Posts Tagged ‘strategy’

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A Sales Negotiator’s Guide To Dealing With A Deadlock

Tuesday, February 10th, 2009
A Deadlock During A Negotiation Can Bring Things To A Screeching Halt

A Deadlock During A Negotiation Can Bring Things To A Screeching Halt

When driving a car, the #1 thing that most of us fear is hitting a wall. Or another car. Or pretty much anything that would cause us to come to a complete stop quickly. Why are we so afraid of this? Well duh – it will damage / destroy the car that we’re in, delay or prevent us from getting to where we want to go, and may even result in damage to us. The same thing can happen during a negotiation, but we call it a deadlock.

A deadlock occurs when both sides have not yet reached an agreement and all of a sudden they reach an issue that they fundamentally cannot agree on. If negotiating was a board game, then there would be no possible moves for either side to take – deadlock.

If you are a negative person you might be willing to give up and walk away. Lots of people do. A deadlock is a powerful thing and it can affect both sides of the the negotiating table in the following ways:

  • A deadlock tests the resolve and the strength of both sides.
  • A deadlock often forces both sides to be willing to give more concessions after it occurs.
  • A deadlock is a signal to both sides of the table that what they want out of the negotiation might not be possible.
  • A deadlock can cause both sides to reduce what they expect to get out of the negotiations.
  • A deadlock can mess up schedules for both sides.
  • A deadlock can make a negotiation more expensive and riskier for both sides.

So this all seems like it’s pretty serious stuff. However, there’s more.

Both sides of a negotiation realize going in that a deadlock can occur. The key thing that you as a negotiator need to determine is which side fears a deadlock more. Generally speaking, the larger an organization is and the more layers that it has in its management structure, the less able it is to deal with a deadlock. If you are willing to risk not walking away with a deal, then your negotiating power may be greater than the other side’s.

No matter how much power you think that you have, what every negotiator needs to realize is that when a deadlock occurs during a negotiation, it’s the negotiators responsibility to find a way to resolve it. A deadlock can have a significant impact on a negotiator’s career in the following ways:

  • You may get criticized by your own management.
  • You may end up getting extra work in order to resolve this deadlock.
  • You may lose your job.
  • You may have a personal sense of failure.
  • You may become frustrated.
  • You may lose friends and damage relationships.
  • You may make people angry with you.
  • You may lose self-confidence.
  • You may start to question your own business judgment.

So there is a lot of personal risk going on here. What’s a negotiator to do? One key action that you can take occurs before the negotiations start. Every negotiation is really a team event – it’s not just you sitting on your side of the table, it’s really you, your team,  and your management structure. If you take the time to discuss the possibility of deadlocks, what might cause them, where in the negotiations they might occur, and how best to deal with them then you’ll avoid a lot of the consternation that a deadlock can cause your team.

One final point – don’t give up just because you encounter a deadlock. In fact, the longer that the negotiations have gone on before the deadlock was encountered, the better your chances of being able to restart the discussions are. The more effort that has gone into the negotiations will mean that neither side wants to let a deadlock stop progress from being made…

Have you ever encountered a deadlock during a negotiation? Did this cause the negotiations to stop? What did you do to try to restart the negotiations? Were you successful? Leave me a comment and let me know what you are thinking.

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Deadline? We Don’t Need No Stinkin Deadline…

Tuesday, February 3rd, 2009
Deadlines Show Up During Negotiations, But Are They Real?

Deadlines Show Up During Negotiations, But Are They Real?

What would the world of negotiating be without deadlines? I can tell you that Hollywood movies would lose a lot of their plot if the bad guys couldn’t set impossible deadlines for our heroes to try to meet. What about real life – why do people use deadlines while negotiating?

It’s actually pretty simple, a deadline is an effective communication tool. Deadlines can be used by either side to apply pressure to the other side and force them to make a choice. If the party that’s under pressure chooses to accept the deadline, then the deal will be done. Otherwise, who knows?

You see, the trick with deadlines is that when you are presented with one you can never be quite sure that it’s real. In the game of poker this is called bluffing. The one thing that we do know about a deadline is that if we accept it, everything will be resolved. However, there will always be that unanswered question as to what would have happened if we had not met the deadline…

One solid piece of advice is given by experienced negotiators: always be skeptical of any deadline that you encounter during a negotiation. These types of fixed time limits have a tendency to come and go.

Now having said this, you also have to realize that in real life sometimes a deadline is real. If you choose to not meet it, then you are running the very real risk that this may kill the deal once and for all.

In order to help you see your way through the deadline maze, here are three questions that you need to ask yourself anytime that you encounter a deadline during a negotiation:

  1. For The Other Side: what deadlines do you know about that the other side has to live with? Do you know what will happen if they miss their deadlines?
  2. For You: what deadlines have been placed on me by either my team, my organization, or myself? Will these deadlines limit how effective I can be during this negotiation?
  3. Renegotiation: Is is possible for my team to renegotiate any of the deadlines that have been placed on us by our own people? Who says that we can or cannot?

