customer.
2. Thinking Long-Term not Short-Term- The best negotiators think long-term. The short-term goal is to close the sale or get the deal, but what precedent does the transaction set on future deals or sales.
In this down economy, people know that the buyer has more control, but will this customer pay more or stay loyal when the economy turns around? Make sure you think about what this customer means to your business, not just the one order. Be sure to ask yourself, can you truly satisfy the needs of the customer beyond this transaction, and does the price/transaction make good business sense? Both parties should walk away feeling satisfied.
3. Set Limits- In your planning you should know your range that you are willing to negotiate within.
Do not throw out an off-the-wall high number just to see if the other party will bite. Insulting someone by offering them an unreasonable number will turn them off and likely make you appear untrustworthy. Your first offer should be fair, not the lowest price, but in line with the market price. If it’s above that, be ready to explain what differentiates your product or service from others on the market. Most importantly, you should know the market demand for your product or service! Chrysler and GM are two companies who have seen their market price for its products fluctuate dramatically. If your competitors are more in tuned to these market changes, they may have the upper hand and they may make your clients aware of it. Also, know your walk away point. It is better to acknowledge that you can not meet the client’s expectations and walk away from a deal, then to close a sale that is unrealistic and not viable for your business.
4. Do Not Use Language that Causes Irritation- This is a hard habit to break.
Do not say things like, "Let me be honest" (Are your usually dishonest?), "This is a fair offer" or "a very generous offer" (Are you indicating that any offer below your quoted price is unfair?), and "this is the best deal around" (Are you disparaging their current vendor?) Try to avoid language that is self serving, the person on the other side of the table is not interested in your bragging rights. Instead stay neutral, say "After considering the market and the value of our product I can offer a price of ..." This allows the other side an opening for discussion about what they have experienced in the market or the prices they have received in the past, and it lets them know you have done your homework without saying this is your final price. If it’s a fair price they should recognize it, if you have wiggle room to go lower, than the door is open for discussion. They may just take your first offer if it truly is a good deal.
5. Listen. You made your small talk and you presented your offer, now shut up, and listen.
The side that talks the most reveals the most. Listen to their concerns and expressed needs, and read between the lines. Doing so may reveal how much more they need you, and this could give you the leverage you need. Do not verbally vomit all over the customer. We..., we..., we..., we... Instead, ask them questions, get them talking, and then only respond to what they have said. Too many people are not able to bare silence, so they add more and more fluff, then the other side realizes you’re desperate and you’re not closing the deal. Example: You say, "We can provide you the first order at $1.10 per unit, and any order after that over 10,000 units at $1.00, with half off the shipping costs." Then the silence happens, and you add "we have a great product, we are rated at a 95% satisfaction rate, we guarantee your order delivered on time or shipping is free, and we have customer service reps available 7 days a week..." Yikes! If the customer is not already aware of the services you promise by the time you make them an offer, you are in trouble. Instead make the offer, and then let silence happen. After 15-30 seconds they'll break, they'll say something. Then you can respond, and only to their true concerns.
Lastly,
6. Both Parties Leave Happy. Both sides should walk out of a closed deal smiling; feeling as though both sides won something.
For example: They received free shipping when they order 15,000 units; you got the customer to agree to ordering over the 10,000 unit goal you set. They get $.10 discount on orders over 10,000 units; you earned a new customer and stole them away from your biggest competitor. However, if they demanded free shipping on orders of 10,000 units or more and instead of a $.10 discount, they wanted $.25, and they said it’s these terms or no deal and you accepted feeling they broke the bank, well you should have walked away. Maybe you got a new customer and you stole them away from your biggest competitor, but what happens when a new customer gets a deal that is more beneficial financially to your company. Your company's current clients or new clients who pay a fairer price are going to get better service and will be a higher priority. Worse your new customer may talk, and if word spreads to another client of the great deal another customer is receiving, how do you save that sale? If the negotiated deal puts your company at a financial disadvantage, then its not a win-win and you should have walked away.
So What Happened with my Customer?
I made my offer at $13/hour for a skilled plumber. I know the market is depressed, but plumbers are still in high demand and would charge a much higher rate if contacted outside my staffing firm. The customer demanded an insultingly low rate of $8.75. Not surprisingly, since at the time when my company had first negotiated with this customer they gave him control over the pricing and he walked away much happier than us. Now he expects that relationship to continue. Knowing that he was not ready to negotiate, I ended the phone conversation by saying, "I needed to look at the numbers again and talk with the president to see what other offer we could present." I spoke to my brother and he agreed that we would counter offer at $12/hour, and if the customer was still unwilling to compromise on his position, then we would walk away. We were prepared to lose the customer.
