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:  http://chelmsmba.blogspot.com/2010/08/negotiating-experience-of-day.html.  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.

Relationship Marketing

Everyone has heard the saying, "If it was fun, it wouldn't be called work". Why does that need to be true? The #1 job of a business is to get new customers. That's pretty fun isn't it? It can certainly take hard work too. Relationship marketing guarantees that the job of getting new customers gets to be fun. It's fun because you begin developing a network of marketing friends to work with every day. Who doesn't want to spend every day working with their friends?

The other thing about working with your friends is that friends usually want to help each other out. I know if I have an opportunity to help a friend, I'm going to do it every time. In marketing, working with friends can and should mean being able to share business referrals and contact lists among friends. If I know 5 people (friends) that could work well with my other friends, then I'm going to introduce those 5 friends to my other friends, and all of those friends would do the same thing for me. These friends get to know those friends and I get to know the friends of those friends, and then we all figure out how we can help each other because we are all friends now and we all want to help our friends while those friends are all helping us.

I know many of you reading this are saying to yourself, "but this is just networking, it's not a new idea." I agree that it's not a new idea, but you would be shocked to find out just how many people aren't thinking about it. I've had an opportunity to present this idea to some of my friends lately and most of them had not thought about it in this way before. I'm offering to do 2 important things for them: 1. I'm offering to do business with them myself. 2. I'm offering to open up my rolodex to them so they can develop business friends with people they never knew before. The key thing here is that they aren't having to do any cold-calling. Instead, they get to pick up the phone and honestly say, "Chris Helms told me I should talk to you." And, because it's a friends of mine, the answer will just about always be YES because friends like to help friends.

In exchange, I get access to the rolodexes of all of my friends, then eventually to all of their friends' rolodexes as well. It's so much easier to do business with friends than with complete strangers. So, create friend-business relationships and do business with your friends every single day. The first step is to share this idea with your friends and get them on board. Next, exchange rolodexes and get to work.

Who are your current friends that you work with? Which of those friends could help some of your other friends? Start thinking about and referring to your current business contacts as business friends. Then, build that relationship up accordingly. Go out with your friends to do some joint marketing to your list of contacts and theirs. If we all help our friends and all of our friends help us, then we will have an exponentially greater opportunity for success.

Build Your Marketing Machine

A lot of companies don't understand that in order to excel in business, they can't just be the company that they are. They also can't simply be a company that does marketing as a part of business. For a company to excel - NO - for it to dominate in business, it must transform itself into a MARKETING MACHINE. The marketing machine exists to generate an over-abundance of new customers. Everything that it does serves the singular purpose of creating new customers. All of its working parts need new customers in order to continue moving. New customers are the very fuel that powers the machine. The marketing machine doesn't care what industry it is in. It doesn't care what kind of widget it makes or which services it provides. It only cares about doing it in a way that creates new customers and keeps them coming back for more.

Companies who want to be marketing machines must completely change the way they view themselves and the way that they do business. These companies can no longer see themselves simply as the company that they are. Instead, they must become a marketing machine that does _____________. For example, a medical office can not simply view itself as a doctor's office. Instead, it must become a marketing machine that sales medical services. Hair salons are no longer just hair salons. They must become marketing machines that sale beauty. If you look at the top companies in any industry, you will likely find a tremendous marketing machine. Nike, Adidas, Coca-Cola, Gatorade, McDonalds, NFL, NBA - just to name a few.

As you read this list of top-tier companies, you're probably thinking, "sure, but these companies spend millions marketing their products. I can't spend that kind of money." Agreed. Maybe you can't spend that kind of money. So, let's make an agreement about spending right here. You decide how much you can afford to spend on marketing your product or service. Then, think about how much you can afford NOT to spend money on marketing. Once you have spent adequate time on the money, get past it. Marketing is not ONLY about spending money. That's small thinking. MARKETING IS ABOUT EVERYTHING THAT YOU DO. That's why you're a marketing machine.