As much as we all dread having the other side throw a deadline at us, we need to remember that deadlines are an effective tool that we have in our own bag of tricks. Studies of negotiations have been done and they have revealed that deadlines do one thing very well – they force the other side to make a decision.

All too often in a negotiation, things can be dragging on for too long. If you find yourself in this situation where the other side appears to be resisting making up their minds, then perhaps a deadline is called for.

This type of situation often shows up when the other side is faced with an especially difficult decision. They will drag their feet longer in order to avoid having to make up their mind. If you can convey to them that there is a sense of legitimacy to your deadline, then you can use this powerful tool to close the deal faster.

Have you ever been presented with a deadline during a negotiation? Were you able to determine if it was a real deadline? Did you meet the deadline or did you skip it? What happened then? Leave me a comment and let me know what you are thinking.

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Negotiating Self Defense: Countering The Reverse Auction Tactic

Thursday, January 22nd, 2009
Sellers Need To Defend Themselves Against Buyers Who Use The Reverse Auction Negotiating Tactic

Sellers Need To Defend Themselves Against Buyers Who Use The Reverse Auction Negotiating Tactic

I’ve always liked superheros. From my earliest days of reading comic books to my current-day trips to the movie theater to see Spiderman and Iron Man, I just don’t seem to be able to get my fill of superheros.

I believe that superheros, although fictional (probably – however I still have hope), can teach us a lot about how to become better negotiators. One lesson that all superheros seem to learn in superhero school is that in order to be successful in a fight, they always need to have good self defense skills.

In negotiations, sellers need to have a good defense against one negotiating tactic that a buyer can use which is called the “reverse auction”. It works like this: let’s pretend that you wanted to build buy a new car. You visit three different car dealers and get three different offers. As you can imagine, each of these offers will contain a confusing mix of different financing and option packages.

Your next step will be to call a “reverse auction”. You go back to each dealer an tell them that you’ve visited the other two dealers. Each dealer will then proceed to tell you why they are the best and why you should avoid buying from the other dealers. After you’ve had a chance to talk with all three dealers, you now understand the subtleties and the options associated with buying the car that you want.

With all of this new information, you are now able to more clearly refine your specifications because the alternatives have become clear. You can now specify the specific financing and option packages that the dealers can bid on.

You will end up selecting the dealer who can provide the best price while providing the most car for that price. By using a reverse auction, the buyer was able to learn a great deal about buying a specific new car and was able to trade off options that he/she originally did not know existed.

All of this is great if you are a buyer, but what if you are the seller (or the dealer in the case of our example)?

It turns out that although it may initially appear as though the buyer is holding all the cards when they are using the reverse auction tactic, that’s not really true – you still have a great deal of negotiating power.

Your greatest strength comes from the simple fact that the reverse auction takes a great deal of the buyer’s time in order to do correctly. They have to identify sellers, collect bids, evaluate, revisit to collect information, and then revisit again to negotiate a final deal. All this takes time that they may not have to give.

What you need to do is to present yourself as being the seller who best understands that the buyer’s needs are. If you can convince him of your credibility then you’ll be well positioned to close the deal.

Here are a few tips that will help you come out ahead when your buyer decides to us the reverse auction tactic on you:

  1. Be Last: You want to be the last person that the buyer talks with, not the first. This may allow you to short-circuit the reverse auction process.
  2. Use Your Best: When dealing with the buyer, you want to use either your best negotiators or at least make sure that you are well prepared for the discussion (no distractions!).
  3. Give In Slowly: This is always a good tip – do not hurry to make concessions to the buyer.
  4. Sell, Sell, Sell: Make sure that you sell the buyer on your strengths and benefits.
  5. Use Limits: Clearly communicate to the buyer that the scope of your authority is limited in this deal to the bottom-line figure.
  6. Use Experts: The buyer is desperately looking for somebody to believe in so that they can be convinced that you are the right one to buy from. Make sure that you provide the expert that they need to find.
  7. Use Innovation As A Back-Up: Life is unpredictable. Sometimes a reverse auction will start to go badly for you. In these cases, you need to make sure that you have a new and innovative approach that you can whip out if this happens – lifetime free oil changes anyone?
  8. Find The Decision Maker: You can talk with the buyer until you are blue in the face, but it will be all for naught if you haven’t done your homework and made sure that they really are the final decision maker. Check before you invest the time and energy.

Have you ever been in a situation where a buyer used the reverse auction tactic on you? Did you feel as though they had the power in the negotiation or that you had it? Was time a key factor that the buyer was dealing with? Were you able to convince them that you were the expert? Leave me a comment and let me know what you are thinking.

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Posted in negotiation tactics | 3 Comments »

How To Negotiate To Buy A New Car In 2009

Tuesday, January 20th, 2009
When Buying A New Car, You've Got To Understand How Much Negotiaitng Room You Have

When Buying A New Car, You've Got To Understand How Much Negotiaitng Room You Have

Ok, so let’s be straight about this – buying a new car is one of the biggest negotiations that most of us do on an annual basis. Any time that we have a chance to find out how to do a better job at negotiating this transaction, it’s almost like putting more money into our pockets. Interested now?

