I am always extremely happy when a client starts to negotiate with me. At that point, I know that I have won. They may not have explicitly said so, but no one negotiates for something that they do not want. So, by starting to negotiate, they are acknowledging that they want your product. From this point on, you are both trying to achieve the same objective - a commercial arrangement that suits you both.
It may be that a commercial arrangement can be difficult to finalise but if you have done everything correctly up to that point, then there is no reason for it to be. The customer should know exactly what your product does for them – what problems it solves, what benefits it delivers. They should know what it is going to cost and how they are going to pay for it. You should also know all of these things so that you can determine what elements of the deal you can modify to suit the client and which you can hold firm on due to their importance to the client.
Negotiation is the process of movement to reach an agreement that is fair to both sides. Both sides will have a set of objectives for the negotiation and both will have some variables that they can trade with each other. Variables are important as you cannot always trade like for like. I used to tell clients that the only things I could vary were the price and the timing of the deal. I would be prepared to lower the price to get the deal signed in my timeframe rather than the customers. This was really to set the framework for any negotiation and to limit the discussions. However, there are a lot more things that could vary.
For example, if you have a relatively new product, you may want as much publicity for the sale as you can get. Getting agreement for a press release or major announcement of the sale is then a variable that you could include in the agreement. Likewise, if you have a technical product, presenting a joint paper at a trade show would be another objective for your negotiation. These things are worth a lot to you but don’t really cost the client anything so they can often easily agree to them.
Quite often, the client will handover negotiations to the procurement department. This can often cause problems for the seller as procurement are tasked with buying rather than supporting the end user to solve their problems. For this reason, it will be critical to have understood all of the client’s objectives before procurement get involved. It is very difficult to go back to the end user once Procurement are involved. Knowing exactly what their problem is and how you will solve it are even more critical if Procurement is involved. Procurement has less variables than the end user and less interest in extending the discussions to other elements of the deal.
In any negotiation, you need to be prepared to walk away if you cannot reach an acceptable deal. This should not be necessary if you have done all of your research as there should not be any surprises for either side. However, there must be a price at which no deal is the best option. This will vary based on a variety of factors. If you have not won a deal for a month or two, any revenue may be better than no revenue. Conversely, if your order books are full with lots of backlog, then new orders may not be critical and you might walk away sooner rather than later. Either way, knowing what your limits are is important before you start.
No matter what, remain positive about the deal as you have done your job well and your client wants your product. That was the hard part. The negotiations should be the easy part.
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