I called the customer back, and presented the counter offer. Again, he demanded the $8.75 rate or no deal, and if we were not agree he would end the assignments of the two employees we had out at his company. I listened; I responded to his complaints of past dissatisfaction with employees we had assigned. I reminded him that on any employee he reported dissatisfaction with on that employee's first day we did not bill him for those hours. He complained that we were charging different rates on the same product. I reminded him that just like a retail store we offer different products. Someone skilled in assembly work is a different price than someone with plumbing experience. He asked if we were making money on people not working. I stated that we have to ensure that our bill rate is able cover payroll taxes, unemployment insurance, and workers compensation insurance. He stated he was not going to pay $12/hour, I stated that was his decision and I respected it. He then stated we had nothing left to talk about, so I thanked him for considering us for the order and if he changed his mind I would love to work with him. He then called back later, not walking to talk to me, and told our office manager to end the assignments of the two we had working at his company. I walked away knowing that I may have lost the client, but also knowing the deal would have left me unhappy and my company in a position to take a loss on supplying a worker.
I am Not an Expert by Any Means
I know I was not as confident about my product as I should have been. I did not know all the details on our past relationship with this client. I was not prepared for his abrasive personality and it put me on my heels. However, I was able to recognize quickly that the first conversation was not headed in the right direction, so I made the decision to stop negotiations and call him back when I was better prepared. Don't be afraid to do so, if you are caught the same situation. Not every negotiation is successful the first go around. When the client is asking questions and laying out details you are not educated on, its better to recognize that and politely reschedule another conversation. I also used language causing irritation. Try not to get defensive, stay on the offensive. When dealing with a client who demands too low of a price, do not respond, "$12/hour is a great deal, it’s more than fair." Remember stay neutral and say, "I think the market justifies $12/hour." Let the other party try to justify a lower price. Lastly, walk away, but leave the ball in the customer’s court. Tell the customer you understand their opinion and you hope that you are able to work together, and that the door is open if they decide to start a new conversation later. Leave happy knowing you made the right decision. I recommend that you only work with clients whom mutually want your business and theirs to do well.
If you want more information on negotiation tactics I recommend checking out this website:
http://it.toolbox.com/wiki/index.php/Negotiating_Skills
Or for the more advanced negotiator read:
The Skilled Negotiator: Mastering the Language of Engagement (Paperback)by Kathleen Reardon (Author)
This economy is really shaking things up and rattling a lot of vendors. I experienced this myself this week, when a current client who has two of our general laborers onsite, called in asking for a plumber. I said, “we have such a worker available and he is a licensed journeyman (someone who can pull all his own permits) and he would be billed at $13/hour”. The client was surprised that we would charge more for a plumber, than for our general laborers. To him a laborer is a laborer. I asked him what he felt was a fair price and he replies, "$8.75". The fact that he is getting laborers from us at $8.75 is an amazing deal, almost too amazing. It was a deal that was set-up before I started with the company. Even knowing that, I was not willing to send out a worker with his experience at such a low rate. The client feels he has the upper hand knowing that business is down, and his opinion is that we should be grateful to get any order at all. In fact, as a power move he threatens to release the two workers we currently have out at his company. So what's the next move?
Know the Behaviors of a Good Negotiator
1. Planning- You should know your product/service well and the costs involved in providing the product/service. You should also know as much about the client as possible, like what is it that they do and who is their customer? Also what is the personality of the decision maker/negotiator?
When the other party is more prepared than you, you're likely to get steamrolled and you will not have the confidence to convey your position. I know it’s painful, but ROLE-PLAY! Go to a teammate or better your boss, by role-playing with a person of higher authority you will gain knowledge of how much flexibility you will be allowed to work with the customer.
2. Thinking Long-Term not Short-Term- The best negotiators think long-term. The short-term goal is to close the sale or get the deal, but what precedent does the transaction set on future deals or sales.
In this down economy, people know that the buyer has more control, but will this customer pay more or stay loyal when the economy turns around? Make sure you think about what this customer means to your business, not just the one order. Be sure to ask yourself, can you truly satisfy the needs of the customer beyond this transaction, and does the price/transaction make good business sense? Both parties should walk away feeling satisfied.
3. Set Limits- In your planning you should know your range that you are willing to negotiate within.
Do not throw out an off-the-wall high number just to see if the other party will bite. Insulting someone by offering them an unreasonable number will turn them off and likely make you appear untrustworthy. Your first offer should be fair, not the lowest price, but in line with the market price. If it’s above that, be ready to explain what differentiates your product or service from others on the market. Most importantly, you should know the market demand for your product or service! Chrysler and GM are two companies who have seen their market price for its products fluctuate dramatically. If your competitors are more in tuned to these market changes, they may have the upper hand and they may make your clients aware of it. Also, know your walk away point. It is better to acknowledge that you can not meet the client’s expectations and walk away from a deal, then to close a sale that is unrealistic and not viable for your business.
4. Do Not Use Language that Causes Irritation- This is a hard habit to break.
Do not say things like, "Let me be honest" (Are your usually dishonest?), "This is a fair offer" or "a very generous offer" (Are you indicating that any offer below your quoted price is unfair?), and "this is the best deal around" (Are you disparaging their current vendor?) Try to avoid language that is self serving, the person on the other side of the table is not interested in your bragging rights. Instead stay neutral, say "After considering the market and the value of our product I can offer a price of ..." This allows the other side an opening for discussion about what they have experienced in the market or the prices they have received in the past, and it lets them know you have done your homework without saying this is your final price. If it’s a fair price they should recognize it, if you have wiggle room to go lower, than the door is open for discussion. They may just take your first offer if it truly is a good deal.
