As a small-business owner, the prospect of negotiation can be frightening. You may be accustomed to treating your goods and services as commodities, where the set price is the set price. Or you may have close relationships with your loyal customers and be reluctant to disturb them. And sometimes the process might feel unnatural and uncomfortable. Nevertheless, negotiation is a part of life in most types of businesses, and your long-view success can depend upon putting these five tactics to work during the sales process.
1. Understand What’s Really Important
In his book Give and Take, Wharton faculty member Adam Grant suggests an approach called rank ordering. Grant’s negotiation research illustrated that participants achieved stronger outcomes when they ranked all their issues in order of importance. The idea is to share your rankings with the other party and compare them so each party walks away with the items that are most critical to them. This process usually involves trade-offs—for instance, a shorter warranty for a reduced cost.
2. Hear Your Customer
William Ury, the author of the negotiation books Getting to Yes and Getting Past No, recommends listening carefully to your customer, acknowledging their needs and agreeing whenever possible. Should the customer ask for something extra, probe sincerely. Why is this necessary? Instead of pushing your agenda, imagine that you are a mediator. Come back with an alternative arrangement (Ury calls this the golden bridge) that incorporates their ideas and shows that you understand their position.
3. Throw Out Your Dream Price
If a customer asks you how much a deal will cost, consider starting high. Why? If your customer balks, it can be easier to negotiate down than to negotiate up. In her book The Heart and Mind of the Negotiator, Northwestern professor Leigh Thompson calls this the anchoring effect. Essentially, the first offer is an anchor that establishes a set point for the rest of the negotiation. The number that you ultimately settle on will likely be somewhere within the anchor’s general vicinity.
4. Keep Your Hands Clean
Let’s say that your customer is being difficult and you're concerned with keeping the relationship intact. You can remain the good guy by stating that you’ll have to check with another person or group regarding whether the customer’s desired deal is possible. As the owner, you can check with your employees or suppliers. This tactic can help preserve your goodwill and provide a much-needed break in an incendiary conversation.
5. Know When to Walk Away
BATNA, or the best alternative to negotiated price, is the course of action taken if the current negotiations fail and an agreement cannot be reached. You should think carefully about this ahead of time, understanding that you should not accept a worse resolution than your BATNA. If your customer won’t pay the minimum price you've set, you may want to force yourself to leave the negotiating table. Not only are you more likely to maintain your integrity, but you may still get the deal when the customer sees that your stance is firm.
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