Effective Negotiation Tips: Leveling the Playing Field

Interested in saving money?  Who isn’t!  Last week we discussed the proper negotiation mindset (see Blog dated Dec 6th) and this week we delve into practical strategies to apply.

So how do you get the best cost or price?  It’s simple.  It’s done by applying strategies that level the playing field.negotiation

Recall, retailers/salespeople are doing their ‘selling’ every day and you are NOT their first customer!  Consumers enter the market less frequently for big purchases i.e. a car, house, mattress (once every decade maybe?!).  So, read the below strategies to level the field.

  1. Be confident and knowledgeable.  Be prepared and armed with an understanding of  ‘The Market’ – it is the easiest low hanging fruit.  Research is available online, magazines, etc.  Consumer testimonials are essential.  Know what you want and do your homework before purchasing.  Isolate your options so you spend time efficiently.
  2. Concepts around timing –
    1. Investment in time – The more the salesperson has invested time in you, the less time they have spent on other customers.  You are affecting their commission.  When the right amount of time is invested, a few hundred bucks off (a big deal for you), means little to them to ‘get the sale.’
    2. End of month – depending on what product is being negotiated, ie cars – sales people must make monthly quotas.  Use this to your advantage and go at end of month.
    3. Time of day!  Let’s continue with the car example –go on a Saturday – Do you go in the morning or at end of day to close the deal?  The answer: At the end of the day of course!  They want to go home and want to conclude the sales and you can negotiate effectively.
    4. Seasonality – never buy your winter jacket, snowmobile or skis in the winter.  Purchase in summer.  Buy your boat or convertible! etc in the winter – there are always better deals as they flush through inventory.
  3. Threaten to leave!  Call up your telephone or Internet provider and threaten to go and they will send you to their loyalty group.  If you have done ‘a’ above, they will reduce your bill by 25% or more!

But like anything, it takes an effort to save $.    Level the playing field as best you can.

 

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Category Management: Effective Negotiating

Perhaps you are a novice to negotiating.  Perhaps you don’t like confrontation or asking for ‘things’.  fear2But many hurdles to effective negotiating are only mental barriers, such as fear and fear is just a mindset. 

I’ll repeat that – FEAR is just a mental barrier to effective negotiating and can be overcome. 

I have blogged on topics like negotiation before and received several responses and questions regarding different tactics and proper mindset.  This is a two-part blog; this week we delve deeper into effectively overcoming simple mental barriers while the second blog will discuss some sensible strategies to employ and get the best value.

Step 1.  Adjusting your mindset (overcoming the fear).

Some people fear negotiating as much as giving speeches.  People fear rejection and /or the confrontation.images

Perhaps you are a novice to negotiating.  Or perhaps you don’t like confrontation.  But fear is just a mindset.  Visualize that you just engaging yourself in a harmless conversation with a complete stranger (that’s right – a stranger!).  You don’t know him/her, and they don’t know you from Adam.

Step 2.  The worst case scenario: prepare yourself for it!

Here it is!  The answer: no! 

Let’s put negotiating into context here folks.  The worst that can happen is they say ‘No’. 

No!  There I said it again.  Ok, I jest, but was that so bad?   A complete stranger says “no” to us and we can walk away.  That’s the only risk and the worst case scenario.  Don’t be afraid of rejection.  Your pride might be pinched, but that is ego.  And ego has no place at the negotiating table.

Step 3.  Practice. Practice. Practice.

The classic cliché, but still an effective one.  During the process of adjusting your mindset, start to haggle over some small stuff regularly.  Goods that are not urgent or pressing to you

You don’t go straight into important negotiation with something you really really want.  The less you want it, the better you will negotiate.  Trust me.  Why?  Because your mindset is relaxed and prepared to walk away.   Its No Deal. 

And having a relaxed mind and knowing you can walk away,  is one of the keys to effective negotiating.

Merchant Tip: Vendors as Personal Consultants

In an earlier blog, I commented that bullying your vendors is not a synergistic business paradigm (see Nov 29th blog). Win / Win is the highest form of cooperation and this blog builds on that philosophy.

Vendor’s are SME (Subject Matter Experts).  Don’t think you have to know it all; there’s too many competitors, listings and programs out there and likely your portfolio is huge. 

