With the rising cost of materials, many companies find themselves negotiating price increases with customers. Here, Tom Feinson, senior consultant at Glasgow-based negotiation skills development consultancy Scotwork, shares his top tips to help maximise acceptance, minimise rejection, and get the best value out of negotiations.
Be specific
It starts with clarity – be specific about what you want, what your message is, where you have flexibility and where you don’t. Nothing is more powerful than putting the actual numbers on the table. Of course, while going open book may not always be appropriate, you do need to be prepared to answer ‘what is the basis of the increase?’
Be realistic
In many cases, businesses let themselves down by making an extreme demand. Even in the current environment, too big of a price increase will be seen as an opening gambit which will be rejected. You will increase your chances of getting what you want if what you ask for is realistic.
If your tactic is to start with a figure you hope will be accepted, there are three guidelines: (1) it should be defendable and rational, (2) it should be within the limits of acceptability of the other party, and (3) it must address the issues, needs and balance of power of all the parties, not just your side of the table.
Create a sense of urgency
Telling the other party when the price increase is going to happen helps create a sense of urgency and removes the status quo as an option. Give a reasonable lead time and implement it when you say you are going to.
Demonstrate value
Develop a simple repeatable message that intuitively makes sense. Explain it in consumer terms, remind the other party of the value you deliver and demonstrate market acceptance.
Don’t make ultimatums without exploring the power balance
If your client has alternatives in the market, ‘take it or leave it’ ultimatums may lead to them leaving without exploring further alternatives. A key question is, how important you are to them, and how important is their business to you? Sometimes it may not be the total size of the relationship, but the importance of a key element of the product mix.
Be ready for push-back
Once you’ve made your pitch, be prepared for push-back. The first and most widely used tactic is flat-out refusal – computer says NO – sometimes allied with brinkmanship and threats in the hope it will deter you. If it doesn’t, you are likely to face delaying tactics.
Don’t be surprised if you’re asked to provide evidence to demonstrate the basis of the increase. This is often a ploy to lure you into what is essentially a filibuster, where implementation of a price rise is delayed by drawing you into the minutiae of technical and procedural differences of opinion.
Don’t be deterred – stick to your guns and eventually the other party will recognise that you’re not going away.
Identify trading variables
At some point you’ll hear words to the effect of ‘So what is it that you want?’. Once you move into this phase you need to calculate how strongly you will hold the line. It’s in your interests to have identified trading variables that will create value for you and the other party based on the initial proposal. Even if you conclude that you will ultimately have to concede, don’t signpost to the other party that this is likely to happen, as you will encourage push-back.
One last thing…
Oh, and one last thing, be alert to the phrase ‘Oh, and one last thing’. It is rarely delivered by accident and is almost always a ploy to secure additional concessions in the end game.
