Negotiation: Price is What You Pay. Value is What You Get. How Much Are You Getting?
By Guy Johnson
Many people think of negotiation as a battle of nerve, pressure and power to drive a hard bargain and secure the best price. But the reality is, price is so often only part of the equation.
It’s true, there are times when it is all about securing the best possible price, where nothing else matters. Perhaps when buying a standard leather bag in a market in Marrakech, maybe a one-time sale of your used car. However, in commercial negotiation, more often than not, there are many other important issues to agree terms on. When we focus on the seductive issue of price, we risk leaving all the value on the table.
In planning and preparing for a negotiation it is critical that we identify not only each and every issue that is important to us, but also each and every issue that we believe is important to the other side.
In order to understand what is important to them it is vital to gather and assess all the available information. What do you know about their business and its current circumstances, the key people you are dealing with, their objectives and pressures? Taking the time to collect this information will stand us in great stead once we get around the negotiating table.
Once we have built a picture of the issues that are important to each side, we can begin to identify possible trades. First, we want to find items that are valuable for us to receive and low cost for them to give. Next, we want to identify those items which are valuable for them to receive and low cost for us to give. Now this is where the magic happens… when we trade low cost, high value items in both directions, we can GROW the value of the deal. Very often, we can trade all sorts of items without so much as a mention of price!
It is crucial that we complete these trades in conditional “if you, then we” format. We must never give anything away for free. Let’s look at a couple of example trades:
“IF YOU can give us free delivery, THEN WE can increase our order volume to 10,000 units”
“IF YOU give us 30-day payment terms, THEN WE will give your team access to our technical support line, free of charge for 90 days.”
In your next negotiation, remember: Price is what you pay. Value is what you get.
Guy Johnson is the Founder of Negotiation consultancy BreakPoint Black