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Secrets of Power Negotiating by Roger Dawson

Power Negotiating

RATING: 8/10…READ: September 22, 2011

Master negotiating and sales advice. If you’ve felt like you got less in a deal than you hoped for, want to gain the confidence to negotiate for more, and sell more in life, I highly recommend this book.

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Nothing happens until somebody sells something! In our system, salespeople are the force that creates the demand that consumers the supply, which is the fuel of our entire economy.

Let’s face it, when you’re sitting down in front of a buyer—if you’re lucky enough and skillful enough to get to sit down with the buyer—he wants the same thing that you want. There’s not going to be a magical win-win solution. He wants the lowest price and you want the highest price. He wants to take money off your bottom-line and put it right on to his.

Power sales negotiator leave buyers feeling that they have won. Poor negotiators leave buyers feeling that they have lost.

Ask the buyer for more than you expect to get.

Effectiveness at the conference table depends upon overstating one’s demands. The obvious reason is that if gives you some negotiating room.

What you should be asking for is your MPP—your maximum plausible position. This is the most that you can ask for and still have the buyer see some plausibility in your position.

The less you know about the other side, the higher your initial position should be, for two reasons. First, you may be off in your assumptions. If you don’t know the buyer or his needs well, he may be willing to pay more than you think. The second reason is that, if this is a new relationship, you’ll appear much more cooperative if you’re able to make larger concessions. The better you know the buyer and his needs, the more you can modify your position. Conversely, if the people on the other side don’t know you, their initial demands may also be more outrageous.

If you’re asking for far more than your maximum plausible position, imply some flexibility.

The second reason for asking for more than you expect to get will be obvious to you if you’re a positive thinker: you might just get it!

The third reason to ask for more than you expect to get is that it raises the perceived value of your product or service.

The fourth reason is that it’s a great strategy for avoiding deadlocks caused by the conflicting egos of the negotiators.

There’s a fifth reason to ask for more than you expect to get, and it’s the reason Power Sales Negotiators say that you should do it: It’s the only way that you can create a climate where the buyer feels that he or she won.

When a buyer asks you for more than he expects to get, you should recognize the Gambit, appeal to his sense of fair play, and use Higher Authority and Good Guy/Bad Guy. You should say, “Of course you could open the negotiation at any figure you choose, and I could respond with an equally outrageous proposal, but neither of us would benefit from that approach. Why don’t you tell me the highest price you can live with, and I’ll take it to my people and see what I can do for you with them. Fair enough?”

The buyer is offering you $1.60 for your widgets. You can live with $1.70. Bracketing tells you that you should start at $1.80. Then if you end up in the middle, you’ll still make your objective.

You can stop a buyer from bracketing you by getting hum to commit to a position first. –they must state first.

Specific numbers build credibility, so you’re more likely to get them to accept an offer such as this than have them counter at a higher price.

Napoleon Bonaparte once said, “The unforgivable sin of a commander is to form a picture—to assume that the enemy will act a certain way in a given situation, when his response may be altogether different.”

Turning down the first offer may be tough to do, particularly if you’ve been calling on the buyer for months and just as you’re about to give up, they come through with a proposal. It will tempt you to grab what you can. When this happens, be a Power Sales Negotiator—remember not to say yes too quickly.

If someone pulls a flinch on you first, the best thing to do is simple and recognize the gambit: “That was a terrific flinch!” Where did you learn how to do that?”

Flinch in reaction to a proposal from the buyer. They may not expect to get what they’re asking for, and if you don’t show surprise, you’re communicating that it’s a possibility.

When you meet a reluctant buyer, say, “I don’t think there’s any flexibility in the price, but if you’ll tell me what it would take to get your business (getting the other side to commit first), I’ll take it to my people (Higher authority) and I’ll see what I can do for you with them (Good Guy/Bad Guy—an ending negotiating gambit).” Power sales negotiators don’t get upset by a reluctant buyers/seller. They just learn to play the negotiating game better than the buyer.

