Six Must-Follow Rules for Gathering Information When Negotiating

Why do most people fail to – or fear gathering and analyzing information when they are negotiating?  It can be potentially disastrous for people to go into any personal or business negotiation without the relevant information needed to optimize their negotiated outcome.  During our negotiating skills training presentations, seminars, and learning workshops, we provide a proven process and methodology for gathering and analyzing information, and we teach participants key gambits and the corresponding countergambits to manage information gathering to their advantage.  In this blog post, I am going to provide you the six, basic must-follow rules to follow when gathering information for a negotiation.

It is critically important for people to invest the necessary time to learn more about the negotiating situation and the people they will be negotiating with – before as well as during the negotiation!  A simple rule of thumb is that the side that has the more relevant information before and during a negotiation has the advantage.  Why do all professional sports teams study replays, game film, and still photo images of their opponents before, during, and after games?  Because knowledge is power – and the more knowledge one side is able to gather and analyze about the other side – the better the outcome is for that side.

Whether you are involved is a personal negotiation to purchase a home or a vehicle, rent an apartment, or procure goods and services from contractors, you need information to be successful.  Regardless of your experience level in business – and whether you are an entrepreneur or work for a corporation in senior management, purchasing, sales, marketing, human resources, IT, or finance – you need information to optimize your outcome at the negotiating table.

THE FOLLOWING ARE MY SIX RULES/TIPS FOR GATHERING AND ANALYZING INFORMATION:

RULE ONE: DON’T BE AFRAID TO ADMIT THAT YOU DON’T KNOW

Why are people reluctant to gather information? Because to find things out, people need to be much more curious and investigative, and most people are extraordinarily reluctant to admit when they may – or do not know something. So this first rule concerning gathering information focuses on not being overconfident, lazy, and/or complacent – realize that time and effort are required to gather information. There is no excuse for making half-hearted attempts at this important task. Admit to yourself that you don’t know and that anything you think you may know might be incorrect, inaccurate, or outdated. Also, don’t make assumptions, use conjecture, or hypothesize to arrive at half-baked conclusions – do your research prior to all negotiations – no matter how formal or informal the negotiation is.

RULE TWO: WHERE TO GATHER INFORMATION

Despite the obvious importance of gathering, analyzing, and exchanging information prior to and during a negotiation, it has been my experience with clients and participants in our training programs and coaching sessions that too many people just can’t be bothered investing time in their personal or business negotiations to properly gather and analyze information. There is no excuse in today’s technology-driven world that people cannot easily gather information. Consider all the benefits of using easily accessible technology to gather good information: Google Search, Google Alerts, LinkedIn, Facebook, and Twitter – just to name a few of the social media platforms available for research. There are also fee-based service options such as D&B Hoovers that can be used to gather information for higher-value business negotiations. A businessperson can effectively gather information, business and competitive intelligence at conferences, trade shows, conventions, and industry events.

RULE THREE: DON’T BE AFRAID TO ASK CHALLENGING BLUEPRINTING QUESTIONS

Early in my business career, I worked with many people who were afraid to ask powerful and effective blueprinting questions out of fear that asking the right question would potentially upset the other person involved in a negotiation. People are often intimidated and/or fearful when it comes to asking questions. Therefore, the reaction to this intimidation and fear is to resort to asking really “soft” questions such as “Would you mind if I asked you?” or “Would it embarrass you to tell me?”

No matter what a person’s negotiating personality type and corresponding negotiating style is, I encourage everyone to understand the need to practice in order to become more comfortable with asking the right questions. We never know how the other side involved in a negotiation is going to respond to your questioning technique, tone, and style. Often, the real fear of questioning people exists in the person’s mind who is asking the question and not necessarily with the person who is answering the question. Also, when a person refuses or avoids answering a question or provides vague information to you, that can be as revealing to you as getting a full answer.

If you want to learn more about a particular negotiating situation or the other person involved in the negotiation, then nothing works better than preparing and asking a direct question. Based on my own experience over 30 years, I have never met that many people who ever refused to answer one of my questions. If people resist answering, I teach and also use the proven gambits to help overcome a person’s concern with answering the question.

Two of my favourite questions I provide my clients with are used to separate content from emotion when the other party in a negotiation makes a comment or statement. These questions work almost all the time when asked properly: “Obviously you have a reason for saying that – may I ask why?” or “Obviously you have a reason for feeling so strongly about that – may I ask why?” These two questions can help you understand the real issue impacting the negotiation.