5. Listen. You made your small talk and you presented your offer, now shut up, and listen.
The side that talks the most reveals the most. Listen to their concerns and expressed needs, and read between the lines. Doing so may reveal how much more they need you, and this could give you the leverage you need. Do not verbally vomit all over the customer. We..., we..., we..., we... Instead, ask them questions, get them talking, and then only respond to what they have said. Too many people are not able to bare silence, so they add more and more fluff, then the other side realizes you’re desperate and you’re not closing the deal. Example: You say, "We can provide you the first order at $1.10 per unit, and any order after that over 10,000 units at $1.00, with half off the shipping costs." Then the silence happens, and you add "we have a great product, we are rated at a 95% satisfaction rate, we guarantee your order delivered on time or shipping is free, and we have customer service reps available 7 days a week..." Yikes! If the customer is not already aware of the services you promise by the time you make them an offer, you are in trouble. Instead make the offer, and then let silence happen. After 15-30 seconds they'll break, they'll say something. Then you can respond, and only to their true concerns.
Lastly,
6. Both Parties Leave Happy. Both sides should walk out of a closed deal smiling; feeling as though both sides won something.
For example: They received free shipping when they order 15,000 units; you got the customer to agree to ordering over the 10,000 unit goal you set. They get $.10 discount on orders over 10,000 units; you earned a new customer and stole them away from your biggest competitor. However, if they demanded free shipping on orders of 10,000 units or more and instead of a $.10 discount, they wanted $.25, and they said it’s these terms or no deal and you accepted feeling they broke the bank, well you should have walked away. Maybe you got a new customer and you stole them away from your biggest competitor, but what happens when a new customer gets a deal that is more beneficial financially to your company. Your company's current clients or new clients who pay a fairer price are going to get better service and will be a higher priority. Worse your new customer may talk, and if word spreads to another client of the great deal another customer is receiving, how do you save that sale? If the negotiated deal puts your company at a financial disadvantage, then its not a win-win and you should have walked away.
So What Happened with my Customer?
I made my offer at $13/hour for a skilled plumber. I know the market is depressed, but plumbers are still in high demand and would charge a much higher rate if contacted outside my staffing firm. The customer demanded an insultingly low rate of $8.75. Not surprisingly, since at the time when my company had first negotiated with this customer they gave him control over the pricing and he walked away much happier than us. Now he expects that relationship to continue. Knowing that he was not ready to negotiate, I ended the phone conversation by saying, "I needed to look at the numbers again and talk with the president to see what other offer we could present." I spoke to my brother and he agreed that we would counter offer at $12/hour, and if the customer was still unwilling to compromise on his position, then we would walk away. We were prepared to lose the customer.
I called the customer back, and presented the counter offer. Again, he demanded the $8.75 rate or no deal, and if we were not agree he would end the assignments of the two employees we had out at his company. I listened; I responded to his complaints of past dissatisfaction with employees we had assigned. I reminded him that on any employee he reported dissatisfaction with on that employee's first day we did not bill him for those hours. He complained that we were charging different rates on the same product. I reminded him that just like a retail store we offer different products. Someone skilled in assembly work is a different price than someone with plumbing experience. He asked if we were making money on people not working. I stated that we have to ensure that our bill rate is able cover payroll taxes, unemployment insurance, and workers compensation insurance. He stated he was not going to pay $12/hour, I stated that was his decision and I respected it. He then stated we had nothing left to talk about, so I thanked him for considering us for the order and if he changed his mind I would love to work with him. He then called back later, not walking to talk to me, and told our office manager to end the assignments of the two we had working at his company. I walked away knowing that I may have lost the client, but also knowing the deal would have left me unhappy and my company in a position to take a loss on supplying a worker.
I am Not an Expert by Any Means
I know I was not as confident about my product as I should have been. I did not know all the details on our past relationship with this client. I was not prepared for his abrasive personality and it put me on my heels. However, I was able to recognize quickly that the first conversation was not headed in the right direction, so I made the decision to stop negotiations and call him back when I was better prepared. Don't be afraid to do so, if you are caught the same situation. Not every negotiation is successful the first go around. When the client is asking questions and laying out details you are not educated on, its better to recognize that and politely reschedule another conversation. I also used language causing irritation. Try not to get defensive, stay on the offensive. When dealing with a client who demands too low of a price, do not respond, "$12/hour is a great deal, it’s more than fair." Remember stay neutral and say, "I think the market justifies $12/hour." Let the other party try to justify a lower price. Lastly, walk away, but leave the ball in the customer’s court. Tell the customer you understand their opinion and you hope that you are able to work together, and that the door is open if they decide to start a new conversation later. Leave happy knowing you made the right decision. I recommend that you only work with clients whom mutually want your business and theirs to do well.
If you want more information on negotiation tactics I recommend checking out this website:
http://it.toolbox.com/wiki/index.php/Negotiating_Skills
Or for the more advanced negotiator read:
The Skilled Negotiator: Mastering the Language of Engagement (Paperback)by Kathleen Reardon (Author)
No comments:
Post a Comment