You market your company by the way you treat customers. You do it with the packaging of your product. Your pricing structure is part of your total marketing presentation. The neatness of your uniforms and the cleanliness of your business location markets the company. The way you say things markets your company. Your company name markets your company. Your colors, designs, and logos market your company. The quality of your personnel markets your company. Marketing must be built into everything that you do in your business. In fact a marketing machine never makes a move without considering the impact on the customer, especially how it will effect the inflow of new customers.

The marketing machine has certain internal rules that it never violates:

1. Everything it does has a purpose - to create a new customer.
2. Every single piece of written (marketing) material has a killer, customer-focused headline.
3. It always answers the customer's question, "What's In It For Me?" (WIIFM)
4. It never spends money on anything that is not working to generate new customers.
5. When budget cuts must be made, it NEVER cuts the marketing budget.
6. It always knows how customers heard about it and why they chose it over the competition.
7. It always does more of everything that works to generate new customers.
8. All of its working parts (employees) are a vital part of the sales team.
9. It never forgets its historical numbers and its current targets and benchmarks.
10.It unconditionally loves its customers.

Because it is a machine, the marketing machine makes everything automatic, only auto-drive happens in over-drive. Policies have a built-in customer focus. Procedures are created in a way that saves the customer time and encourages the customer to buy from you more often, and certainly instead of the supposed competition. Training is done fanatically so that customers receive a consistently excellent experience and consistently excellent products. Customer service is more important than dollars and cents. Therefore, employees are taught and encouraged that customer satisfaction is the minimum acceptable outcome - that customer enthusiasm is the pinnacle of the customer service plan. That's right - the customer service plan because in the marketing machine, everything is written up and standardized - especially the expected enthusiastic customer experience. When the marketing machine senses or is alerted to a potential dissatisfied customer, it takes immediate action to turn that customer into a source of future fuel that will enthusiastically tell others about their excellent experience.

Finally, once the marketing machine builds up a full head of steam, it becomes a locomotive that is ready to treat illnesses, give hair cuts, repair broken pipes, replace roofs, personal train clients, make hamburgers, or whatever else it does along with marketing. The marketing machine will dominate its industry because it is first and foremost a marketing machine that exists to do just that.

Is your company a marketing machine?

Qualities of Great Leaders

Great leaders have many qualities - so many that I can't possibly list them all here. You will likely think of others. Regardless, I want you to read this list and evaluate yourself on each one. Be brutally honest with yourself and work on the areas where you are not as strong. Most importantly, build on your current strengths. These are the things that probably come naturally to you. Finally, if you find that you are the exact opposite of any of these, consider how being so detracts from your overall leadership ability.

Leaders are skillful and persuasive speakers.
Leaders have a positive attitude that is contagious.
Leaders motivate others.
Leaders have a vision of greatness.
Leaders are compassionate.
Leaders are trustworthy.
Leaders persuade rather than coerce.
Leaders empower others to make good and innovative decisions.
Leaders are ethical.
Leaders are honest.
Leaders have unyielding drive.
Leaders never show pettiness, spite or vengeance.
Leaders encourage innovative thinking.
Leaders control their temper.
Leaders are consistent.
Leaders make tough decisions.
Leaders set and reach goals.
Leaders are self-confident.
Leaders are dynamic and energetic.
Leaders frequently praise others.
Leaders plan ahead.
Leaders treat others as equals.
Leaders show respect.
Leaders never gossip.
Leaders never speak badly of others.
Leaders delegate to accomplish more.
Leaders know that good people are the key to success.
Leaders care about their staff.
Leaders identify and build on each person’s unique talents.
Leaders place strengths ahead of weaknesses.
Leaders instill confidence in others.
Leaders want to inspire others.
Leaders reject average.
Leaders listen at least as much as they talk.
Leaders give credit to others, even when it sometimes belongs to themselves.
Leaders take responsibility for problems.
Leaders focus on solutions more than problems.
Leaders solve problems before they get out-of-hand.
Leaders set consistent expectations for everyone.
Leaders use resources efficiently.
Leaders take and learn from constructive criticism.
Leaders criticize without insults or degradation.