It’s a fact of human nature that people are often willing to talk about themselves, yet some people are reticent when it comes to asking other people about themselves. We fear the potential nasty look we might get or the rebuff to a question. We refrain from asking good questions because we expect the following responses: “That’s none of your business!” or “I’m not in a position to disclose that kind of information to you!”

When people start to overcome their fears and inhibitions about asking people questions, the number of people who are willing to help might actually surprise you. It seems even more incredible that “subject matter experts” are rarely asked to share their expertise. Most people find “experts” intimidating, so their experiences, insights, and knowledge are never fully explored. What a senseless waste of a valuable potential resource – all because of an irrational fear that some people have about asking questions!

RULE FOUR: ASK OPEN-ENDED QUESTIONS

Power Negotiators understand the importance of asking in-depth and intimate questions and of properly preparing questions in advance, as well as investing the necessary time to practice and role-play. What’s the best way to develop questions? Rudyard Kipling, the British journalist, short story writer, poet, and novelist (The Jungle Book and The Man Who Would Be King), often talked about his six honest serving-men. He said: “I keep six honest serving-men – they taught me all I know.” Their names are What, Why, When, How, Where and Who.

Of Kipling’s six honest serving-men, I like “Why” questions the most. However, to some people, the word why may be interpreted as accusatory. “Why did you do that?” implies criticism. “What did you do next?” doesn’t imply any criticism. If you really need to know why, soften and rephrase the question by using the word what instead: “You probably had a good reason for doing that. What was it?” Learn to use Kipling’s six honest serving-men to find out what you need to know.

You’ll get even more information if you learn how to ask open-ended questions. Close-ended questions can be answered with a yes or a no or a specific answer. For example, “How old are you?” is a closed-end question – you’ll get a number and that’s it. “How do you feel about being your age?” is an open-ended question – it invites a response to the question that may contain a wealth of information.

“When must the work be completed?” is a closed-ended question. “Can you elaborate about the time limitations on the project?” is an open-ended request that can be used to gather additional or more detailed information.

Need Help? By this point in this article, you may be realizing that you don’t have a resource library of great questions and/or know how to properly ask them. Contact me now to get the proven solutions for your organization.

RULE FIVE: WHERE YOU ASK THE QUESTIONS MAKES A BIG DIFFERENCE

Power Negotiators also know that the location and environment where people ask questions can make a big difference in the outcome. If you meet with people at their corporate headquarters, surrounded by their trappings of power and authority and their formality of doing business, it’s the least likely place for you to get good information. In a work environment, people are usually surrounded by “invisible chains of protocol,” which can influence how people feel about having open and honest conversations.

When people are in their work environments, they’re cautious about sharing information. Try to get people away from their work environments and information will usually flow much more freely. Sometimes all it takes is a discussion over a cup of coffee at a local Starbucks – or if you meet for lunch at your country club, surrounded by your trappings of power and authority, where the person with you is psychologically obligated to you because you’re buying the lunch, then getting information is easier.

RULE SIX: ASK QUESTIONS OF OTHER PEOPLE WHO ARE NOT NECESSARILY NEGOTIATING DIRECTLY WITH YOU

If you go into a negotiation knowing only what the other side has chosen to tell you, you are very vulnerable. Other people may tell you things that the other side directly involved in the negotiation won’t, and they may also be able to confirm what the other side has already told you.

Start by asking people who’ve done business with the other side already. I think it will amaze you – even if you thought of them as competition – how much they’re willing to share with you. Be prepared to do a little negotiating to get information. Don’t reveal anything that you don’t want them to know, but the easiest way to get people to open up is to offer some useful information in return. People who have done business with the other side can be especially helpful in revealing the character of the people with whom you’ll be negotiating. Can you trust the other party? Do they bluff a great deal in negotiations, or are they straightforward in their dealings? Will they stand behind their verbal agreements, or do you need your legal counsel to read the fine print in any contract or agreement?

Next, ask questions of people who are further down the corporate ladder than the person with whom you plan to deal. Let’s say you’re going to be negotiating with someone at the head office of a national retail chain. You might call up one of the branch offices and get an appointment to stop by and see the local manager. Do some preliminary negotiating with the manager because that person may provide you with valuable information (even though he or she can’t negotiate the final deal) about how the company makes its buying decisions, why one supplier is favoured over another, the specifications being considered, the gross profit margins expected, etc. Be sure that you’re “reading between the lines” in this kind of conversation. Without your knowing it, the negotiations may have already begun. For example, the branch manager may tell you, “The company never works with anything less than a 40 percent markup,” when that may not be the case at all. And never tell the branch manager anything you wouldn’t say to the people at head office. Take the precaution of always assuming that anything you say will be forwarded to head office.

