Using Accordence's 4D Strategy to Change the Negotiation Game from Beginning to End

Grande Lum was invited to share some advice as a thought leader in negotiation for the recently published book, The Mind of the Customer: How The World's Leading Sales Forces Accelerate Their Customer's Success, by Richard Hodge and Lou Schacter of The Real Learning Company (www.reallearning.com).  He provides three best practices for value creation in negotiation in the following excerpt from the book.

Easy to Jump to Price

Customers focus on price for good reason. It is an obvious differentiator. They can easily defend their decision to a cost-conscious executive. It is more challenging to explain long-term savings or benefits. To negotiate on total value rather than just price requires a persistent focus on abundance, a thorough understanding of the customer, and skillful use of questioning and framing skills. We now turn to focusing on value in the beginning, middle and end phases of negotiation. 

1.  In the Beginning: Design Your Negotiations to Enhance Value Creation

If you are reactive rather than proactive in the beginning of negotiation what is likely to happen?  The customer is likely to go right to offers and perhaps haggling. This is problematic as the customer is discounting not just the price but also the value of the service or product.  Changing the game means beginning your negotiations in a collaborative fashion that emphasizes underlying value creation. Before the negotiation, communicate that the goal of the process is to create the best possible solution and maximize the return on investment. 

Consider sending an agenda that includes discussion of the customer's interests followed by brainstorming of possible options.  This prevents an immediate haggling game where the buyer starts low and the seller starts high.  Consider issues or topics of discussion that will likely bring a yes. Start with big picture issues to create the foundation for value discussions.

Create a collaborative atmosphere by asking customers for their goals for a negotiation meeting. Seek out their agenda items. Invite experts and creative types from both sides to the negotiation, so that they can provide input that creates more value for all parties. Have the meeting in an environment that inspires creativity and spontaneity.

Make value creation your core message for the entire negotiation.  When the negotiation begins, get everyone at the table to reflect the overarching goals and vision for the overall negotiation. Ask people to share what are the wonderful things that happen if they successfully negotiate.  When leaving the negotiation, the customer's lasting impression should be that the seller will help create better results than the competition rather than that the seller will reduce their price to meet the competition.

2. Middle: Dig and Develop to Create and Capture Value

Once you've begun your negotiations with a collaborative attitude and supporting process, you have set the table for digging for and developing value.  Convey a mindset of abundance. Your ability to generate more value at the table will differentiate you from the competition.  Resist the tendency to go into argument mode. Here's where asking questions gets the customer to reflect on their own needs.

Remember value comes in many forms. Value could be lowered costs, increased revenue, reduced hassle, time savings, increased services, reduced risk, additional safety, and enhanced reputation. Value might be provided to the individual from the customer organization. You might help the person look better to her boss, by making a suggestion that individual can pass along. Your credibility and trustworthiness provides value in that the buyer believes what you say and can count on you to deliver on your commitments.  Money itself can have subtle and deeper layers than just price. Perhaps you can structure financial agreements that cost you little but bring great benefit to the customer (e.g. payments begin in the new fiscal year).

Dig for value by asking questions that go deeper than price. Instead of making great arguments for your service or product, take the time to generate sophisticated questions that get the customer to pause and think. Some may be general questions that focus on the customer's vision or business. Some may be specific that focus on the problems the customer is facing.  All should generate reflection that leads to deeper appreciation of the value proposition.

As you develop a proposal and discuss price and other terms, be a strong assertive advocate while treating the customer fairly and openly.  Create the framework that the numbers can be plugged into.  Rather than spending an exhaustive amount of time on price, figure out early on what the rest of the agreement should look like (with blanks for numbers).

In discussing price, share ranges and contingencies that affect price. Learn as much as you can about the competition so you can differentiate yourself from them.  Show as best as you can why you have better value and ultimately how it will serve your clients better financially even if your product is offered at a premium price. Be ready to make an offer when you need to.

When you hear price demands or positions think of them as clues so that you can further understand their interests. Positions are the tip of the iceberg and 5/6 of the iceberg is hidden beneath the surface.  For example, their position may not have come from them, but from their boss. Spend as much time understanding with whom they communicate and to whom they are responsible. Understand their criteria, benchmarks, and standards completely.

3. The End: Help the Customers Decide Easily Based on Value

At the closure of negotiations or the Decide phase, it's all about making it easy for the customer to say yes at the end.  Recognize the decision-making style of your negotiation counterpart. Listen to them. Ask explicitly how they are going to make their decision. If the customer is a rational thinking type, provide objective measures of value and show the clear steps that lead to creating that value. If the customer makes decisions based on emotion, consider scaling up the use of passionate customer feedback, references, and success stories.

If the customer is negotiating with you and one of your competitors, you still want to compete on value.  This is the ideal time to present evidence of the way you create value. Consider a reference that will speak highly of you, your company, and your value proposition.  Many customers are concerned about risk.  If you can truly deliver results, create agreements that reveal your confidence by adding incentive clauses, guarantees, and contingencies based on success and failure.  Reducing risk makes it easier for the customer to say yes.

Find ways to give the power to the customer. Provide two options rather than one and give the customer the choice.  Rather than just saying yes or no, this allows the customer to pick and choose.  Work from their ideas and proposals rather than your own.  This enhances collaboration as you get toward the end.  The more the customer is engaged in creation of the final agreement, the more likely they will execute it. 

Conclusion
Focusing on value during the Design, Dig and Develop and Decide phases of negotiations will make agreements more creative and satisfactory while creating the foundation for longer term relationships.