Paint the Portrait of Pain

It is well studied that most people will go to great lengths to avoid pain. In this case, I don't necessarily mean "pain" literally. Pain could be a problem that people would want to avoid. It could be a significant loss that would result from a specific action or inaction. It could be financial and it could be social. For now, we'll use "pain" to mean anything that a person would like to avoid in order to avoid a negative consequence.

In sales, the idea of pain avoidance is a powerful tool. Currently, gold dealers are promoting the pain of a falling dollar because gold will not likely ever lose its value. Put your money in gold, they say, and not only will you get a great return, but your money will not be worthless when things get worse. Who wants their money to be worthless? Nobody. And these companies tell you to buy gold in order to avoid the pain of a worthless dollar (they may be right by the way).

Doctors know all about this principle too. When you're seeing the doctor and all you have to pay is your copay, what do you think you would say if the doctor asked you, "would you like to get blood work to rule out a life-threatening illness?" Hmm. . . let me think about it. OK - go ahead since it could save my life.

What pain do your customers suffer when they don't buy from you? What pain do they suffer when they go to your competition. In my medical office, when an injured worker goes to the competition, he finds himself back at work with an injured back. That's literal pain. Some of them go to doctors who don't understand workers comp rules, so they don't get their forms filled out correctly and they get fired from their jobs. When I tell them how we solve these problems, they wouldn't consider going to the competition and I don't blame them.

Personal trainers have a captive audience of gym members who experience various levels of pain - from being overweight and unhealthy to being almost as strong as the next guy. When they paint the picture of an ineffective workout being performed in a gym that they are paying a monthly fee to belong to, and show prospects the success of their past clients, they not only paint the portrait of pain, but they paint the portrait of solution at the same time. Powerful.

You have to figure out how your customers experience pain if you want to be able to solve their problems and promote those solutions to future prospects. Customers who want economic cars likely have the pain of a long, expensive drive to work. So, hybrid dealers sell them an inexpensive car that gets 40 or more miles to the gallon. Problem solved. Lawn care guys go door-to-door leaving business cards at the houses with the worst yards. They assume that the home-owner doesn't enjoy doing his own yard or it would look nice like the neighbors. They fix the pain by offering a service that other people want to avoid. During "tax season," firms promote the avoidance of scary IRS audits. Who wants that kind of pain? Nobody, so these companies make a ton of money by using (at least partially) fear avoidance.

To attract more customers and prevent your existing customers from going to the competition, you must identify their areas of pain, solve their problems, and promote the ways in which you solve their problems. Paint the portrait of pain and then paint the solution through advertising and promotions.

Covert Customer Loss

Smart companies budget their marketing, advertising, and sales costs, and these costs can be significant, but even greater when they don't produce the desired results. Take the following example into consideration.

Say you spend $15,000 per month in total marketing, advertising, and sales costs. For this, you expect to get 100 new customers per month. That's $150 per new customer (assume this is a great deal with a high return-on-investment). What if you only attract 80 new customers? Now your cost is almost $188 per customer. Many companies have relatively low profit margins which means when your cost per new customer increases by $38, like in this example, your margins are swallowed up in the new customer loss. Incidentally, another way to look at this is that with only 80 new customers, you lost $3,000 in advertising costs (because they were ineffective) plus all of the sales revenue that you hoped to receive from those lost 20 new customers. Assuming a 10% margin, each of the 20 lost new customers would have brought the company $165, for a total of $3,300. That's a total loss of $6,300 per month, and over $75,000 per year if this continues. Wait just a minute!

$75,000? We should probably take a deeper look into why our marketing, advertising, and sales budget was so ineffective. So, you go back and find that your ads are perfectly designed and perfectly located in the perfect geographic areas and media to make a perfect impact. Your sales team is doing a perfect job attracting new customers and your marketing plan was written perfectly to maximize the company's tools in each of the promotional areas.