Next, take advantage of peer group sharing. This refers to the fact that people have a natural tendency to share information with their peers. Power Negotiators know how to use this phenomenon because it applies to all occupations – not just in the professions. Engineers, controllers, managers, and truck drivers all have allegiances to their occupations – as well as to their employers. Put people together with each other and information may flow more easily.

If you’re thinking of buying a used piece of equipment, have your company’s equipment operator meet with his or her counterpart at the seller’s company. You can take an engineer from your company with you to visit another company and let your engineer mix with their engineers. You’ll find out that unlike top management – the level at which you may be negotiating – engineers have a common bond that spreads throughout their profession, rather than just a vertical loyalty to the company for which they currently work.

Naturally, you have to watch out that your person doesn’t give away information that could be damaging to you. So be sure you pick the right person. Caution that person carefully about what you’re willing to tell the other side and what you’re not willing to tell – the difference between the open agenda and your hidden agenda. Then, let the engineer get involved, challenging him or her to see how much can be found out. Peer group information gathering can very effective in negotiations.

Power Negotiators always accept complete responsibility for what happens in the negotiations. Poor negotiators blame the other side for less than ideal outcomes. As a professional negotiator, I accept that there’s no such thing as a “bad” negotiation. There are only negotiations in which one or both sides may not have known enough information about the other side. Never underestimate the importance of gathering, analyzing, and exchanging information in all your negotiations – a successful outcome will depend on it.

Contact me before your competitors do! I can provide your company with a proven formula for developing great questions, as well as with the best questions to ask before, during, and after negotiations – all organized into six easy-to-follow blueprinting question categories. By hiring me to help members of your organization develop and learn to ask the right blueprinting questions during all their negotiations, I can save you and your company time and enhance your profitability.

How to Effectively Sell and Negotiate Price Increases

How to Effectively Sell and Negotiate Price Increases

Effectively selling and negotiating a necessary price increase can be difficult in almost any situation.

Trying to sell, justify, and negotiate price increases to customers/accounts, in any channel, in a difficult economy and in complex market conditions can present some serious challenges for poorly trained and ill-equipped sales and marketing personnel.  Yet, as challenging as the task is, selling and trying to negotiate price increases is often an essential requirement in order to maintain your company’s overall profitability.

Your customers/accounts will most likely try to use negotiating skills to mitigate, manage, or refuse a proposed price increase.  Therefore, vendors will need to contemplate the following when preparing and planning to enter into price increase discussions with customers

  1. Is the customer’s unwillingness to consider and/or accept a price increase a belief, strategic business practice, or a company policy.
  2. Or, do customers/accounts utilize a conscious negotiating process and/or aggressive tactics to see if the vendor will back down quickly from a proposed price increase request? In other words, when faced with negotiating pressure, will the vendor make price or other monetary concessions that will help offset the proposed price increase?

The challenge associated with selling and negotiating a price increase in difficult market conditions usually stems from the fact that sales and marketing personnel and the customer view the situation from different perspectives.  The customer/account will invariably utilize strong objections, issue threats (coercion power), and use proven negotiating gambits to fend off the salesperson’s efforts to sell and justify a price increase.  Also, it is likely that the customer will use the Higher Authority gambit (and other recognizable negotiating gambits) in order to carefully manage and control the overall decision-making and approval/rejection process.

I am sure that over the course of your business career, you or members of your sales organization have heard the following statement from a customer:

“You know the economic situation as well as I do. This is not the time to try to pass on any kind of price increase. The market is soft and increasing prices will only hurt your company’s sales with us. There are several competitors who would be very interested in capturing your market share and growing their business with us. Let’s just wait six months and revisit the situation when the economy improves. If you insist on implementing a price increase, then you are going to force us to reassess the category and your current position with our company. A price increase in this situation seems like a very risky move on your part.”

Perhaps some customers are more direct with their response to a proposed price increase:

“We do not accept price increases from vendors, no matter what the circumstances are.”

All members of the vendor’s organization need to understand that almost all price increase requests need to be properly sold and negotiated with each unique customer/account.

