Quote:
Originally Posted by Fistdantilus
So far you've touched on negotiations that are closed: the parties will tend not to interact with each other afterwards. How does the strategy differ with multiple and separate negotiations with the same party?
I own a service-based business in a high-margin niche, serving medium to large companies.
Do you have to 'balance your range'? Example: we typically price high and work from there, walking away from contracts that simply can't enter our acceptable price range. However, I'm afraid a client has learned he can whittle me down if we hit a soft patch for quarterly results. The contracts are still favorable to us, but I move on price to keep the relationship clean. Do I simply take a stand on one [of several] contracts with him just to stem the flow and eliminate the expectation that he can always get this result in the future?
Perception management: Rate the "honesty" of your evaluation of the product. Do you only emphasize the truly good features? Is there ever a time to admit fault with the product [when faced with direct evidence], and if so, what is the percentage of those times? (5%? 60%? 25%?)
Re-opening: You mentioned that you let the customer walk and wait a week to see who breaks first. Is it worth re-opening on the potential customer with a number that was still higher than what they wanted? (Within reason, of course)
You're caught bluffing with air; how do you recover to make it up on the back-end?: In car parlance, they know invoice price, demand of the vehicle, and refuse to move. They know they've won this round. Is there any reset button to hit?
This is a really really good list of questions. I'm going to be clear here that I don't think a lot of these questions have good answers. With that in mind I'm going to talk mostly about what you definitely shouldn't do- and make a couple of random recomendations. Please realize that I don't have a ton of details to work with here- so I could be very very wrong.
In super high margin situations I sometimes wonder about the wisdom of negotiating at all. The reasons are pretty obvious- every time you discount the product you reduce its value in the customers eyes. There are lots of other firms your customers do business with who have relatively high margins- I'd bet a lot of them don't give them a chance to whittle down the price. Negotiation is usually the result of a business being SUPER competitive- like the car business.
Part of me feels that if you're going to negotiate you should be negotiating longer contracts- possibly with more favorable terms for the customer. The reason why I say this is that the less often you renegotiate the harder it is for competitors to worm their way in to your business
If they want some kind of discount it's absolutely essential that you get SOMETHING back. A longer/larger contract, some kind of return service, something, anything. Anything to fight the perception that your price is full of hot air that can be safely deflated. You ballance your range by making sure that when you negotiate you get some kind of concession for any concession you give away.
Basically you say "The price is the price, but if you agree to buy x for y time period maybe I could knock off z%". If you don't get something more from them for the discount they'll think that that discount is permanently attainable.
On the subject of honesty about the product I think you build a lot more respect from the customer if you're willing to admit when something isn't perfect. I don't see the point of denying to the customer that they have a point. At best they'll think you're egotistical and/or insecure and at worst they'll think you're a lying piece of ****.
The walk-and-wait-a-week tactic isn't something I'd do all the time. In your business with ongoing relationships I really wouldn't reccomend it at all.
In situations where you're dealing with people you're going to be doing business with regularly you shouldn't bluff with air. Being caught bluffing is simply too horrible to accept. When you come down in price always get something back. I've said that like 4 times, but in complex business to business negotiations it's absolutely essential that you have a few concessions in your back pocket that you can make to close the deal. These are things like free installation, free cleaning, free service, whatever... Just things you can throw in to make them feel like you gave something to THEM for being a loyal customer blah blah blah.