Always play reluctant seller

It is critical for you to remember during the beginning stage of the negotiation that you should always concentrate on the issues and not get thrown off by the actions of the other negotiator.

Concentrate on the dollar amount that’s being negotiated. Because the buyer seems angry with you, it may seem like a bigger deal than it really is.

Once you’ve said, “You’ll have to do better than that,” what’s the next thing that you should do?”

–You’ve got it. Shut up! Don’t say another word. The buyer may just make a concession to you. Sales trainers call this the silent close, don’t they? I’m sure that somebody taught you the silent close the first week that you were in business. You make your proposal and then shut up. The buyer may just say yes, so it’s foolish to say a word until you find out if he or she will accept your proposal.

When the buyer uses the Vise on you, automatically respond with, “Exactly how much better than that do I have to do?” This is an attempt to get the buyer pinned down to a position. You should never make a concession to a buyer unless it’s in response to a specific counter-proposal from them.

A negotiated dollar is a bottom-line dollar. Be aware of what your time is worth on an hourly basis.

When buyers know that you the final authority to make a deal, they know that they only have to convince you. If you’re the final authority they don’t have to work as hard as give you the benefits of the proposal because once you’ve given your approval, they know that they have consummated the deal.

–Make the first move. Your first approach should be to try to remove the buyer’s resort to higher authority before the negotiators even start by getting them to admit that they could make a decision if the proposal was irresistible.

“I don’t mean to put any pressure on you, but if we’re going to go ahead on this we need to get it going right away. So let me ask you this: If this proposal meets all of your needs…”(That’s as broad as any statement can be, isn’t it?) “If this proposal meets all of your needs, is there any reason why you wouldn’t give me a decision today?”

Here are the three steps that Power Sales Negotiators take when they’re not able to remove the buyer’s resort to Higher Authority:

Step number one: Appeal to their ego: With a smile on your face say, “But they always follow your recommendations, don’t they?”

Get a commitment that they’ll take it to the committee with a positive recommendation.

Your biggest problem is not an objection—it’s indifference.

So, when you say to them, “You will recommend it to them, won’t you?” they can either say, yes they will, or no they won’t. Either way you’ve won. Move to number 3

The qualified subject to close

When the tables are turned. What if someone is trying to remove your resort to higher authority? Let’s say that a buyer is pressuring you to commit to price and terms on a shipment, but wants a decision right now. She’s saying, “Harry, I love you like a brother, but I’m running a business not a religion. Give me what I need on this one right now, or I’ll have to go with your competitor.”

–How do you handle it? Very simple. You say, “Jane, I’m happy to give you a decision. In fact, ill give you an answer right now if you want it. But I have to tell you—if you force me to a decision now, the answer has to be no. Tomorrow, after I’ve had a chance to talk to my people, the answer might be yes. So, why don’t you wait until tomorrow, and see what happens, fair enough?”

The buyer says, “Your price is far too high.” If you argue with him, he has a personal stake in proving you wrong and himself right. Instead, you say, “I understand exactly how you feel about that. Many other buyers have felt exactly the same way as you do when they first look at our program. However, when they take a closer look at what we offer, they have always found that we offer the best value in the marketplace.”

Use the feel, felt, found formula to turn the hostility around.

If you sell a service, remember that the value of that service will go down quickly once it has been performed. Agree on the price before you start the work. Agree on a formula to use if circumstances change and you need to increase the fee. Get paid in advance if you can. If you can’t get paid in advance, get paid incrementally as the work is being done, or as quickly as possible after the work is done.

Always stress how long you’ve been negotiating if a deal is about to fall through.

Don’t fall into the trap of thinking that splitting the difference is the fair thing to do.

Splitting the difference doesn’t mean down the middle, because you can do it more than once.

Never offer to split the difference, but instead encourage the other side to offer to split the difference.

By getting them to offer to split the difference, you put them in a position of suggesting the compromise. Then you can reluctantly agree to their proposal, making them feel that they won.

