We could all learn a thing or two about negotiation from Princess Leia. And JFK, too.
Actress Carrie Fisher once wisely remarked: “Everything is negotiable. Whether or not the negotiation is easy is another thing.”
Negotiating with vendors is something of an art form, something of a science. And indeed, it’s almost always a testing proposition if important stakes are at play. But negotiation doesn’t have to be difficult. With a little instruction and a lot of practice, it can become an invigorating exercise that will drive serious cost savings and added benefits for your business.
Study these 10 negotiating tips and you’ll be well on your way to pinching pennies and maximizing value.
1. Make a Connection
Be nice! A study in the Journal of Applied Psychology found that the first five minutes of a negotiation can predict the outcome. Always start friendly and see if you can find some personal commonalities. You don’t want to be a softie for long, of course, but it’s much easier to turn up the heat later rather than try to scale back the tone once you’ve opened up as a proverbial a-hole. Remember this phrase: “Be soft on the relationship, firm on the substance.”
2. Know Your Facts
It’s critical to enter any negotiation armed with all your facts and figures. Dig up some background research and don’t let the other party pull a fast one simply because you didn’t do your homework. You should even see if you can find some rates and deal points they gave to a similar company. Use data to your advantage to show you know your stuff.
3. Learn Their Motivation
How are you going to convince a vendor to see your side if you don’t know what’s driving them? Maybe they just need to make a sale (any sale) to meet a quota. Maybe margin matters most to them, so you know they’ll be price sensitive. Until you know their currency (so to speak), you can’t even begin to bend them to your will.
4. Understand Their Acquisition Costs
For many vendors and technology companies especially, getting you to the point of the negotiation is a major expense. In the consumer world, it’s shocking to know that cable companies spend nearly $1,000 to acquire a new customer (no wonder they can give away an Xbox with every new deal). And if you’re already a customer, they know that keeping you is far cheaper than gaining a new account. So don’t be afraid to work this leverage in your favor.
5. Have an Alternative (and Mention It)
Make sure you enter discussions regarding any deal with a second-best option in play. And make sure the other side knows about it. Feel free to give them details about your other contender, especially if it’s cheaper or you think it’s better. They need to know you’re not just playing a threat card; they need to believe that you’ve got another decent option to consider. On a related note . . .
6. Be Willing to Walk Away
They say that the source of your power stems from the ability to walk away. In other words, you’re stronger than the other side when you’re legitimately OK if the deal falls through. If you have a backup plan and you’re not under the gun, the pressure is on your vendor to close the deal. Don’t be afraid to step away from the negotiation a couple of times to show that you’re willing to walk away.
7. Take Your Time and Wear Them Down
Be prepared to win the endurance game. Start early. You never want to negotiate under a deadline. Stretch out the talks. Let some time pass between emails. Show them you aren’t sold, and then let them start getting squirrelly. They’ll probably beg you back in, and that’s a good thing.
8. Play the Classic Good Cop, Bad Cop
It’s a common phrase, but an underutilized tactic. Make the other side understand that multiple stakeholders in your organization are influencing the decision (it’s not just you!) and be willing to put some of the blame on a co-worker or boss. If you show that you’re feeling pressure from those sources, it creates a common bond between you and the other side. And it allows you to bring up sticky subjects while not taking the blame.
9. Find Unique Points to Negotiate When Stuck
If you’ve come to an impasse, get creative. Find another deal point to introduce and lobby for. In a classic example of this tip, Marc Cuban once realized that a company he was negotiating with on Shark Tank had excess advertising inventory in their mobile app. Instead of continuing to battle on equity, he asked for $100,000 worth of ad space he could use for his portfolio on top of the existing offer. No cost to the company, huge gain for him.
10. Know When to Back Down
Sure, being a bulldog typically ends in getting what you want. But there’s a fine line when a negotiation can become contentious. If it’s a vendor with whom you’ll work closely, you want to maintain cordiality. The relationship does matter. On the other hand, if it’s simply a software tool where you’ll never speak to that rep again, be a pistol and beat ’em up!
To close our list of negotiating tips, we go back to the 1961 inaugural address of John F. Kennedy for one of the most poignant quotes ever on the topic: “Let us never negotiate out of fear. But let us never fear to negotiate.”
Go forth and conquer!