Rules for Negotiation
I wanna talk about negotiation, and I'll tell you my view of this because I get to hear from a lot of sales leaders. And they say something to me like, "Our salespeople are terrible negotiators. "They're terrible at it." And then I'm like, "Actually I think "they're really, really good. "I think they're super skilled." And they said, "Why would you say that?" And I say, "Because they come back to you "and they ask for a discount and you say yes. "So they're great at negotiating with you. "They always get what they want." And they're like, "Oh, okay." "Why don't you turn them around "and send them back after the client "and have them negotiate that direction?" And they hadn't thought about that, but they're getting negotiated with. Every single thing that we do is a negotiation in this. The commitments that we talked about, they're all a negotiation. It's a negotiation around time, a negotiation around explore, it's a negotiation around change. You have all these conversations where it'...
s not one-sided. We don't always get our way. We have to modify what we're doing so we get something done. So everything starts out as a negotiation. And I say this to salespeople and creatives too here specifically because I know you can get emotional about this. You can go do all this work, have exactly the right investment, and then somebody says, "I'm gonna hand you over "to our Purchasing Department, "and they're gonna ask you to sharpen your pencil, "and you're gonna have to come back with something else." And then you're like, "Damn it, how did this happen?" You have to know that it's negotiation. You can't be emotional about it. And when you're an artist and you create art and you have your soul, literally your soul poured into this piece of art and then somebody decides that it's not worth what it's worth, you're gonna feel something emotionally and you just have to resist that and say, "Okay, it's their job to ask. "Everything is a negotiation, "and we're gonna find a way to get through this." And we are, and I'm gonna give you some rules. But it starts with understanding everything is negotiation and anybody can have anything they want as long as they're willing to pay for it and as long as you retain the right to walk away and say, "If you undervalue what I'm doing for you, "I don't have to do it. "I can walk away from this." Hopefully we have these conversations before we get to the end, but sometimes it happens at the end. I had one client that I negotiated with, and he said he wanted something that I didn't wanna give him, and I gave it to him. I thought, "Okay, I'll just give it to him. "I'll try my very best to help this person." And then he moved the goal line again. You know this one. Yeah, it's not good. And he moved the goal line again, and I said again, "Okay." And then he decided to take another bite of the apple and he gave me his third negotiation, and I eventually had to say, "I can't do this anymore." This is a "we don't negotiate with terrorists" kind of thing. He decided that he was gonna do a lot of claiming and he wasn't giving anything back. But you have to know it's a negotiation and you have to be willing to engage in this and have this conversation. And I wanna tell you it's just business. And so don't get emotional about it. Don't get too attached to what you want. Just take a step back. Be calm and say, "Okay, we'll have a conversation "so we can find something that we can both do together." The starting point for this, though, is to defend the value you create. You have to defend the value that you create. And that's the first thing you wanna do is push back. So when someone says, "I'm gonna need you "to reduce your price by 10%," you just immediately reflexively say something back that sounds like this. "I'm happy to do that, "but we're giving up the outcomes on the other side. "If that works for you I'll reconfigure this "and we'll reduce the outcomes that we're getting "if that's the right thing for you. "But if it's not and these outcomes that we've spent "all this time talking about are important, "this is the right investment for that, "and I'm gonna ask you to make that full investment "so we can get you the full result. "I'll serve you either way here. "What's the best thing for us to do? "Are the outcomes more important, "or is it the price?" I have to defend this. I'm giving them the right price. I'm not inflating the price so I can reduce it. I'm telling them exactly what the investment is and I'm gonna always be as honest as I can with that because I don't wanna have to negotiate over things that I shouldn't negotiate over. That's number one. The investment matches the outcome. That's what you're trying to do. You match those two things together. So I'm defending the value because the outcomes match the investment, and without the investment I can't deliver that. And if I can't deliver that, then you buy from me and you say, "That isn't at all "what I thought it was gonna be." Yeah, well you took the money out, so I couldn't do it. Too late, now you already failed me and I'm gonna start telling people their work isn't what they say it is. They don't do good work. You're better off defending it on the front end than having something go wrong and not be able to defend it because somebody's gonna say their experience wasn't what it was supposed to be. You don't concede on price without asking for something. This one's the most interesting one for me because I hear people say, "I need to teach my people "how to negotiate," and honestly they don't negotiate. They just give a price concession. Those are two different things. A price concession is you ask me to reduce my price and I reduce my price. There wasn't a negotiation that happened there because there was no reciprocity. You didn't give me anything. I gave you something, but you didn't give me something of equal or greater value. So the negotiation hinges on this idea that it's not a concession. You asked me to reduce my price by 10% and I say I could do that, but here's what has to happen. You have to pay me in full up front and you have to put the resources on your side here, and you have to cover those resources instead of me. You have to do something like that. And it almost doesn't matter what it is, but you have to extract some value back for it to be a negotiation. And I don't know why this is confusing to people but it is, so I have a slide because it's confusing to people. When you concede on price it's not a negotiation, it's just what you're doing to win the business. If you wanna negotiate you ask for something, and any time somebody asks, you ask for something that you want back. And that's how you trade things off. And then you find a way, you find some balance where you can do this and say, "I'll give you this if you can give me this because this is actually more valuable to me." Payment in full is a