When someone hands you a hot potato, test for validity right away by asking, “Who has the authority to exceed the budget?” or “Who has the authority to waive that charge?” or “When does your budget year end?” If you can break through the barrier of the problem they’re trying to give you, even if it is hypothetical, you have eliminated the Hot potato.

When asked for a small concession by the other side, always ask for something in return.

Use this expression, “If we can do that for you, what can you do for me?”

Buyers use Good Guy/Bad Guy on you much more than you might believe. Look out for it whenever you’re negotiating with two or more people.

It is a very effective way of putting pressure on the other person without creating confrontation.

Counter it by identifying it. It’s such a well-known tactic that when you catch them using it, they get embarrassed and back off.

Stop the buyer from Nibbling on you by showing him in writing the cost of any additional features, services, or extended terms, and by not revealing you have authority to make concessions.

When the buyer Nibbles on you, respond by making her feel cheap, in a good-natured way!

The way that you make concessions can create a pattern of expectations in the buyer’s mind.

Don’t make equal-size concessions because the buyer will keep on pushing.

Don’t make your last concession a big one, because it creates hostility.

Never concede your entire negotiating range just because the buyers calls for your “last and final” proposal, or claims that he or she “doesn’t like to negotiate.”

Withdrawing an offer is a gamble, so only use it on a buyer who is grinding away on you.

You can do it by backing off of your last price concession, or by withdrawing an offer to include freight, installation, training or extended terms.

To avoid direct confrontation, make the Bad Guy a Vague Higher authority. Continue to position yourself on the buyer’s side.

Position the buyer to feel good about giving in to you with a small concession made just at the last moment.

If the other party jumps first to be the author of the contract, I’ll say to that person, “Look, we need to put this down in writing; but let’s not go to a lot of expense on this. I have an attorney on retainer, so it won’t cost either one of us anything for me to have my attorney do it.” Even if I had to pay the attorney to do it, I still think I’d be better off to be the one who is writing the contract.

A huge advantage goes to the side that is writing the contract, because when you start to write out he agreement, you will think of several things that you didn’t think of when you were verbally negotiating. If you’re writing the contract you can write those points to your advantage. When the other side reviews the contract, they will have all their energy tied up in trying to renegotiate those points with you.

Take notes as you’re negotiating and put a check mark next to points that you will want to include in the final agreement. It will remind you to include them. Also, you won’t be reluctant to include them because you will be certain that you did cover the point during the negotiation.

Negotiating is a game that is fun to play, when you know what you’re doing and have the confidence to play it with vigor.

The next time you’re trying to get somebody to spend money, remember that they really want to spend more money with you, not less. All you have to do is give them a reason and convince them that there’s no way they could get a better deal.

Important things that are more important than money:

-Being convinced that they are getting the best deal you’re willing to offer.

-The quality of the product or service

-The terms that you offer

-The delivery schedule that you offer

-The experience you have in delivering the product or service

-The guarantee that you offer and how well you stand behind what you do.

-Return privileges

-Building a working partnership with you and your company

-Credit

-Your staff

-The ability and willingness to tailor your product and packaging to their needs.

-The respect that you will give them

-Peace of Mind

-Reliability

Determine their quality standards by offering a stripped own version. “We may be able to get down below $1.50 if you don’t care about copper contacts. Would that work for you?” In this way, you probably get them to acknowledge that price isn’t their only concern. They do care about quality.

Establish the most they can afford by offering a higher quality version. “We can add an exciting new feature to the switch, but it would put the cost in the $2.50 range.” If the buyer shows some interest in the feature, you know that he could pay more. If he says, “I don’t care if it’s diamond plated. We can’t go over $1.75,” you know that fitting the product to a price bracket is a critical issue.

4 Stages of Selling:

Prospecting—finding people who have a need or want for your product or service

Qualifying—finding people who can afford your product or service.

Desire-Building—making people want your product or service more than anybody else’s, and more important, want to do business with you more than anybody else.

