Wednesday, May 30, 2012

The Business of Negotiations

Illustration by Shannon May Illustrations

I had my business sales class today, and what we learned was negotiating. I will share with you what I can. :)
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Some people are really good at negotiating, others (like me) not so much. But what's important is to negotiate in business. Whether it's to get a better consignment percentage (60%/40%) or to gain something. Of course, we all know that in order to get something we must give something in return.

We learned in class that negotiation helps to establish norms.
The principles of negotiation are: Get gains • Receive & Give (in order to receive, you must give).

There are also guarantees we business owners must have. This is an action we take in case the client feels wronged somehow. You never know. Boy Scouts motto "Always Be Prepared" is a good one to have, right? In other words, a guarantee is a bargaining chip. You know, now that I've typed that out, I'm not sure how that works in our favor. :) In my case, a guarantee would be that if one of my monsters were to rip at the seams, I would be more than happy to repair it for them free of charge. That way my client is still happy with my product, and doesn't feel wronged.


I suppose the most that I've learned is that negotiation is all about being able to respond to a client/customer's objections. Always focus on the benefits your product will bring to that particular client. Will it bring them profits? Or perhaps a new clientele? What about eternal youth (for items that incite desire)? Maybe it'll bring them a pay back. Who knows!

Lastly, before you start negotiations with your client, know your leverage, the 'bottom line' of how low you're willing to go, the objectives you want, as well as your margin of negotiation. It's always good to know these in advance. Let me give you an example of what I'm talking about:

Let's say my leverage is length. In this case, this will refer to the length of time of a client contract, say in a store for items on consignment. My bottom line would be a contract of 6 months, and my objective is to have a contract of at least one year. In this situation I don't really believe I have a profit of margin, because I'm not really talking about money. I'm going to give you a real situation involving selling monsters to a direct customer at a fair, and my leverage here is price. My objective when selling 2 monsters to one customer is to get the full price, which is $88. I had a customer who came to me, loved both monsters she had in her hands but couldn't decide which one she wanted. In this case my bottom line is to sell each monster for $40, which is a total of $80, and for the customer a savings of $8. This is my margin of negotiation, or what I'm willing to 'lose' in order to make the sale. To me, I'm still making money, but the customer feels like they've won the big lotto! 

Now, I know we're not supposed to negotiate price, and I asked this exact question in class. Yes, it is a negotiation in price, but I'm not lowering my price to undervalue myself, but because it's within my limits or "bottom line" it's okay. Now if I were to lower the price to $75, it'd be more than I wanted to lose, and in this case I truly am negotiating my price. As a business owner, you don't want to start doing that. You want to find someone who will pay your price, no questions asked (especially no haggling). If they're haggling you, they're not your customer.


Well I hope you all learned something today. Typing it out helps the information sink in for me. Next week will be 'Invoicing Tools.'

2 comments:

  1. Great post, very helpful!! thanks for sharing!!!:)

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    Replies
    1. Thanks. I think I might have to reword a thing or two to make sure it makes sense. Glad I could help. :)

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