Seven Tips to Enhance Your Success When Selling and Negotiating Price Increases

  1. The Importance of Having the Proper Attitude and Necessary Self-Confidence to Negotiate Price Increases: The customer’s response to any proposed price increase is rarely positive. In addition, there are the usual concerns that a competitor’s price may undercut yours or that the customer may choose to go down a different path instead of buying from your company.  As big as these issues are, they pale in comparison to the number one roadblock to achieving your maximum plausible position (MPP) – the confidence of the salesperson. The main reason why companies do not capitalize on their improving business results is because most salespeople do not have the confidence to ask for and achieve their maximum plausible position when it comes to a proposed price increase.  If salespeople are confident in what they are selling and in knowing how the customer will benefit from their products/services, then they will be more confident in asking for and getting their desired outcome.  If the vendor organization’s sales and marketing personnel do not have a positive and optimistic attitude or the required level of self-confidence to persuasively sell and negotiate a necessary price increase, then the process will likely be more challenging – and achieving success will be unlikely. Effective negotiating is a learned skill.
  1. The Use of Situation Power: There are eight different forms of personal power that can impact and influence negotiated outcomes. Situation power refers to the power that a party/person has in a particular situation. If you and your company operate in a very competitive market/category that has many non-differentiated vendors and product lines, then it may not always be possible to increase your prices (especially if you’re selling a commodity product) – in this case, the customer has situation power over the vendor.  Depending on the vendor’s situation power in the negotiation, it is likely that the vendor’s maximum plausible position may be higher than the salesperson and the company believe.
  1. Learn to Ask Effective Blueprinting Questions to Negotiate Price Increases: It is imperative that sales and marketing personnel be equipped with and then be prepared to ask the right questions of the relevant members of the customer’s buying centre, which is defined as “the composite group of individuals who make or influence decisions.” The following are five examples of effective blueprinting questions that can be used during a price increase conversation:
    • “Under what circumstances have you and your company ever accepted a full price increase from a vendor?”
    • “How frequently do you allow vendors to present price increases to your company?”
    • “What is your company’s policy regarding getting price increases approved?”
    • “What decision-making criteria do you and your company utilize that would result in getting our company’s price increase approved?
    • “What process does your company utilize to approve price increases from vendors?”
      Top-performing salespeople learn how ask the right questions that allow their customers to elaborate on their needs, pain points, and dominant buying motive. Top performers also demonstrate good listening skills by asking the appropriate follow-up questions that allow them to press for specifics and/or seek clarification.
  1. The Importance of Using the Proper Negotiating Methodology, Strategies, and Tactics – The Higher Authority Gambit and Corresponding Countergambits: An important part of the negotiating process is to provide yourself and/or your company with several potential layers of protection. Therefore, I recommend that any salesperson designated to communicate and/or present the proposed price increase should not have the final authority to make any price-based, monetary, or non-monetary concessions.  There are many reasons for this recommendation. To fully understand the power of the Higher Authority gambit and the corresponding countergambits (tactics to use when a customer uses this particular gambit on you in any negotiation), it will require an investment in negotiating skills training and development.
  1. The Impact That Proper Messaging Can Have on Negotiating Price Increases: To improve the chances of selling and negotiating a potential price increase, it is critical that you and your company develop the most effective and persuasive messaging strategies that can help to sell-in the price increase and communicate value. The following are some recommendations:
    • Use a well-written, edited, and expertly vetted business letter or presentation format for communicating the proposed price increase. Do not use generic and poorly written “Dear Valued Customer” letters to announce or propose a price increase.
    • Be clear and detailed with your written communication.
    • Be proactive, realistic, and truthful regarding your proposed price increase. Provide plenty of advance notice concerning the timing for any proposed price increase.
    • Provide an explanation and/or rationale for the proposed price increase. Include any relevant “evidence” as an exhibit item in your letter or presentation. Exhibit items may include correspondence such as letters from suppliers showing raw material price increases; labour cost increases; government tax increases; currency fluctuations; and utility price increases, etc.
    • Calculate and communicate the gross profit dollars that the customer has generated from doing business with your company over the past year. Include all value-based monetary and non-monetary support/investments that your company has provided to the customer. In your aggregate financial calculations, include investments such as co-op marketing funds; O&A marketing funds; merchandising and markdown allowances; permanent and secondary displays; favourable product turn ratios; fixtures; and the cost for any extended payment terms/invoice dating that extend past your standard payment terms. This strategy is called the Positioning for Easy Acceptance gambit. Depending on your company’s situation power, if your products are generating a good ROI and gross profits for the customer, it will be more difficult for the customer to turn down the price increase. Know your “trade math” inside and out, and avoid any and all “cost-based” pricing discussions with customers.
  1. How Much of a Price Increase to Ask For and How to Position the Price Increase: Always ask for more than you expect to get when you want to negotiate a price increase. The proposed price increase needs to be based on a maximum plausible position (MPP).  By asking for more than you expect to get in the initial stages of the negotiation, you can “bracket” your objective and leave room to make a concession to the other side (the customer), thereby creating the potential for a Win-Win outcome through compromise. Example: Initially, propose a price increase of 3.35% and then use the process to negotiate/agree upon a price increase of 2.73%.   Always use odd numbers or odd percentages when proposing price increases. Never present price increases using even numbers or even percentages. Do not present price increases in increments such as 2%, 4%, or 6%.
  1. Invest Time and Money for Proper Preparation, Negotiating Skills Training, and Practicing: It is essential for even the most experienced salespeople to prepare effective oral and written scripts/phrases, statements, and blueprinting questions well in advance of any meeting to discuss a proposed price increase. Also, sales and marketing personnel must consistently practice and role-play using the designated scripts/phrases in order to be fully prepared to effectively pre-empt potential objections from customers. If the vendor organization’s sales and marketing personnel have not received the necessary negotiating skills training and/or have not developed effective, easy-to-use turnkey tools for their negotiating arsenal, then your company will need to invest in acquiring the necessary skills and tools.

