Written by Sean McPheat |
Effective negotiating can entail a plethora of ideas, actions and techniques, primarily because the scope of negotiating can change dramatically from industry to industry. However, here is a foundational platform, or a framework you can use to help in almost any negotiating arena.
NEGOTIATING TO GET A HIGHER PRICE
When negotiating to get the higher price, to close the deal or the sale for the most money, take these steps:
1. Start HIGH and Keep an “Ace in the Hole”
2. Remain Firm
3. RAISE the Value 2 or 3 times
4. Slightly LOWER the price in exchange for something in return
#1: Start HIGH and Keep an “Ace in the Hole”
Of course, when in any negotiating situation, you want to start your negotiating at the high end leaving yourself room to drop. However, in addition to keeping the overall price or rate high, you also want to hold on to, or suppress one or more additional benefits that you can offer later in the negotiation. In other words, do not put everything you have on the table at once. Hold on to something that you can add to “sweeten the pot” when needed.
For instance, you know that you can add in free shipping or free installation. Hold on to something that you can add later.
#2: Remain Firm
Do not be too quick to even think about changing or altering that first offer. Stick to your price for a while.
#3: Raise the Value 2 or 3 Times
Now, as the other party begins to push for a lower price, do not debate price. Instead of discussing LOWERING the price, RAISE the VALUE of your original offer. Stress the benefits, the problems it will solve and the monetary value of those problems.
“This product will cut your expenses by 38%. It will pay for itself in two months…”
“With our service your sales team will close more sales and finally overtake your competition…”
“This home has the best schools in the area and isn’t that what you want; for your children to attend the best schools?”
RAISE the overall immediate and future value instead of debating the price.
#4: Slightly LOWER the Price in Exchange for Something in Return
Finally, and only if necessary, slightly reduce the price for something in return. The price reduction cannot be by the mere stroke of a pen…they must EARN it. Now you may also add in that Ace in the hole. In this way you raise the value while simultaneously lowering the price.
“Ok, if you will give me some referrals and references, I will reduce the price 10% and we will also pick up the shipping costs…”
If still no agreement, then repeat the process. YES, this takes patience; a key negotiating skill.
Now let’s look at the flipside of the negotiating table.
NEGOTIATING TO GET A LOWER PRICE
When negotiating to get a lower price or to obtain the product or service for less money, take these EXACT OPPOSITE STEPS.
1. Start LOW and Keep an “Ace in the Hole”
2. Remain Firm
3. REDUCE the Value 2 or 3 times
4. Slightly INCREASE the offer in exchange for something in return
#1: Start LOW and Keep an “Ace in the Hole”
Start with the lowest offer and keep an Ace. In this case, the Ace in the Hole should be something that you do not necessarily HAVE to have. Ask for some EXTRA benefit or item that while costly or important to the other party, is not something that you greatly need to go forward with the deal.
For instance, you request that the supplier include two new laptops for your field sales team. Although that would be nice to have, you know that it is not essential and certainly not a deal breaker. But ask for it anyway.
#2: Remain Firm
Stick to your offer for a while.
#3: REDUCE the Value 2 or 3 times
Instead of simply asking for a reduction in price, lower the overall value of the offer. Take measures to show how and why the product or service is not worth the offered price or how it will cost you additional money, time and other expenses above the actual cost.
In addition to the cost of the product…
“I am going to have to spend a fortune on the installation…”
“I will have to hire new staff to operate the machine…”
“We will have to invest in new hardware to accommodate the extra needed memory…”
LOWER the overall immediate and future value instead of debating the price.
#4: Slightly INCREASE the Offer in Exchange for Something in Return
Now if needed, slightly raise your offer for more value or benefits in return. This is a good time to GIVE UP that thing you did not really need in the first place.
“Ok. I’ll give up the two laptops if you will reduce the price 20%…”
Successful negotiating does not require posturing. Just patience, process and practice!
Originally published: 20 September, 2012