Positive negotiations with customers

How to make deals that solve problems and maintain good relationships

As a business owner or manager, your daily activities include negotiations with customers to solve problems and secure orders while maintaining a mutually beneficial relationship.

Here are some approaches that I have found successful in maintaining positive relationships with your customers while dealing with these challenges.

Your first step is to acknowledge there is a problem. Denying or ignoring that fact only makes it worse and usually, the solution selected will be more expensive and possibly damage the relationship between the parties.

The next step is to ask the customer to clearly define the problem and identify potential solutions. Don’t offer a solution until you totally understand the details of the problem. The best solution may not be the first one that comes to your mind or theirs. Once you have clearly defined the problem and developed your proposed solutions, evaluate the customer’s suggested solutions and compare them to the solutions you have developed. Whatever solution you select, it should be a “win-win.” In some cases, you may have to give up something in the short-term to get the order or retain the customer.

If the problem was caused by the customer, link your solution to a change in their business behavior. Linking is tying a change in behavior or a concession the customer makes to a concession you offer. You should never make a concession unless the customer also gives up something of value. This is the basis of a collaborative approach to problem solving.

Many times, when you are negotiating a deal, the buyer may state, “The price is too high,” or “I need the delivery by a certain date.” When you hear the price is “too high” you have options available to you. You can reduce your price by a set percentage, ask what part of the price is too high or suggest the customer moves to the next price break. The option that has the best possibility of resolving the price problem is determining exactly what component of the price is too high. It may be the freight, the size of the discount or the unit cost. All it may take is a small adjustment to the quantity or the unit cost to seal the deal. In many cases, when you offer a percentage off, e.g. 10 percent, you may give away too much of your margin and set a precedent for future negotiations.

The request of “delivery by a certain date” is another opportunity to negotiate out of a potential problem. In many cases, I have run into this problem and found that asking, “Do you need the entire quantity on that date?” revealed the answer was no. That provides the opportunity to ask a follow-up question. “How much do you need by that delivery date?” You may find out you can fulfill the entire order over time, avoid additional costs and keep the customer satisfied.

Should the parties to any of these business negotiation scenarios reach an impasse, a point when the negotiation has come to a dead end, there are options. Many purchase orders and contracts contain a clause that permits the parties, if they reach an impasse, to introduce a third party into the negotiation. Some contracts stipulate Alternative Dispute Resolution, which involves mediation and, in some cases, arbitration if the parties cannot reach an agreement within a reasonable time. Mediation usually results in a “win-win” agreement, while arbitration awards tend to be a “zero sum” result. Such a result would make one party whole at the expense of the other party. This result would not aid you in maintaining a positive long-term relationship with the customer. These costly and time-consuming options can be avoided by applying the approaches summarized above.

These types of situations offer you the opportunity to identify options with your customer by maintaining an ongoing dialogue. This dialogue will strengthen the relationship between the parties and create a “win-win” situation. Your vendors and customers will become your business partners and enjoy a positive relationship because together, you are solving problems in a manner in which both parties benefit.

As a business owner or manager, your daily activities include negotiations with customers to solve problems and secure orders while maintaining a mutually beneficial relationship.

Here are some approaches that I have found successful in maintaining positive relationships with your customers while dealing with these challenges.

Your first step is to acknowledge there is a problem. Denying or ignoring that fact only makes it worse and usually, the solution selected will be more expensive and possibly damage the relationship between the parties.

The next step is to ask the customer to clearly define the problem and identify potential solutions. Don’t offer a solution until you totally understand the details of the problem. The best solution may not be the first one that comes to your mind or theirs. Once you have clearly defined the problem and developed your proposed solutions, evaluate the customer’s suggested solutions and compare them to the solutions you have developed. Whatever solution you select, it should be a “win-win.” In some cases, you may have to give up something in the short-term to get the order or retain the customer.

If the problem was caused by the customer, link your solution to a change in their business behavior. Linking is tying a change in behavior or a concession the customer makes to a concession you offer. You should never make a concession unless the customer also gives up something of value. This is the basis of a collaborative approach to problem solving.

Many times, when you are negotiating a deal, the buyer may state, “The price is too high,” or “I need the delivery by a certain date.” When you hear the price is “too high” you have options available to you. You can reduce your price by a set percentage, ask what part of the price is too high or suggest the customer moves to the next price break. The option that has the best possibility of resolving the price problem is determining exactly what component of the price is too high. It may be the freight, the size of the discount or the unit cost. All it may take is a small adjustment to the quantity or the unit cost to seal the deal. In many cases, when you offer a percentage off, e.g. 10 percent, you may give away too much of your margin and set a precedent for future negotiations.

The request of “delivery by a certain date” is another opportunity to negotiate out of a potential problem. In many cases, I have run into this problem and found that asking, “Do you need the entire quantity on that date?” revealed the answer was no. That provides the opportunity to ask a follow-up question. “How much do you need by that delivery date?” You may find out you can fulfill the entire order over time, avoid additional costs and keep the customer satisfied.

Should the parties to any of these business negotiation scenarios reach an impasse, a point when the negotiation has come to a dead end, there are options. Many purchase orders and contracts contain a clause that permits the parties, if they reach an impasse, to introduce a third party into the negotiation. Some contracts stipulate Alternative Dispute Resolution, which involves mediation and, in some cases, arbitration if the parties cannot reach an agreement within a reasonable time. Mediation usually results in a “win-win” agreement, while arbitration awards tend to be a “zero sum” result. Such a result would make one party whole at the expense of the other party. This result would not aid you in maintaining a positive long-term relationship with the customer. These costly and time-consuming options can be avoided by applying the approaches summarized above.

These types of situations offer you the opportunity to identify options with your customer by maintaining an ongoing dialogue. This dialogue will strengthen the relationship between the parties and create a “win-win” situation. Your vendors and customers will become your business partners and enjoy a positive relationship because together, you are solving problems in a manner in which both parties benefit.

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