Philip Reed, a Senior Consumer Advice Editor over at Edmonds has spent some time thinking about this topic and so it would probably be a good idea to see what he has to say on the topic.

When you get ready to negotiate to buy a car, the first and most important question that you need to have the answer to is just how much room does the dealer have to give? I mean if the car has a list price of $20,000 just how far could you expect to negotiate him down to if you were the best negotiator in the world?

Reed points out that In a $20,000 car, the difference between the sticker and the invoice (dealer cost) is between $1,500 and $3,000. This is the negotiating territory that you are dealing with. I’m very sorry, but no matter how good you are your chances of negotiating the dealer down to $5,000 for the car are basically nil.

That being said, just a bit of negotiating on your side should result in a savings of $1,500 on most cars. Reed’s opinion is that if you negotiate actively you might save $3,000 (dealer holdbacks and rebates mean that you can sometimes buy a car for invoice or below).

A quick aside here: who does the best / worst job of negotiating? Studies by lawyers who have been investigating civil rights claims have revealed some interesting things.

The tests that they conducted reveled that white males receive significantly better prices than blacks and women. White women had to pay forty percent higher markups than white men; black men had to pay more than twice the markup, and black women had to pay more than three times the markup of white male testers.

It sure looks like we all need to be on our toes when we negotiate for a new car – and knowing how low the dealer can go is just the start.

Reed’s next point has to do with just how you go about talking about the 900 lb gorrilla that’s in the room when you are negotiating for a new car – the starting price.

One of the biggest issues here revolves around who brings up price first. The thinking is that whoever mentions it first will set the starting point for the discussions. Since you really don’t know how low the car dealer is willing to go, you are at somewhat of a disadvantage here.

The suggestion is that you hold off and bite your tongue. If the car dealer asks you (and they will) how much you are willing to pay, don’t answer them. Be vague, ask them how much they are REALLY willing to sell it for.

Remember that the sales person that you are dealing with may know about dealer discounts that they will receive that you don’t know about. They may start out at a lower price than you had even dreamed about and this could  help you save a lot of money!

How did your last negotiation for a car go – did you feel like you got a good deal? Have you ever been the first one to put a price on the table? How did that turn out? Did you ever let the other party bring up price first? How did that turn out? Leave me a comment and let me know what you are thinking.

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Posted in car buying | 9 Comments »

Negotiation Tactic: The Reverse Auction

Thursday, January 15th, 2009
The Reverse Auction Negotiation Technique Is A Powerful Tool For Buyers

The Reverse Auction Negotiation Technique Is A Powerful Tool For Buyers

In the world of negotiations, there are few tactics as old and as well thought of as the “reverse auction”. This is a powerful negotiating technique that allows a buyer to get the sellers to offer their best pricing for the most amount of work. Not bad if you are a buyer, eh?

Here’s how a reverse action works for you if you are a buyer: let’s pretend that you wanted to build a house. You go out and get three different offers from three different home builders. As you can imagine, when you get the bids they will contain a confusing mix of different options and time frames.

Your next step will be to call a “reverse auction”. You invite all three builders to meet with you. You have them show up early and have them wait in the same room before they meet with you. After they’ve had a chance to sit and glare at each other for a bit, you then call them in to meet with you one by one.

Each builder will then proceed to tell you why they are the best and why you should avoid selecting the other builders. After you’ve had a chance to talk with all three builders, you now understand the subtleties and the risks that are involved in building the house that you want.

With all of this new information, you are now able to more clearly refine your specifications because the alternatives have become clear. You can now provide the builders with an updated proposal that they can bid on.

You will end up selecting the builder who can provide the best price while providing the most house for that price. By using a reverse auction, you were able to learn a great deal about building a house and you were able to trade off options that you originally did not know existed.

Why does a reverse auction work for a seller? Simple, there are four reasons:

  1. Competition Works: when you allow sellers who are competing against each other to “see” each other, it increases the level of competition.
  2. Apply Pressure To Management: the reverse auction technique allows you to move beyond the salesperson that you are dealing with and actually put pressure on the company’s management.
  3. Almost There Syndrome: each of the sellers has already put a lot of time and effort into responding to your original proposal. This means that they all think that with just a little more effort they can close the deal.
  4. It’s Concession Time: you know that sellers are more adverse to losing a deal during negotiations than earlier in a deal. This means that they may make concessions that they normally would not.

This negotiating technique is not without its downside. You need to keep in mind that whichever seller you select is going to feel as though they were put through the ringer. They will probably resent the auction process and will want to make up for being forced to bid a low price.

What this means to you is that any changes that you want to make to the contact after it has been signed will probably end up costing you dearly. Additionally, the seller may end up delivering the product to you late and may even shave some corners on the quality of what gets delivered.

Have you ever had a chance to use a reverse auction during a negotiation? Was it successful? Were you happy with what was delivered in the end? Have you ever had to compete in a reverse auction process? Did you win? How did you feel if you did win? Leave me a comment and let me know what you are thinking.

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