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I once got a phone call from a woman who was responsible for sales
training at a large software company. She said to me, “Mike, we're
looking for someone to train our sales force to become better
negotiators.” I said, “Great, you've come to the right place.” And then
she said, “But do you teach that win/win negotiating?”
And there was just something in her tone of voice that just made me feel
I'd better clarify that question before answering it. So I said, “What
do you mean by win/win negotiating?” And she said, “Oh, that's where you
build really good relationships but give away the store.”
False choice. It is not either you negotiate a good deal OR you have
good relationships. You can have BOTH. You can really negotiate hard
over money and other issues, and still come out with a total and
complete win-win.
The Automatic Side of Win/Win
There are two pieces to the win-win puzzle. The first is what I call the
automatic win-win. Let’s say, for example, that a software company
provides expensive, niche software programs for engineering consultants.
The software costs $15,000 for a site license for firms with up to ten
consulting engineers (the bulk of the customers for this product are
small shops with 10 or fewer engineers).
Although there are no competitive commercial products on the market, the
real competitors are the workaround solutions that the engineers cobble
together themselves from other software that they already have. For this
reason, the software company sometimes has to be aggressive on price
and, if they have to, they can go as low as $9,000 for a site license.
This is their Least Acceptable Settlement. In other words, any sale
between $15,000 and $9,000 is an Acceptable Settlement, but $9,000 is
the last stop (the LEAST Acceptable Settlement) and anything below
$9,000 does not provide them with sufficient profit.
Now let’s look at a potential customer. Let’s say that the customer is a
small firm with eight engineers and that they really like this software.
Unfortunately, things are a bit tight right now and they only have
$12,000 left in their budget for software. They will try to negotiate as
low a price as they can get but will, if they absolutely have to, pay up
to $12,000 for this software. Thus, $12,000 is their Least Acceptable
Settlement. Even at that price, they are still better off buying the
software then they would be walking away.
So how many places can we have a win-win? We will have a win-win
anywhere between $9,000 and $12,000, because anywhere in that space,
both parties are better off than they would have been had they walked
away. But, the space between $9,000 and $12,000 is also the ONLY space
in which can have a deal. Any deal we make must be between $9,000 and
$12,000 since above or below, one party will have to walk away.
Thus, no matter how tough the price negotiation was, when the sale is
closes, both sides automatically win because both are better off than
when the negotiation started.
In fact, have you ever made a sale and had the customer moan and groan
that they probably shouldn't have done that and it’s not really a good
deal? How do you know whether it was a win for the customer? Answer,
they did the deal. It had to be at or below their Least Acceptable
Settlement and therefore, it was a win for them. In fact, the more they
moan and groan, the more I worry that I gave away too much. So you see,
a win/win is automatic if we make the sale.
Feelings Count
However, in order to have what I call a really robust win-win, there's a
second piece that we have to focus on. That involves the customer’s
feelings. Let's pretend for a minute that you are the buyer in this case
and I’ll pretend that I am the sales person.
You have bought software before and you know that sometimes you can get
large discounts. We are on the phone and you say to me, “Mike, we like
your software but it is a nice to have item, not a necessity, since we
get the work done just fine with what we have put together ourselves. If
you want to make this sale, you will have to come down to $9,000 for the
site license.”
There is a pause. And then I say to you, “Well, that's an awfully low
price. However, it’s the end of the month, so, ok, I think we can do
that. Cut me a purchase order for $9,000 and we’ll do it.
What is your reaction as the buyer? Do you feel like you just won? Or
instead do you start thinking to yourself things like:
∙ “Boy, was he ever planning to rip me off at $15,000 if he could really
go all the way down to $9,000"
∙ or even worse, “Oh my goodness, why didn't I say $7,000 in the first
place? I probably still could have gotten him lower.”
Negotiation is about paradoxes. Jumping all the way down to my Least
Acceptable Settlement of $9,000 like that, in fact, made it appear that
it wasn't a win-win because first, you will now feel that my initial
prices weren't reasonable, and second, you fear that you still left
money on the table. So in the end, you are not a happy customer. You are
an unhappy customer who is going to be an even tougher negotiator the
next time you buy software.
Everybody has strong feelings about the outcome. Everybody wants to feel
like they won. But it's not the actual numbers on the deal that count as
much as the feeling that you were treated fairly and didn't leave any
money on the table. No matter how good deal is, I will feel bad if I
felt I left a lot of money on the table. No matter how bad the deal, is
I will still feel much better if I believe that, even though I didn't
get everything I wanted, I got everything that was possibly available.
Relationships
Now, imagine a situation where you've reached agreement, you've shaken
hands on that deal, it's a good deal for you, it's a good deal for the
other party. Unfortunately, you wish you never had to see that person
again as long as you live. Do you know any customers like that? Does
that take away from the feeling of win-win? Of course it does.
The second key component of the feeling side of win-win has to do with
something you do naturally, which is to build relationships, make people
glad that they did business with you, and all the other things that
involve those people skills that you are so adept at.
Trust, Credibility and Ethics
And finally, have you ever shaken hands on that deal with someone who
you felt was a little sleazy? Does that take away from the feeling of
win-win? Absolutely. The third component of the feeling side of win/win
has to do with the way you do business, your ethics, your credibility
and how trustworthy you are.
And so you can really negotiate hard over the issues and the money,
because, if the customer agrees to make a deal, you know that it is a
win-win. What you need to focus on is the feelings. Make sure that the
customer feels like they got the best possible deal, that they like you
and like doing business with you, and that you are an ethical,
trustworthy person to do business with.
If you focus on the feeling side of win-win, the automatic side will
take care of itself and you can come out with both a good deal and a
happy customer who feels that they were involved in a real win-win
negotiation.
© Michael Schatzki - 2004 - All rights reserved
Byline
Michael Schatzki is a master negotiator
who, for over 20 years, has provided
negotiation training and coaching for
thousands of people in the U.S. and globally. More than 75% of Mike's
programs
are for satisfied, repeat customers. The Negotiation Dynamics® system
really works. Mike can be reached at (888) 766-3530 or at
www.negotiationdynamics.com.
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