Uncovering Interests Other than Price
By Jacqueline Codair
While different customers may push for concessions on various
terms and conditions during negotiations, virtually all customers
push for concessions on price. One of the most common
challenges clients face is customers focusing solely on price
and making it difficult to discuss the value they are delivering
to them. This price-focused discussion becomes particularly
difficult when dealing with someone from procurement who
is incented based on the price reductions he is able to obtain!
When confronted with this dynamic, sales teams often default
to an adversarial problem solving and negotiation strategy which
results in haggling and give-and-take compromises, frequently
leaving both sides dissatisfied and ultimately damaging the
working relationship. It doesn’t have to be this way! While
most buying organizations care about price, rarely is price the
only interest a customer cares about. Though it may be difficult
to pivot the discussion to include customer interests beyond
price, doing so is essential to protecting the value your company
creates. Making this pivot requires crafting a strategy to uncover
your customer’s underlying interests, developing options that
meet the full range of customer interests while protecting your
margins, and sharing data that helps the customer recognize the
value you are delivering. We recommend that you follow the
steps below in order to successfully uncover your customer’s
interests beyond price and escape a haggling dynamic.
1. Understand your customer and their environment before
you begin any negotiation
The first step to understanding your customer’s non-price
interests is taking the time to thoroughly prepare for your
negotiation. If you are thinking only about price yourself, you
can be sure that the negotiation will quickly become about
price! Take the time to consider what might be important to
your customer’s overall business, and to the specific group
or buyer you are working with. Think through the challenges
in their market, potential threats, etc. What does this suggest
about their company (or their division/business unit’s) short
term and long term business and technical goals? How might
the solution you are providing help them achieve these goals?
The answers to questions like these might even be within your
own organization, or within your own sales team: explore what
other customers in the same industry have found valuable
(other than price reductions). If you don’t know the answers
to these questions, conduct some research via the internet on
your customer’s annual report, recent statements by company
or business unit executives, or analyst assessments of gaps
and opportunities. Ask colleagues who work with similar
customers what they observe in the market. Armed with this
research about what the buyer might find valuable, you can
begin to build your plan for the negotiation itself. Salespeople
who are well prepared and equipped with knowledge of the
client and their business are better able to discuss and create
value for their customers, as well as strengthen the working
relationship, without making unnecessary price concessions.
2.Skillfully dig under positions around price and shift the
discussion to underlying interests, especially when dealing
with a “hard bargainer”
After you have prepared thoroughly for your negotiation, you
must skillfully implement your preparation to ensure your
discussion with the customer seeks to satisfy all of their core
interests, not just price. You have a great deal of control over
how this discussion develops, more than you might think: our
experience is that the vast majority of negotiators choose
their approach to negotiation based on the approach you
demonstrate. Thus, rather than focusing on closing the deal
quickly, seek to create a learning discussion in order to figure
out what is important to the customer and how to meet the
full set of customer interests.
Even when you skilfully set the right tone for a meeting,
you will face customers who lock into price early on in a
conversation. When a customer begins to push you on price,
it is easy to forget your preparation and give in to discounts
in order to close the deal or just to maintain the relationship.
Rather than giving in to this temptation, when a customer
refuses to discuss value and continues to hammer on price,
change the conversation to explore the other potential
interests you identified during your preparation. This requires
skill (and control over your own emotions!). Some advice in
responding to a discount-seeking customer includes:
„„
Don’t fight their position (e.g., “I need a 15% discount and
I’m not taking any less”), and instead look behind it for their
underlying interests
„„
Imagine why they’re not sharing their other interests (for
example, do they fear disclosure will hurt or weaken them?)
and try to address any underlying fears or concerns about
transparency
„„
Model the behavior you want, by sharing your interests (e.g.,
the unique ways you and the customer can work together,
the importance of the relationship to your organization, your
hope to innovate with the customer, etc.)
„„
Use your preparation to test their interests. For example,
say, “I could imagine that your organization is really focused
on
right now” or, “Given consolidation in the market,
I think
and
might be important to you.
Tell me if I’m missing something, though.” Often, what you
hear in response will be a non-price interest you can use to
change the discussion
3. Propose possible options for agreement and invite criticism
in order to learn more about their interests
Once you’ve uncovered some of your customer’s interests,
take the next step by proposing some ways to meet those
interests without a price reduction. The most skillful
negotiators are able to take the interests they have heard in
the meeting, combine this information with the preparation
on what the customer might care about, and generate some
possible options for agreement that your customer can react
to. Focus your options on ways to satisfy these interests, not
the positions the customer may have stated around price.
Remember to explore many options with the customers. For
each option you propose, invite criticism by asking “What
would be wrong with this option?” instead of just making
a proposal and asking for their agreement. By asking this
simple question, you will elicit responses that are more often
than not expressions of their interests (many of which you
may not be aware of), and you’ll help change the discussion
from one about positions to one about underlying interests.
As you collect more interests, you will be able to craft even
more options to meet your customer’s interests.
4.Share metrics/data with your customer to demonstrate
the value of options you propose
After generating options to meet both your customer’s
interests and your own, you must work to sort among the
options and help the customer understand how these options
satisfy a broad range of interests — beyond just price. Rather
than making decisions based on strength of will (i.e., which
side can force the other to comply) focus discussion of options
around standards of legitimacy (i.e., which side can most
effectively demonstrate that its proposed approach is fair and
appropriate, independent of the will of either party). Common
standards of legitimacy might include precedent, market
rates, industry standards, the law, or the opinion of a neutral
party, and each of these can be used to persuade others that
the options you’ve identified not only meet their interests
well, but are fair and reasonable. Using external criteria not
only helps show the customer how you are able to meet
their interests other than price, but also helps produce wise,
durable agreements while enhancing the working relationship.
In contrast, agreements built just on strength of will tend to
reward inflexibility on price, produce arbitrary outcomes,
damage working relationships, and set bad precedents. As you
look to standards of legitimacy to evaluate options, consider
using this data in the following ways:
„„
As a sword: As you prepare, search for a range of standards
that might be applied to possible options for agreement,
especially those that may persuade the other side that there is
value in your offering that can meet interests other than price.
As you introduce options, start with the most favorable criteria
that you would be willing to put before an impartial arbitrator.
„„
As a shield: Do not yield to pressure, only to principle. If
the other side applies illegitimate pressure to force you into
price reductions and you give in, you reward their bullying
and encourage them to repeat it. If, however, you respond to
arguments based on objective standards, you demonstrate to
them that legitimacy works and encourage them to continue
its use.
While this advice has helped our clients across a number of
industries, it is important to remember that every customer
has a unique set of interests (based on their organization, their
industry, their internal relationships, etc.). You must push
yourself to prepare thoroughly for each key negotiation, hone
your skills in discussing these non-price interests with your
customers, and work to put forward options that meet nonprice interests.
About Vantage Partners
Vantage Partners, a spin-off of the Harvard Negotiation Project, is a
management consulting firm that specializes in helping companies
achieve breakthrough business results by transforming how they
negotiate, and manage relationships with, key business partners.
To learn more about Vantage Partners or to access our online
library of research and white papers, please visit:
www.vantagepartners.com
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