Closing

Don’t try to force them to change their minds. Instead, tell a little story to take their mind of the decision they made. Think to yourself, “I asked the right closing question but my timing was way off. I’ll distract them and return to the closing question in a few minutes.” After you’ve mentally walked them around the paddock, go for the close again. If they still say no, walk them around the paddock again, and after you’ve distracted them with a story, go for the close again.

Great salespeople can do that five or six times without becoming frustrated. Excellent salespeople can do it 10 or 12 times and persist. So never think of a no as refusal—simply think of it as a sign that you need to walk the buyer around the paddock one more time.

The buyer says, “Your competitor will sell me widgets for 10 cents less than this.” You say, “But that wouldn’t stop you from buying from us would it?” He may well say, “Well I guess not, if your service is as good as you promised.”

Don’t make your buyers ask you for time to talk it over, give it to them. Just be sure that they’re in the closing room or in your car, not near their car where they can easily leave. You don’t have to say, “Let me give you time to think about it.” Simply find an excuse to leave them for a few minutes, such as fetching coffee or looking for a piece of paper.

The silent close is always a fun one to use. The principle is to make your presentation and then shut up! From them on, the first person who talks loses.

The dumb mistake close is a way of telling buyers what a dumb mistake they are making without actually accusing them of it. The difference is that you tell them a story about someone else who made a dumb mistake when they were in the same situation.

Once you’ve narrowed it down to the Final Objection by removing the appearance of still trying to close, you have only to answer that objection to make the sale. For this close to work you must go through these four stages:

Appear defeated

Release the Pressure

Get them to narrow it down to one objection

Overcome that objection

Puppy dog close: taking the puppy home with you

When buyers look as though they’re close to making a decision to buy and serve you a clarifying question, return the serve and in doing so, you’ll be getting a commitment. When the buyer says, “Does it come in black?” say, “Would you like it in black?” “Can you give me 45 days to pay?” should cause you to respond, “Would you like 45 days to pay?”

Alternative choice close: always have only 2 options

To counter the escalation gambit:

-Escalate your demands in return. Tell them that you’re glad that they want to reopen the negotiations because your side has been having second thoughts also. Of course, you would never renege on a deal, but because they have chose to negotiate the original proposal, your price has now gone up also.

You are likely to fall into two major traps when selling to non-Americans: 1) You will overemphasize the deal and not attach enough importance to the relationship of the parties, and 2) You’ll get down to business too quickly. The two are closely related of course.

–Building a relationship with a foreign buyer to the point where you feel comfortable with him takes time. Enlarging on that relationship to the point where you trust him and he trusts you, so that you don’t have to rely on the contract being airtight, takes a great deal of time.

Negotiating Pressure Points:

1. Time Pressure: The rule in negotiating is that 80 percent of the concessions come don in the last 20 percent of the time available to negotiate. If demands are presented early in a negotiation, neither side may be willing to make concessions, and the entire transaction might fall apart. If, on the other hand, additional demands or problems surface in the last 20 percent of the time available to negotiate, both sides are more willing to make concessions.

When you’re negotiating you should never reveal that you have a deadline.

2. Information Power: The side that has the most information can often dominate the other side. The salesperson who knows more about the company and its people stands a better chance making the sale.

-The first rule for gathering information is: don’t be overconfident. Admit that you don’t know and admit that anything you do know may be wrong.

-Don’t be afraid to ask the question.

-Where you do the asking can make a big difference. If you meet with the buyer at her corporate headquarters, surrounded by her trappings of power and authority, it’s the least likely place for you to get information.

-Go through peer groups because people have a natural tendency to share information with their peers.

-We tend to give more weight to information that we gain surreptitiously. Always consider that the information could have been planted to fool or distract you.

Always be prepared to walk away from a deal.

Handling Problems: by building momentum as you resolve the minor issues, you’ll find that the impasse issue is far more resolvable than it appeared to be at first.

Key Points about a stalemate: be aware of the difference between an impasse, a stalemate, and a deadlock. In a stalemate, both sides are still motivated to find a solution, but neither can see a way to move forward.

