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.

Negotiating Experience of the Day

Today I had a very nice meeting with a new sales rep for a major yellow pages publisher in my area.  This was a great opportunity for me to sharpen up on my negotiating skills.  So, I made note of all of the tactics she used on me (knowingly or not) and I used my own in response.  Here's what happened.

The tactics she used with me.

1.  Time Pressure - The book was closing tomorrow, so that I would have to decide today.  I did not decide today, so time pressure didn't work.

2.  She told me who else wanted the ad space that I was considering.  This happened to be someone that I know and respect.  So, instead of it making me feel pressure, it made me reconsider purchasing the ad space at all.  Backfire.

3.  She deferred to her higher authority to come up with a price.  I told her she would have to do better than that and get back with me.

4.  She tried to get more and more information from me.  I said as little as necessary because that information was a strength for me and could have been turned into a weakness if I shared it.

5.  She said she could keep the price the same instead of raising the rates in order to convince me to do the deal today.  I said that I might just pull out of that book all together.

6.  She offered to give me free ad space to sweeten the deal and convince me to say yes.  I accepted that with the condition that she would also give me better pricing and then I continued to hold out for a better offer.

What else did I do?

1.  I was completely disinterested.
2.  I was noticeably uncomfortable with the idea of signing another agreement.
3.  I was very quiet causing her to give me more information.
4.  I mentioned that my plan B was to completely stop advertising in her book.
5.  I deferred to my higher authority by saying that my CEO would have to approve anything that I agreed to.
6.  I reminded her of the last time that I pulled $35,000 of annual advertising dollars from her company just a few years ago and spent it at the competition.

My best guess is that first thing tomorrow morning, she will email me and offer all of the ads that I want, including the free ads, and come in at no more than $200 per month more than what I was already paying last year.  If that is the case, then I'll accept the deal after she reduces it $100 more per month.  We'll see.

Negotiating Tactics

These are some of my favorite negotiating tactics.  Tactics are things that you say and do to help the other side do more of what you want them to do. 

1.  Fear of Loss.  Show someone how not choosing your product or service will damage their position.  For example, if your product has been proven to help businesses make $10,000 more each month, you might say something like, "It's going to cost you $120,000 per year NOT to do this deal."

2.  Time Pressure.  I personally hate when people do this to me.  Here, you make it clear that the current good deal will go away after a certain date - "This deal's good thru the end of the month."  "If we can get this done today, I can knock off an additional 10%."  Another way people use time pressure is in renewing contracts.  I find that advertising sales people won't contact me to find out if I want to renew my ads until about a week or so before the supposed closing date.

3.  Walk Away Power.  This is a good counter-tactic for time pressure.  When someone says you only have a week or a day (or whatever) to get this done, I'll often tell them nevermind.  Don't succumb to time pressure and other negotiating tactics if you don't have to.  Walk away power can be powerful.  You can always come back to the negotiating table if and when circumstances change.  You're never back into a corner unless you put yourself there.

4.  Show people the net positive value of their good decisions.  If something will cost $1,000 up front, but then bring in $5,000 more, then the net positive gain is $4,000.  When people see what's in it for them, and financial gain is a huge motivator, they will usually agree to a deal.

5.  Show shock and disbelief.  When someone makes an offer to you, no matter how good it seems to you inside, you should show disbelief that they would consider such a bad offer.  To really sell it, you need to look noticeably disturbed for a while after the offer.  Many times, the opposition will modify their offer out of fear that you might walk away.

6.  Isolate points of agreement.  Once both sides agree on what they already agree on, it makes it much easier to break down the remaining points of disagreement.  "We already agree on the color, the quantity, and the base price.  Now, we just need to work on leasing terms and a fair final payment amount."  This prevents the deal from being clouded up unnecessarily and allows you to negotiate the remaining points individually.

7.  Break prices down to their absolute smallest points.  For example, if you are trying to get someone to pay you $12,000 per year for your services, tell them that it would only cost $33 per day.  Then of course remind them of their potential benefit which could be $48,000 per year or 4 times their investment.

8.  Calling people out on their tactics.  This usually will make them feel silly and embarrassed for trying to use negotiating tactics on you.  For example (and this happened to me once), if someone tries using the "good cop, bad cop" tactic on you where one of them is on your side and friendly, while the other is more aggressive and abrasive, it's funny to call them out on it.  I stopped the conversation and said, "wait a minute - is that good cop, bad cop?  I'll do this deal for the amount I originally stated or not at all.  What's it going to be?"  Winner - me!

10 More Tips for Negotiations

This is part 2 in my series on negotiations.  These 10 tips will be helpful in any deal-making situation.

1. Always tell the truth.  If the other side ever catches you in a lie or finds that some "fact" you used to support your position is not accurate, it will sabotage your position completely.  If I find that someone misleads me, lies to me, or uses inaccurate information, I'll be a broken record on that point as often as possible to get a better deal.  My feelings will literally be hurt (as far as the other side knows) and I'll use it to my advantage.  Always be accurate.  Always tell the truth.

2. Dress like a person who is successful.  When you appear successful to your adversary, they will (often unknowingly) give you more respect.  Men - wear a dark suit, light colored shirt and a tie with red in it.  Women - wear a dark colored suit or dress.  Get a haircut.  Wear appropriate makeup.  Shave.  Use nice cuff links.  Shine your shoes.  Be the best dressed person in every meeting.  Dress like the deal is unimportant and be prepared to lose.  Dress for success and have success.