So here’s how I would position it to vendors: “I’m new to the category. But good news! I’m hiring! And you are getting a new title to boot…you’re a Personal Consultant!”

Enlisting Vendors to educate you, including: plant tours, product tastings (always fun) and conduct complete business reviews will grow your category and personal knowledge.

Vendor Personal Consultants, ask them the following:
– Line listing – do I have your top skus for MY business? Which ones should I delist (they don’t like but that’s ok)
– Am I promoting right items at the right times?
– Are my retails competitive? Ie you do the market research!
– How much money is there in the pot for me to promote your items? Ie how much will you invest?
– What listings can we create together such that I have ‘exclusivity’ for these listings?
– Create a planogram for me based upon Consumer Behaviour shopping habits

Engage your vendors. Hold them accountable. Work together.

When you do business reviews (at least quarterly), review the sales. If the results are bad, they can only look to themselves and their recommended programs. Good vendors are happy to do this consultation; bad vendors don’t want to do the work nor want that accountability.
Strategic and effective, Vendor Personal Consultants are a great way to go. But wait! There is still the best part! Its FREE and unlike other consultants, Vendors have to stick around and LIVE the results.  And if they don’t get the results?  Well you’ve done your due diligence and can comfortably source a vendor that will grow your business.

Pricing Strategies Examined

In a tough economy, many retailers are discounting prices.  But price alone is not a sustainable strategy to retain customers and earn a $profit$. Attract them yes! …But retain customers, no!
However, leveraging from your reduced price strategy while concurrently implementing a new value-added program(s) to your business model can be sustainable. And very profitable.

During a discounted pricing strategy, your business will increase customer traffic and customers will get exposure to your newly created (or even existing value-added (VA) services) and this will gain customer loyalty.  Such VA programs should be tailored to your target market and some basic examples include: elderly assistance, VIP treatment for women with children, build in loyalty program/points, partnering with a company that synergizes with your business, etc. 

The more creative and unique, the better: unlike Glengarry Glen Ross, it is not ABC! (Always Be Closing) but ABD! (Always be Differentiating!)

It is important for retailers to emphasize ‘what differentiates them” from the competition while employing the discounted price strategy.  Discounting on price alone will only reduce profits and ultimately precipitate a new retail strategy…one that will be a more desperate measure to gain sales. 

Side Note: New Entry Retailer Strategies
In some instances, however, discounting price is the only strategy of some retailers (usually new retailers or smaller outfits….a tactic employed to gain market share and exposure). This strategy usually has a set time limit and there is a fundamental understanding of the impact on short-term profits.
Strategically, these retailers reduce prices on specific KVI items (Known Value Items to the customer i.e. Coke, Tide) or even on destination departments such as Produce or Meat. This Retailer strategy is done to entice customers to shop repeatedly and gain familiarity with the retailer and its products/services. But, once the retailer gains significant critical mass/customer traffic, gradually they will increase retails to be more competitive. This is usually done slowly to avoid sticker shock.

Fundamentals of Category Management: Negotiations & Win/Win Paradigm Shift

Negotiating.  Palms sweaty. Heart racing. Adrenaline pumping. Negotiation is like a competition. It’s YOU versus THEM. Who will score the knockout and be the victor!

However this need not be the case and many argue that a paradigm shift in business is required for sustained, mutually beneficial negotiations.

Usually the words ‘mutually beneficial’ are not used simultaneously with the word ‘negotiation’ but the best principle to use is a WIN/WIN approach. But before we proceed, recall there are several outcomes:
Win/Lose – I win/you lose
Lose/Win – I capitulate & give up/You win
Win/Win – both winners
Lose/Lose – Both losers
No Deal – We walk away from deal.

Win/Win is the highest level of personal effectiveness. It says, you realize that you need to ‘make a buck’ as does the other. For example, don’t be a bully and crush your Vendor today. You may have better leverage  (ie work for a giant retailer) and beat the vendor down in cost, but win/lose or lose/win is myopic.  
Sustained relationship building is maintained by understanding everyone needs to profit. In such a way, long term relationships are forged and trust is achieved. Trust…. often lost in today’s competitive market; it needs to make a comeback not a knockout.

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