Category Archives: Negotiations
Why do car dealers still put sticker prices on car windows when we all know that “Dealer Invoice” is not what the dealer actually paid and MSRP is just an artificially inflated number? It would stand to reason that if we recognize this obvious sales tactic, it won’t work … but it does. In fact, experiments show that even a randomly generated price has a direct influence on what we are willing to pay for an item, even when we know that the price was randomly generated. This phenomenon, called the anchoring effect by social physiologists, suggests that we have a common human tendency to use the first available piece of information to make a decision. The initial information is the anchor and provides our brains with a mental shortcut when considering a decision, such as what a reasonable price is for a specific product or service.
The Anchoring Effect In Action
In 2006, Drazen Prelec and Dan Ariely of MIT conducted research to test just how influenced we are by an initial anchor price, even if we know that the price is completely disconnected from the value of the item we are buying. In the experiment, Prelec and Ariely auctioned off everyday items, such as a bottle of wine, a trackball, and a textbook, to their students. Before students could bid on an item, however, they were asked to write down the last two digits of their own social security » Continue Reading.
Better Sales Negotiations Go Step by Step
Sales negotiations don’t have to be stressful, contentious affairs. Yes, there’s a lot riding on the outcome of a sales negotiation. Just think of it as one more chance to uncover opportunities to provide value to the customer.
The secret to successful sales negotiations is all based on knowing what the customer is trying to accomplish, converting demands into needs, and then demonstrating and justifying your value.
Richardson teaches the following sales negotiation framework to help sales professionals to structure their dialogue with customers:
Preparation for the Negotiation — It all begins by planning the strategy and tactics, including bottom-line terms, to achieve the maximum outcome that meets the needs of both parties. Opening the Negotiation — The sales professional should set the stage and lay out terms at the outset. Counter-opening — This step draws out the customer’s opening terms and demands in order to maintain control and avoid negotiating elements in a piece-meal fashion. Converting Demands to Needs — The customer’s real requirements may not surface without probing more deeply to convert demands to needs and gaining insight into their true agenda. Value Justification and Concessions — At this point, sales professionals need to protect essential terms by trading expendables, positioning value to persuade the customer that it is worthwhile to make concessions, and trading concessions to achieve essentials. Closing the Negotiation — The last step is to maintain the momentum » Continue Reading.
Are You Caught in a Negotiating Trap?
Here’s a common scenario: You’ve just presented your truly tailored, well researched, totally relevant proposal. The customer, who had been nodding in agreement all along, now has a strange look on her face. The change happened the minute you mentioned price.
She says your price is too high.
It’s your move. What do you do? If you start negotiating on price, trying to find a figure that she’ll accept without hurting your business, you’ve just landed in a negotiation trap.
The trap is in starting to negotiate too early, before justifying your value. This is how a lot of money is lost, either by discounting too early or by leaving money on the table.
Getting pushback on price is a common occurrence for sales professionals. That’s why it’s important to recognize the negotiation trap and learn how to avoid it.
First, don’t start off trying to resolve any immediate price objections; focus instead on justifying the value of your proposal.
Consider the objection as an opportunity to learn more about the customer’s situation. Where does the objection come from? Is the customer at the end of a budget cycle? Would splitting payment over two cycles be workable? Or, would changing delivery options add value?
The point is, you need to understand what the customer is trying to accomplish so that you can determine which terms are most important. This can be more » Continue Reading.
Successful Negotiations: Why it’s Critical Not to Lose Sight of the Big Picture
“Are we negotiating?”
That succinct bit of dialogue from the 1997 movie “The Devil’s Advocate” serves as a good reminder for sales professionals to heed when selling to prospects or existing accounts. Don’t take for granted that it is a mere formality or confined to the period leading up to inking an agreement. You are constantly negotiating and should not only realize this, but practice their approach.
Negotiating is certainly about prices and fees, but also about so much more. What’s negotiable? Pretty much any aspect of a sale can be negotiated from delivery date, warranty, and payment or service terms to product features, account team, and the like. What’s important to realize is that each bit of dialogue and revelation throughout the sale process enlightens both seller and buyer alike with information that will influence this deal – or the next.
Building Confidence in Sales Negotiations by Understanding the Role of Power, Time, Information, and Skill
Four basic elements determine how successful you will be in negotiation. These four factors are: power, time, information, and skill.
Power is not what people might think. Power might be best defined as the ability to accomplish things — the ability to do, not necessarily the ability to order things to be done. Power is a state of mind. It is a multidimensional concept that involves how you think, feel, and act. Power is not related to position. If you think you have power and project it, you have it. If you don’t, you don’t. Power is confidence. If you feel powerless, you cannot be an effective negotiator. You will communicate your lack of confidence.