Good luck in all your negotiations and remember: Everything is negotiable … except not negotiating.

For more information about our cost-effective and tailored in-house seminars and learning workshops for your organization or association, please visit our website at negotiatingcoach.com or to book an impactful and engaging presentation, seminar, or learning workshop, contact me directly at michael@sloopka.com

Michael E. Sloopka, Negotiating Coach®, is President and Founder of Selling Solutions Inc. and negotiatingcoach.com.  Michael is an internationally recognized negotiating expert, speaker, author, consultant, and coach. He conducts tailored, engaging, and impactful presentations, seminars, and learning workshops on various negotiating and sales topics for organizations and associations around the globe. Michael has written articles for – or has contributed to articles for Forbes, Amex Open Forum for Business, Fortune, Selling Power, and Profit magazines.

negotiatingcoach.com is an international negotiation training, consulting, and coaching firm that specializes in teaching negotiating skills and the decision-making dynamics that affect negotiation outcomes. We are a proven solution provider and the benchmark for providing high return-on-investment negotiation solutions, ranging from our negotiation training programs to complex organization-wide negotiation initiatives. Offering more than 25 years of successful negotiating experience and expertise in sales, marketing, purchasing, distribution, and consulting – from small business to multinational corporations, from personal transactions to multimillion-dollar extended supply agreements and contracts – negotiatingcoach.com has added hundreds of millions of dollars to its clients’ collective bottom line through effective training, consulting, coaching, and negotiation facilitation.

 

Buying a Sale – The High Cost of Poor Negotiating

Buying a Sale – The High Cost of Poor Negotiating

Making a sale – it sounds simple enough. But if you bargain badly, you may end up “buying” that sale.

The real art of negotiating is to complete a satisfactory exchange without giving away more than necessary. The challenge is to identify all the components of the exchange and to realize how much value you and your customers place on each of them.

Too often, companies fall victim to their own bad negotiating. An oversimplified barter of an increasingly expensive package of concessions means that eventually they have not made the sale but have bought the sale!

As the marketplace becomes increasingly complex and competitive, salespeople often don’t have the necessary skills, or they neglect to apply the proper art of negotiating and resort to the more common and less challenging “concession sale.”

Picture this familiar scenario: A salesperson makes what he thinks are gratuitous concessions, believing he is closing in on a deal. But as he nears closing, he realizes that all the concessions made so far are seen by the other party as merely the starting point for final negotiation. He is then trapped into making additional concessions to get the business, having already committed his company to everything he has “thrown in” along the way.

Not only has the real cost of the transaction gone up, but also the salesperson can’t be certain that the initial concessions were required at all. One thing is clear, though: Reclaiming spent concessions is not possible – and they now have become part of the base package that the customer expects.

Because negotiating skills are not adequately refined on the supply side, corporations throughout North America have seen gradual erosion of their profit margins. On the buying side, sophisticated customers are increasing not only their profitability but also their power base. This dynamic has generated a growing number of vulnerable suppliers prepared to give greater concessions at each transaction to maintain their business volume in the face of collapsing margins.

Here are some suggestions to help you avoid “buying the sale” when negotiating:

  • Follow a disciplined process in order to achieve desired results.
  • Carefully determine the wants and needs of the customer before making concessions.
  • Avoid making concessions early in the sales process.
  • Identify all concessions you are prepared to make and know the cost of each.
  • Don’t assume there is value in a concession just because there is cost.
  • Invest in the appropriate training to become a better negotiator.
  • Reinforce your training annually to stay one step ahead of your customers.

Remember: Nothing affects the bottom line of your company more, or your personal income more, than good negotiating skills. You can’t make money faster than when you’re negotiating well!