-The response to a stalemate should be to change the dynamics of the negotiation by altering one of the elements.

Key Points about a deadlock: the only way to resolve a true deadlock is by bringing in a third party.

-The third party can act as a mediator or an arbitrator. Mediators can only facilitate a solution, but with an arbitrator, both sides agree up front that they will abide by the arbitrator’s final decision.

-The third party must be seen as neutral by both sides.

Handling an Angry Person:

Stage 1: Establish Criteria—you should find out exactly what the other side wants to do. Do this even when you’re sure that you won’t like what you’re about to hear. Even if you cannot, or will not, make any concessions to them at all, find out exactly what it is they want. Get them to establish their criteria.

Stage 2: Exchange Information—having established the criteria so that each side understands exactly what the other side is initially willing to do, then you go to stage two where you will find out everything you can about the situation.

Stage 3: Reach for a compromise—only when you’re completed these two stages do you then go to stage three—reaching for compromise—which is what most people think of as negotiating.

DEVELOPING PERSONAL POWER

Legitimate Power: the power of your title or your position in the marketplace.

Reward Power: does he feel that you can reward him, now and in the future?

Coercive Power: does the buyer feel that doing business with you could protect him from problems?

Reverent Power: the ability to project a consistent set of values. This build trust.

Charismatic Power: the power of personality

Expertise Power: does the buyer believe that you know more about your product than he does?

Situation Power: is the buyer at a disadvantage because of circumstances?

Information Power: does the buyer see you as a storehouse of helpful information?

UNDERSTANDING THE PERSONALITY OF THE BUYER:

-The pragmatic/street fighter’s goal is clear. Her goal is victory—this person plans to win the negotiations. Doesn’t feel that he can win unless other people lose.

-The extrovert/den mother’s goal is to influence the other people. He has so much fun changing other people’s minds that he loves to make a position against the other side, just to see if he can turn their thinking around. Wants to inspire people.

-The amiable/pacifier’s goal is agreement. He feels that if he can get everybody to agree on something everything else will fall into place. His theory is that if he makes concessions, the other side will want to reciprocate.

-The Analytical/Executive’s goal is to have order in the negotiations. She wants to get the negotiation on a formal format so that the procedures established produce a solution. Too rigid.

Instead of trying to dominate buyers and trick them into doing things they wouldn’t normally do, I believe that you should work with the buyers to work out your problems and develop a solution with which both of you can win.

That’s why I stress doing the things that service the perception that the other side won, such as not jumping at the first offer, asking for more than you expect to get, flinching, positioning for easy acceptance, and so on.

3 Fundamental rules to Win-Win Negotiating:

Don’t narrow the negotiation down to just one issue: this creates a scenario in which one side has to lose.

Understand that people are not out for the same thing: the biggest trap which salespeople fall is assuming that price is the dominant issue in a negotiation. Obviously, many other elements are important to the buyer. You must convince him of the quality of your product or service. He needs to know that you will deliver on time. He wants to know that you will give adequate management supervision to his account. Explain how flexible you are on payment terms. Does your company have the financial strength to be a partner of theirs? Do you have the support of a well-trained and motivated work force? This all come into play. As well as half-a dozen other factors. When you have satisfied the buyer that you can meet all those requirements then, and only then, does price become a deciding factor.

Don’t be too greedy: Don’t try to get the last dollar off the table. You may feel that you triumphed, but does that help you if the buyer felt that you vanquished him? That last dollar left on the table is a very expensive dollar to pick up? So, don’t try to get it all, but leave something on the table so that the buyer feels that he or she won also.

Put something on the table: do something extra, over and above what you promised to do. Give your buyers a little extra service. Care about them a little more than you have to.

Let me leave you with one though. If you understand the power of this simple thought and make it the cornerstone of your career, it will make everything else in your career drop into place. Here’s my advice to you: Forget everything else you are doing and concentrate on getting better at what you do.