Tuesday, July 6, 2010

Power Negotiation for Superstars

In the last two posts I explained how you're leaving money on the table by refusing to raise prices and how to raise them without incurring dissent.  In future posts I discuss how and when to raise prices to achieve maximum profit by improving your brand while keeping your clients happy.

For now, let's explore another way many proprietors leave money on the table: by reacting to pricing pressure by indulging haggling.

In pure negotiation, neither party knows the other's expectation.  The first person to name a figure loses because the other person now knows their boundaries.  The counter-party can then move their own figure closer or further away from the figure as it benefits them.

Information has value, and the one who possesses more of it is better positioned.  When neither parties know the other's limits, the seasoned negotiator strives to get the other party to name a starting price.  When as in retail sales, the seller publishes the price, buyers are forearmed with the seller's expectation but the seller is not similarly equipped.  Thus a retail seller who demonstrates flexibility on price puts herself at a disadvantage because her buyer starts with more information.

Sometimes a prospect pushes for a discount.  What is their underlying motive?  Do they truly demand a reduction to buy?  Contrary to popular myth, a customer will almost never engage you in the buying process without being able to afford the product.  Price objections from customers arise when they're probing your confidence level.  If they sense you wavering, they may interpret it as a lack of confidence in your product or service.

Believe it or not, your clients hope you’ll stand firm.

To bear this out, imagine you're looking at a vehicle on a dealer’s lot.  It sports a ten thousand dollar sticker but you really want it.  The salesperson sidles up and you low ball him. 
"I like this car but I didn't want to spend more than eight thousand dollars."  You expect your utterance will preface a lengthy negotiation.  But instead of negotiation the rep replies "$8000?  Sold!"

How do you feel now?  Confident?  No, you’re seriously reevaluating your decision, anxious you may have just made a huge mistake.
 

To contrast, imagine the same scenario but instead of giving in the rep smiles assuredly at your inquiry and begins outlining the value of the vehicle.  He stays firm on the price, explaining the value of the car.

As a consumer, which experience would you rather have?

In this same way, your customers expect you to demonstrate confidence in your offering.  If you exhibit conviction in the value you provide, your client will feel the validity.  When a qualified client reconsiders a purchase at the last minute or brings up price, the culprit is usually uneasiness.  Often this is because they sense a lack of confidence in
the salesperson.  Your savvier consumers (often salespeople themselves) may opt to push for a discount if they feel you're unconfident.

If a customer starts to haggle or seems to question the value, realize that it is probably because you have opened the door by failing to demonstrate your conviction.  To recapture lost momentum, express confidence in the value.  Whatever you do, don't let their inquiry make you defensive.  Build trust.  Reiterate the value and assuage
your client's anxiety.  Confidence is the secret to POWER negotiation!

Have you ever printed a huge run of printed material only to discover a typo after the fact?  I'll show a way to avoid that in the next article.  Look for it in the next couple of days.  And please keep your comments coming!  


Until then,
profitable business All!

P.S. For further reading on negotiation, I enthusiastically recommend Getting to Yes.

3 comments:

  1. Nice example of the topic with the car salesman,
    I guess I never thought of it like that before.

    ReplyDelete
  2. Good post man,

    I look forward to your post about how to avoid typos, I really am curious to hear the advice.

    ReplyDelete
  3. I once new someone who said that they ended up printing lots of copies of their brand new book only to find it had a small but major typo. Had to reprint the whole thing, look forward to post.

    ReplyDelete

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