Wednesday, August 18, 2010

Negotiation Backfire!

A week ago, I wrote about a business negotiation I was doing for some yellow pages advertising space.  You can read that at the following link:  Today, I finalized the deal and wanted to tell you about the outcome.  The title of this post is "Negotiation Backfire!", because of the way it ended up for the sales lady.

After she applied time pressure to me last week, unsuccessfully, she went on vacation and didn't get back to any of my emails until today.  When she finally replied to me, she told me that her boss wouldn't accept my offer of $2,500 per month for the back cover of the phone book (basically the best advertising spot on a phone book), and that it was originally going for $4,500 per month.  Incidentally, reading back to my previous post, $200 above my offer would have been $2,700 per month and I would have said yes to the deal.

Since I last spoke to her, I surveyed lots of my customers to find out that 72% of them use the internet for search instead of the phone book.  Seems like a no-brainer to me too, but written statistics can be very powerful, so I put together the data.  I presented the data to her and told her that with that information, I no longer cared if I was in the book or not, and that I would just go ahead and continue my previous 1/2 page advertising, but I would need it for 1/2 the price.  This was not a threat.  It was just a matter of fact that I was going to cut my advertising in half with her phone book.  That's a great negotiating principle - sometimes, a great impact can come from pulling dollars off the table that were already assumed to be part of an agreement.

Her response was priceless for me.  She sort of did the same thing that I did.  She told me that because we took so long to come to an agreement, that the advertising on the inside of the book had already "closed" and that my previous ads were no longer an option for me.  The only remaining option was this UNSOLD back cover, so she offered it to me for $2,800 per month.  (No kidding, as I write this my I'm smiling with a feeling of excitement.)  Anyways, I turned that back around and offered to take 100% of my dollars off the table instead.

I said that since I couldn't get my prior "ineffective" ad space for half price because she took a vacation in a failed attempt to apply even more time pressure on me and caused me to lose the only thing I had even a little interest left in, that I would pay $1,400 per month for the back cover.   If we couldn't do that deal today, I told her I would just take that $1,400 and advertise with her competition (it wouldn't be the first time I had to do that anyways).  She faxed over a contract for $1,400 two minutes later.

So, let me summarize the value that I got from working all of the necessary tactics on this deal.

Back Cover original price = $4,500 per month ($54,000 per year).
My Final Negotiated price = $1,400 per month ($16,800 per year).
A difference of $37,200 per year in my favor.

The real killer part of this deal though is not in the money that I saved above, and that's a lot of money for something like this.  No, the best part is that for $329 LESS PER MONTH, I have the BEST advertising spot available.  Being inside the book is like being burried in and around the competition.  Now, for $329 less per month that my previous ineffective 1/2 page ad, I'm able to help my prospective new customers to never have to look inside the book where my competitors are.  I essentially get to make my competition invisible.

OK, so here are some negotiating lessons that you should gain from my this experience.

1.  Never fall to time pressure.  Turn it around and use it to your advantage.

2.  Deadlines are very often not real.  Push them back as often as you can so that time pressure is on your side.

3.  Take money off the table that was previously assumed to be part of the deal in order to get a better deal.

4.  Paint the portrait of pain.  I did this by showing the sales lady how I would take all of my money out of her book and put it in her competitors' books.  She would have lost the sale and her competitors would have gotten stronger.  I was absolutely going to do this.  Be prepared to do what you say you're going to do.  If your bluff is called, that can seriously backfire on you.

5.  Use market data to back up your position.  The power of the written word, especially in relevant statistics, can be a very powerful tool.

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