Really? Then what happened? All of this perfect effort achieved a 20% loss in new customers. I'll tell you what happened. Your receptionist turned away new customers when they called because she didn't understand how valuable that call was. Your on-site staff wanted to leave early a few nights so they weren't available to help the new customers. Your phone was busy when the new customers called, so they just called the next number listed in the yellow pages. Your staff underwhelmed new customers by their lack of customer focus or by their lack of product knowledge. You had some crazy policy or procedure that unknowingly limited new customers and nobody told you about the problem. When the customer called, your phone sales staff wasn't trained well enough to close the deal.

And. . . all of this stuff happened right under your nose. It happened in the evening when you were no longer in the office. It happened during the afternoon when you were really busy working in the business. It happened because you and your management team didn't have or make time to ensure that it did not happen. This is one other very important reason for you to spend more time working ON the business than IN the business. It's another reason that you must focus your effort on training, not only your staff, but their managers as well. You need to set up "secret shopper" phone calls to find out what's being said on the phone. Send "secret shoppers" into the office / store to find out how the on-site sales team operates. You must find all of the areas of covert customer loss that kill your business right under your nose.

When you don't know that all of these things are happening (and believe me, they are happening), you spend more time on advertising. You fire your sales team, you re-work your otherwise effective marketing plan. You spend valuable time and money on all of the wrong things and then as a result, you continue to get the same poor returns.

Be aware of your company's areas of covert customer loss. Find them, and you will see the result of your otherwise excellent plan, people, and marketing materials.

Critical Missing Sales Step

Businesses that do great marketing and sales have a well written marketing plan, with a killer sales offering, a compelling message, and effective marketing and sales materials. As part of the marketing plan, one or more sales people may be charged with face-to-face marketing with key referral sources. During these sales attempts, the marketer / sales person will try to get time with key decision makers. They will hopefully present the sales materials (brochures, booklets, presentations, etc.) in a way that compels the decision maker to send them more new business / customers.

But, with the potential high cost of marketing and sales, and in spite of the effective sales materials, the effort to reach decision makers, and even with having what you think is a spectacular marketing / sales person, if the following critical sales step is missed, the entire cost and effort could result in a frustrating and damaging nothing. What is this critical missing step?

Always Ask For The New Business. Always Ask For The Sale. Always Ask For The Referral.

Yes - you must ask if you want to receive. This seems so obvious, but the number of sales attempts that end without actually asking for the business is shocking. This sometimes happens when the sales / marketing person is intimated by the decision maker, so you must hire someone for this position who is not only very skilled, but very confident (almost cocky). It also happens when the sales person is not trained on effective sales techniques or even worse - when the sales person simply doesn't believe in your product. In the first case, you need to make sure your sales team is highly trained. In the last case, you just have the wrong person in that key position. Get someone else fast.

Asking for the new business can dramatically improve your sales effectiveness. While there's a lot that plays into this step (enough to write an entire entry on the subject) you must be aware that your sales / marketing team may not be doing it, and this is hurting your business. Make this part of your marketing and sales policies. In policy, you should clearly mandate that asking for the business is part of the sales and marketing process. Asking for the business should also be found in your marketing and sales materials. Do not take it for granted that your customers will do business with you just because you have good materials and good people. Instead, always ask for them to do business with you.

What are You Really Selling?

I think it's critically important for you to understand what you're really selling to people. If you can't identify your real product, you will never be able to effectively sell your product or service to the masses that you want to sell to. Let me give you some great examples.

1. Hair Stylists do not sell hair cuts.
2. Chiropractors do not sell adjustments.
3. Electronics stores do not sell big screen TV's.
4. Furniture stores do not sell beds.
5. TV advertisers do not sell advertising.
6. Realtors do not sell houses.
7. Athletic shoe stores do not sell shoes.
8. Lawn Care guys don't sell lawn mowing.
9. Gyms don't sell gym memberships.
10. Photographers don't sell photos.

