“If you are the buyer, should you undermine the confidence of the salesperson by making a ridiculously low counter-offer”?
I was recently asked this at the end of giving a keynote speech on cross-cultural negotiations to the Kuwait British Business Forum.
The answer to this question is complex: if you are involved in a “transactional negotiation”, where you’re never likely to be dealing with that person again, this might be an okay strategy. Many of us have been to souks in Greece or Turkey, where we know we have to make an offer of half the asking price if we don’t want to be ripped-off.
Most business negotiations are “relationship-based” rather than transactional – in other words, we will most likely be working with the other party over an extended period of time, so developing a healthy long-term trusting relationship is important. Tough tactics may often be counter-productive in these situations. Remember that negotiation is only a means to an end – to agree a mutually beneficial trading arrangement. If you try to “stitch them up” during the negotiation, it is likely that the ensuing business relationship will be arduous and costly to maintain.
However, even in relationship-based negotiation, we still need to protect ourselves from being beaten-down on price. If we are selling commoditised products, this is hard because everyone knows the cost of an iPhone 5c for example – we all have access to comparison websites, which give buyers more information than they ever had before, which some people believe puts them in the driving seat.
Communicate the value you bring to the customer
To make it harder for the buyer to make direct comparisons with competitor products, it is vital to de-commoditise your offering. For example, our company provides training services. A question we are often asked is “what’s your daily rate”? If we answer this question, the buyer will be able to say “well company x has a lower daily rate than you – can you match that?” The problem here is that we have now positioned ourselves as a commodity broker – selling time.
To avoid this pitfall we need to sell on the value we create for our customers. To give an example, we package our negotiation skills program to include online pre-assessment, training, simulations, follow-up work, feedback and post-assessment. This has the benefit of making direct comparisons with competitors much harder and thus make us less vulnerable to price concessions.
Even more important, is how we position ourselves. Our positioning is: “Others teach negotiation … WE CREATE NEGOTIATORS”. We back this up with figures showing that on average each delegate that takes our program will save £20,000 in the following month. By communicating this, the benefits of our offering become so apparent to the buyer that haggling over price slips way down their agenda.
This in effect introduces a “unique selling proposition” (or USP) which makes us less dependent on competing on price than communicating the value we bring, and creating an “emotional hook” for the customer. In a best case scenario, the buyer will be so concerned that they reach a deal with us that they won’t risk haggling over price!
Strategies such as these help put the seller back in the driving seat and counter the myth I hear so often that the buyer has the power. Have you been thinking about is it illegal to drive barefoot, if yes this article will show you. Next post, I will be looking at what you should do if you do get asked for a price concession.
Watch our five top tips for negotiators video or find out more about our negotiation skill training on our website or better still join me at one of my complimentary seminars for the perfect opportunity to discover the secrets behind win-win negotiation and gain advantage over your competitors.