good thing to ask for, for sure. Asking for a longer contract. "Yeah, I got a three-year contract. "I'm willing to do something for you "if you're willing to go five years. "I'm willing to do this "if you put in the resources on your side. "I'm gonna put an increase to the price "in years four and five. "Whatever it is, get something "so that I can give you what you want, "you give me what-- "I'll give you what you want. "And in your world, price, this is a big part of it. "I'm happy to extend this for you here "so that I need to be able to do that." And we're trying to find this balance and make a trade-off. This is the short section for us because there's not a lot of rules to follow here. Retain the ability to walk away. Immediately defend your pricing. If you're going to negotiate and you give a concession, get something back for what you gave, whatever it is. That's how that works. And then if you change the price change the solution. If you change the price change the solution because if you don't then what you're signaling is my price is fluid here. And when your price is fluid then people understand, "I should keep negotiating with you "because you'll continue to give me concessions "without asking for anything back." When you start taking the outcomes out and say, "We're gonna have to give up these outcomes," then people say, "No, those outcomes are important." Then we get to have a different conversation about what that negotiation looks like. So if you make any concession at all, that concession has to match taking something out of the solution. That's what has to happen. You're gonna transfer your confidence to your dream client. That's what happens. So if you believe strongly that your price is what it's supposed to be, that that's what's necessary to generate those outcomes, other people will believe it too. But if you have that little shred of doubt, like, "Well, other people do this cheaper than we do." They do. If you have this little shred of doubt that this isn't right, then that immediately gets projected and people can sense it. Like you're not 100% sold on yourself or your product or your pricing, so now I'm not 100%, so I'm gonna push a little bit harder. You have to always be willing to convey that value and then defend that value and if you make a concession to ask for something back, whatever it is. For most of you you could sit down and make a list of things that you would negotiate around very quickly and very easily. "I'd be happy to give them this if they gave me that. "I could give this if they gave me that." And you have something to work from. So you can say, "I'm happy to do that for you. "You can't spend the extra 10%, I get it. "I'm happy to help you with that. "Here's what we need to do. "We're gonna have to have a five-year contract "with an escalator in year five "so that we can recover this, "and we'll make this investment on the front end. "Does that work for you?" Fine, whatever it is, just know what that's gonna look like so that you can have a real negotiation and say, "If I can do this, will you do this?" And then we start making trade-offs. I told you that was short. Now it's Q and A which means I absolve myself of the responsibility to have any more content in this segment, and I give it over to you where now you have to do all the work. Questions, or are we negotiating?
How do you deal with a client or company that asks you to participate in a bidding process?
Good question. We have to go back to how buyers buy. We have to go back to that and talk about that concept because what happens is a buyer's dissatisfied. They decide that they have some needs and they led an RFP. And so they ask you to bid and be in this process. So all of the part where you create value, the commitment for time, the commitment to explore, the commitment to collaborate, the commitment to build consensus have all disappeared now. So when you've been asked to bid, what you're doing is you're saying, "I'm going all the way to the evaluation of options "without doing anything "to have created a preference at all." So I will give you some ideas about this. My favorite way to handle this, especially if I get a bid from a purchasing department, is to call them in immediately, tell them why their RFP is wrong. So if you wanna bid you gotta pull yourself out of the box and be a value creator. So you do that by saying, "You know what? "I looked over your bid..." I actually did this in real life in staffing. I would call and say, "You don't have the right money "dedicated to these roles, "and you're never gonna get anybody to fill these "with quality candidates because it's wrong here, "and I'm gonna respectfully decline the opportunity to bid "because it won't work for you." And when I did that I would get calls that said, "What's wrong with us? "How far off are we off?" Unless you can pick it apart and say, "I need you to go back up to the top of that chart "with dissatisfaction so I can explore "what you're trying to do and why you're trying to do it," and have those conversations, then what you're doing is you're gonna end up looking like price. So you have to do something to pull yourself out of the box. I think the easiest way to do it is to make a call and say, "I looked at this. "There's three things here that make no sense at all "the way that they're worded. "And maybe we're wrong, but I'd love to ask you for a form "that I could fill out to say "we're a no bid and here's why. "But I think if you want a different result, "you need to look at it this way." And that purchasing person who does not have the subject matter expertise, they're doing their job. They're trying to do their job. They're gonna say, "What is it that we need to know?" You need to get to that point because I gotta get back up to discovery to be able to create a preference. What's it gonna be like to work with me? Now I've already demonstrated I know something you don't know. You wanna know what it is? Kind of. Is it worth having this quick call? You get that call if you have the chops to have it and you're fearless. And if you're asked to do a bid, your chances of winning it are right around 10% anyway. That's about what the math turns out to be. So if you don't have a lot at risk. So if you don't have a lot of risk you take a good run at people because if you lose you were losing anyway. So you don't worry about it. But it's to individual-- This is again all contextual. If you sell to the government, you're gonna get an RFP. And that's the way it works. So you're gonna have to figure out how you get in front of those. And you always wanna be in front of it as much as possible having had all the meetings that you're gonna have so that when they tell you, "Hands off, "you now have to be arms length, "you can't get near me anymore," that you've already had the conversations that developed a preference. Best advice I can give you on that.