So, what do all of these people really sell? Well, hair stylists sell people self-confidence and a strong ego. Chiropractors sell relaxation and freedom from pain. Electronics stores sell an entertainment experience you can share with your friends and family. Furniture stores sell the best night's sleep you've ever had. TV advertisers sell companies a dramatic increase in new customers. Realtors sell dreams and a better life. Athletic shoe stores sell a better jump shot. Lawn Care guys sell a beautiful yard that is the envy of the neighborhood. Gyms sell beach-ready bodies and photographers sell memories that last forever.

When you know exactly what you sell, you're able to create more effective advertisements with more powerful headlines and better sales pitches. You create a mission that everyone who works for you can get behind and believe in. Most importantly, you give your customers an emotional reason for buying from you instead of your competition.

What are you selling?

5 Marketing Tips That Make the Competition Invisible

If you want to truly beat the competition and be untouchable in your market, you have to follow these unbeatable marketing tips and make your competition invisible to your customers.

1. You must have a remarkable headline that grabs the audience's attention. Take this blog's title for example. Notice how is doesn't say something like, "Use these marketing ideas" or "Good marketing ideas". Instead, it stops you cold. After all, who doesn't want to make the competition invisible.

2. Use information in your marketing materials that is useful and of great interest to your target audience. This information should set you far apart from the competition. For example, if you are a personal trainer, don't tell the reader that you are certified and you have been a trainer for 5 years. Everyone expects their trainers to be certified. So what? Instead, tell them that your training techniques have helped your clients achieve massive reductions in body fat. Tell them about your clients that met all of their goals and were very happy with you. Tell them how compared with working out without a trainer, your training techniques achieve a 70% greater improvement in body composition. (PS: don't forget to add your certification to the ad.)

3. Use color and pictures that get people's attention. Don't use the same stuff that everyone else is using unless there is clear evidence that it works so good that you must use it. Otherwise, it is a good idea to stand out and be noticed. After that, you better have a killer headline and intriguing content.

4. Connect the dots between your offering and the audience's needs. Tell people why they need what you have. Tell them all of the things others use your product for. Tell them the very best uses for your product or the very best reasons others use your product (or service).

5. If something bad could happen if customers don't choose you over the competition, absolutely point that out and be emphatic about it. But, be careful you don't unintentionally talk bad about a specific competitor or competitor's product. This could get you into unnecessary legal trouble. Instead, you need to point out exactly how you or your product will solve their problems, even if they don't yet know that the problem exists.

For more information or assistance on ways to supercharge your marketing materials, email me at chelmsmba@aol.com.

High-Value Marketing Tips

Your marketing department might just be you, or as described in The Ultimate Sales Machine, "A one-person army," or you might have multiple people on your marketing team. Either way, you need to understand these important marketing tips in order to run a tight and effective marketing machine.

1. Use a marketing budget to avoid excessive and wasteful spending. However, always exceed the budget on everything that gives you your desired return-on-investment.

2. Test, test, test. This means finding out what works and what does not work. Kill everything that doesn't produce new customers.

3. Survey customers to find out what works. What the manager thinks is irrelevant if the customers don’t agree. Stop funding for all marketing projects that are not supported by positive customer feedback.


4. Establish multiple pillars of marketing. For example: web sites, yellow pages, brochures, mail-outs, signs.

5. Create a customer-referral program. Reward referrals for the right kinds of customers.

6. Make customers say, “WOW” in order to become a referable company. Focus close attention to excellent customer service.


7. Formula for Growth = Capture + Amplify + Maintain. Capture new clients. Amplify the customer relationship. Maintain that client relationship. (From Your Management Sucks!)

8. When customers leave, you must find out why. Try to get them back and learn from mistakes.

9. Always ask for referrals, especially from happy customers.

10. Don’t try to win awards with advertising. The best award is new customers.