3. Put your information in writing.  People generally believe things that are in-writing.  Use charts and catchy headlines.  If you're product saves businesses thousands of dollars per month, show the other side the average dollars saved monthly.  Put it in writing.  If your customers are overwhelmingly and enthusiastically satisfied with your services, put their satisfaction scores in writing.  This will be far more powerful than just verbally saying so.

4. Cite your experts.  Tell people who else uses your services and who else recommends you.  This can be anyone in positions of authority.  Mayor, council person, doctor, lawyer, CEO, pastor, etc, etc, etc.  Anytime you can cite the strong opinions of a (even perceived) expert, you will be in a position of strength.

5. Get people to commit to things verbally and publicly.  Generally, when a person says something out loud, especially to a group of people or to someone they respect, they will be inclined to back that up with their actions.  For example, if you can get a potential client to tell a group something good about your product, he/she will be more likely to back that statement up with a purchase.

6. Make yourself well liked.  Try to use charisma.  When people like you, they are far more likely to do what you want and expect.  If you want someone to buy from you, you have a lot better chance if they like you than if they don't.

7. Never get angry.  Negative emotions are deal-killers.  He who gets angry, loses.

8. Put your strongest arguments either at the beginning or at the end.  These are the most memorable points of any presentation.  Putting them at the beginning can set the potential client up for agreeing with everything else you have to say.  Putting them at the end leaves the potential client with a strong feeling that will be hard to forget.  The very best thing to do is put your strongest point in the beginning and then reiterate it at the end.

9. The Power of Golf. The reason so many business deals are done on a golf course is because golf can be such a pleasant distraction.  When the buyer / client is in a positive frame of mind, a deal will be more likely.  It doesn't have to be golf.  It DOES have to be whatever the client finds to be a positive experience.

10. Always tell people what you want or expect.  If you want them to buy something, you have to say so.  If you want a better price, you have to say so.  Tell people what you want.  This is the very best way to get it.

High Dollar Negotiating Tips

This will be the first in a series I'm going to be writing about negotiating.  Negotiating isn't just important in business.  It's also valuable in your personal life.  When you are talking to your kids, you're negotiating (even though they may be winning).  Dealing with your spouse can be a process of negotiation.  When you're purchasing something, it's a negotiation.  Business deals are full of negotiations.  Buying a house, or a car - serious negotiations.  So, this is a topic that really affects everyone, and that's why negotiation is my favorite of all business topics.  In this blog, I am going to give some helpful tips in negotiating.  Later, I'll talk about some specific negotiating tactics, preparing for a negotiation, closing the deal, and more.  So, stay tuned.  For now, here are some helpful tips to think about in any negotiating situation.

1.  Be prepared.  This means that you should know about the person or business you are going to be negotiating with.  What are their "hot buttons"?  What do they want?  What problems are they experiencing?  What problems can you help them solve?  What weaknesses do they have?  What weaknesses do you have?  How do you hide those?  How much do you want to pay and how much are you actually willing to pay?  How much do you want and need to get paid?  You need to spend an adequate amount of time preparing for whatever deal you're working on.  This is the first and most important part of any successful negotiation.

2.  If you're planning on making the first or opening offer, it needs to be very high or very low depending on what's best for you.  For example, if you're trying to purchase a piece of real estate and you know the market value of the property is $100,000, you might want to initially offer $85,000.  It seems like a ridiculous offer considering the market value, but this prevents the seller from coming out of the gate with a ridiculously high offer like $125,000.  You're anchoring the sales price at or below the market price and that starts you out in a strong position.

3.  Never fall in love with a deal.  You must remain objective and keep your options open, including the option to simply walk away.  The purpose of a negotiation is for you to get a good deal.  Don't sabotage yourself by losing objectivity.

4.  Always say "no" to the other side's opening offer.  They are trying to anchor the deal in their direction anyways, so don't say "yes" yet.  Make them work for it.  Even if you like the deal, you don't love it and you are going to say "no".  This will get you a better deal every time.

5.  When the other side makes the opening offer, be shocked at their offer because you can't believe they would offer such a bad or one-sided deal.  Then wait for them to cave in and make a better offer.  Always say, "you have to do better than that".  Even if you like their opening offer, be shocked and tell them to do better.  It will work most of the time.

6.  Only give up something if you get something in return.  These are concessions and you can't concede if the other side is unwilling to do the same.  Because you did your planning in advance, you already know what things you would be willing to concede and what things you want.  If someone says they need you to drop the price by $5,000, (after you look shocked that they would ask such a thing) you tell them (very reluctantly) that "I might be able to do that, but I would need you to pay 40% up front instead of the original 25% that we talked about before".  Always get something of value in return for giving up ANYTHING - regardless of that thing's value to you.

7.  Never offer to split the difference.  That is your opponent's job, not yours.  If the other side wants $100,000 and you want to pay $80,000, don't offer to split.  However, if the other side offers to split the difference, then you're in a very good position.  That means they would now be willing to accept $90,000 and you're only $10,000 apart instead of $20,000.  From this point, you would say, "wow, you'd be willing to take $90,000?  That's great because now, we're only $10,000 apart.  Surely there's a way we can get this deal done since we're so close on price."  If you end up paying $87,000, you're in better shape than if you would've offered to split the difference.  Because then you might have ended up at $93,000.  You just saved yourself $6,000!  Great job!

So, that's quite a bit of information for you to soak up for now.  Try this stuff out.  It's amazing how well it works.  Practice, practice, practice.  Have fun with it.  What's the worst thing someone can say to you?  "No"?  So what.

Stay tuned for more High Dollar Negotiating Tips.