On a recent trip to Southeast Asia, I was reminded of the art of negotiation. In the marketplace, tourists meandered through vendor booths with many of the same or similar products. Few of the products had prices, naturally forcing negotiations.
In Thailand I found myself searching for some infamous elephant pants to bring home for my grandson, Wes. Finding the right size with a language barrier proved challenging, until I met one vendor. Using a mannequin, he demonstrated how the pants could be sized to fit Wes. He had successfully differentiated himself. I bought the pants and I’m pretty sure I paid a premium for them because of his service.
It reminds me of the key elements of effective negotiating that I’ve learned along the way through buying products and companies. Everyone likes to feel like they got a “good deal,” but few people actually like negotiating. It is, however, a critical skill in leadership.
elements of effective negotiations:
- It’s not all about money.
I saw this firsthand with the elephant pants. What matters is value — and service often comes into play. Today’s marketplace, for example, rewards fast (and free) shipping thanks to Amazon. Currently, at Marco, we have been working with one of our partners to ship products directly to our clients. The outcome will be better customer service while saving time and resources overall. It’s a win-win. - Personal contact doesn’t always happen.
We’ve seen a shift in the negotiation process as more of it is conducted virtually or is implied. Consumers can go from one store to the next from their smartphone – to identify the “best price” for what they want. This impacts everything from consumer to business-centric products. It’s a key reason why we implemented our more efficient online
eStorefront to make it easier for our clients to buy and for us to sell. - Find a dollar range first.
This is key. When it comes to one-on-one negotiations, start by identifying a price range. This is helpful whether you’re negotiating a salary for someone you’re hoping to bring on your team or the price of a big-ticket transaction like a business. It allows you to see if a deal is possible. - Compromise is often required.
A mediator once told me that if he does his job right, both parties will leave a little disappointed. Usually both parties have to give up something to reach a deal. Negotiations are not about getting it all. No one wants to feel beat up in the process. Know what matters to you and be willing to compromise on less impactful items. - Recognize negotiations are sensitive.
I’ve definitely seen this during business acquisitions. Buying a business is one of the most sensitive negotiations. The owner is selling his or her life’s work. How an owner values the business does not translate to how a buyer values it. Everyone has a number, even when they say they don’t. The goal is to get to a range that might work without totally offending the seller.
Successful negotiations are achieved when both sides leave feeling like they got a fair deal. The decision often gets made based on perceived value rather than on price alone. Just like the elephant pants I bought for Wes, price became less important when added-value was provided.
