What is the real secret of negotiating success? Tactics, bluff, strategies? Those all have their place, but the real secret to winning is information. The more information you have, the less you need tactics and strategies. In fact, if you have enough of the right kind of information, you don’t need tactics and strategies at all.
Go back to our software example in the previous section and take a look at Figure 1.1, page 4. Imagine that you are the salesperson in this case. You’ve told the buyer that 11 licenses would cost $500 each. But before the buyer even has a chance to respond, you take a quick look at the screen on your “magic mind reading” laptop which is flashing you the following message, “this buyer only has $5,000 in his budget, so the most he can pay per license is $454.”
Now, if you really knew that the buyer’s Least Acceptable Settlement (LAS) was $454, just how difficult would this negotiation be? Obviously, not very tough at all. If you actually knew the other party’s LAS, all the problems associated with a negotiation disappear. All you have to do now is maneuver the conversation and make judicious concessions in such a way that you end up at a price of about $450. No anxiety, no tension, no risk. This is a slam dunk.
Unfortunately, in the real world, we almost never know exactly where the other person’s LAS is located. Occasionally, we can find that golden nugget of information that will tell us where it is, but most of the time, we have to find the building blocks that determine the other person’s LAS so that we can develop a better guess as to its location.
Let me give you an example. I was talking to the owner of a large plumbing distributor in Georgia. He said to me:
Mike, I’ve got to tell you this story. One of our inside salespeople was busy filling out a quote that had been e-mailed in. So I asked him, “What’s this?” He said, “This is a really big request for a quote. This guy wants a lot of stainless steel pipe and other specialty items. And you know what, he’s all the way over in Texas. He’s got to be spreading a really wide net here. We better quote a steep price, don’t you think?” So I said, “I’ll tell you what. Let me go talk to the customer.”
So he called the guy, who was a builder and constructing a manufacturing plant. The following conversation took place
I have a couple of questions about the quote request you just sent us.
Thanks for getting back to us so soon. What do you need to know?
Well, first of all, when do you need the order delivered?
I need it next Monday.’
Well, that’s a really short lead time for these items, but you’re in luck, we have it in stock. One other thing: You’re over there in Texas, we’re over here in Georgia. How did you happen to find the best plumbing distributor in the United States?
Well, it’s this way. I called up my own local supplier here in Texas and told him what I needed. And he said to me “Those are specialty items that I don’t carry.” So I asked him, “Can you get them for me?” And he said “sure I could, but if I do that, I’m going to have to take them in here, I’m going to have to handle them and I’ll have to charge you for that. Why don’t I just give you the name of the folks I would call to obtain what you need? That way you can go direct and save yourself some time and money?”
Does the seller really have to quote a steep price here? Is the customer spreading a wide net?
Do you think that this turned out to be a very profitable sale? You bet. You see, if you have all of the information you need, as the seller did in this case, you don’t need tactics. He simply quoted his standard list price and got the business.
Compiling the “Information to Find List”
Now let’s be a little more analytical. As you plan any negotiation you should always have what we call an “Information to Find list.” Each item on that list should help you determine the building blocks that may have gone into creating the other party’s LAS.
In the preceding example, the plumbing distributor had two items on his Information to Find list. The first was whether the builder had any time pressures. The second was whether the builder was considering any of his competitors. His first question, “When do you need the order delivered?” was pretty straightforward.
However his second question, “How did you happen to find the best plumbing distributor in the United States?” was more indirect. If he had said to the builder, “Are you looking at any of my competitors?” he might have put the builder on guard. By asking a more open-ended and vaguely worded question, he was able to elicit the key information that he needed, namely that the customer was not looking at any of his competitors. That information led him to believe, correctly as it turned out, that the customer’s LAS would go all way up to the standard list price for these products.
Now notice the customer did not come right out and tell the distributor his LAS. It had to be pieced together. You find a clue here and a clue there, do a little research, then put the whole thing together to create a picture of what is really going on with the other party. You have to learn to think like the other party and see the situation through their eyes. Obviously, it isn’t always this easy to ferret out the other party’s LAS. However, this is the basic technique of how we go about it.
If we look at this from the buyer’s point of view, we could certainly make some suggestions as to how he might improve his negotiating skills. In response to the first question regarding his delivery needs, he pretty much had to disclose that he needed the order within one week or he might not get it in time. But in response to the second question, he did not have to give away that he was not considering any competitors. He might have responded with something like,
“Well, we only deal with the best. You are one of the best aren’t you?”
This would not have been a lie. But it might have deflected the question and led the supplier to think that there were other competitors involved.
If you are a buyer, items on your Information to Find list might include:
• Are they desperate to make the sale before the end of the quarter?
• How afraid are they that I might go with their competitor?
• Are they overstocked and trying to get rid of inventory?
If you are the seller, questions on your Information to Find list might include:
• What are their time pressures?
• How do they view my products and services versus my competitors?
• How much clout does the end-user have versus the purchasing department?
• Does he have the authority to make decisions?
• Are there any potential asymmetrical trades (we will discuss these later on in the Section on Tactics), things that are of very low cost or importance to you but are important to the customer?
If you are negotiating a licensing agreement, items on your Information to Find list might include:
• What past experiences have they had to make them so nervous about hold harmless clauses?
• What royalty rates have they given for other technology that they have licensed in the past?
• Are they really serious about considering competitive technologies, or is that just a smokescreen?
To get the answers to these questions, your probing will have to be focused, although as we noted earlier, you will often need to be indirect and disguise what you’re trying to find out as you probe.
Remember, no matter what you intend when you ask a question, always watch for a surprise. You may ask what you think is a very focused question, designed to get a specific piece of information, but instead uncover a whole new area. So always really keep your ears open and listen hard to what you’re hearing.
The Four Primary Sources of Information
There are four primary sources for gathering information for the items on your Information to Find list. The first two are nonverbal and the second two require dialogue.
Databases
The first source of information is databases and the first place to look is on the Internet. If you are negotiating with someone in a public company, that company’s website will have their annual report. There are also many other sources on the Web where you can gather information about people, companies, and whole industries. Some of these sources are free and some require subscriptions.
Observation
The second nonverbal source of information is observation. I once accompanied a salesperson for a hospital equipment company on a few sales calls. On one call, we visited a lab manager who explained to him in excruciating detail why he didn’t really need to buy any new equipment. We left the account and when we got to his car, the salesperson grinned and shook his head. I said. “what’s so funny?”
He didn’t say anything but showed me his right hand, which was caked with dust and grime. As he left the lab, he managed to walk by the piece of equipment that the lab manager said was working so well and run his fingers across it.
“He will buy my equipment,” the salesperson said, “he really has no choice. His existing unit doesn’t work, otherwise it wouldn’t have gathered so much dust. The workarounds he’s using now are very expensive. He’s just trying to soften me up to get a lower price. But now that I know he’s the one who’s really over the barrel, he’s not going to get much of a discount.”
The People Involved
The other two critical sources of information are the person with whom you are negotiating and other people who might have the information that you need. It is here that you need to start using your verbal skills to gather the information that you will need to succeed in the negotiation.