I recently attended a sales meeting as part of mentoring a senior executive. I observed a negotiation that could have been a B-school role-play on supply and demand -- and If I'd been the professor, I would have flunked the students. Afterward, I found myself thinking, "If you're not negotiating, you're donating -- and don't we do enough of that on Sunday?" How many of us are too uncomfortable to ask for what we need, and deserve -- and therefore, end up donating our value, or breaking off a relationship in order to avoid that outcome?
Negotiation should be collaboration between individuals who are committed to improving each others' outcomes. But too often, strategic relationships have not been intentionally developed before negotiation-time arrives. I've seen partners to a negotiation get greedy and destroy a really good thing because they perceived they "deserved" more money. I've seen vendors lose valuable clients because they felt "underpaid." I've seen executives make dumb decisions about money. Real business relationships take the high road and invest in one another. Ending a relationship over a failure to come to a mutually acceptable agreement is frankly immature.
I understand that negotiation is frequently difficult; market factors that constantly shift. Suppose Lisa has a perishable supply of product (or hours that lose their value if not sold, as is the case with professional and personal services.) She may need to drop the price in order to sell that inventory. Say the market value of that offering was $100 but she drops her price to $50 in response to a drop in demand, so she can get rid of her supply. Lisa's customer gets comfortable paying $50 for her value.
Then the market rebounds to a point where Lisa could get $150 for that same value. She goes back to the customer paying $50 to negotiate an increase to closer to the current market value. That's where her relationship gets tested! Candor -- one of ten relationship impact moments I've identified -- becomes valuable. (I wrote about the Ten Relationship Impact Moments on HuffPost Business last year.) Lisa needs to let her customer know the true facts of the situation. "I value you, but I cannot keep my commitments if you and I keep doing business at the $50 price point. We both know others are paying closer to $150."
This is stress-testing a relationship. "Dig your well before you need it," the saying goes, and it proves true now. How this negotiation proceeds will depend on the trust, empathy, and candor Lisa and her client have learned to expect from each other over time.
If she has built a trusting relationship, she can have transparency in this negotiation. Lisa can tell her customer what her price is based on, and her client can tell her what constraints he's under. I know it won't be easy for him to see his costs rise by 300 percent, just as he knows that Lisa can't sustainably deliver a $50 value to him that costs her $100 to produce. Together, they can problem-solve to find a way forward that meets both their needs to operate at a suitable profit. Neither of them will ask the other to "donate" because they know neither of them is running a charity.
"No" is simply intellectually lazy. "How can we work together?" is infinitely valuable. Negotiation is not the time for demands and counter-demands. It's time for conversation. It's time to illuminate the situation around whatever's on the table, so that all parties understand all factors influencing the negotiation's outcome.
Think of it this way: when you are driving in the dark, down an unknown road, why do you turn on your high beams? Not because they let you see further -- they don't. What high beams do is expand your peripheral vision.
Strategic relationships should be conducted with a high-beam mentality that extends your view of the periphery. When you come together to negotiate, that high-beam mentality makes the negotiation a discussion. It becomes a collaboration from which the relationship will emerge even stronger and more resilient. Yes, you may need to settle for a price that is lower than you can otherwise command from a net-new customer. But if you calculate the customer lifetime value of a tenured relationship, it's frequently worth the investment.
In short, don't let money get in the way of great relationships! Be reasonable. It's easy to be "penny-wise and pound-foolish." It's harder -- but much more rewarding, financially and in relationship capital banked -- to take the high road with your high beams on.
Nour Takeaways
1. Negotiation stress tests a relationship, revealing whether it is merely transactional, or truly strategic.
2. Market factors shift, bringing recurring need to renegotiate the price/value equation--and need for candor. When both sides are transparent, a way forward can be found.
3. To negotiate successfully, develop a "high beam mentality" that improves your peripheral vision--your understanding of the situational factors surrounding each others' desired outcomes.
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David Nour is an enterprise growth strategist and the thought leader on Relationship Economics® --the quantifiable value of business relationships. In a global economy that is becoming increasingly disconnected, The Nour Group, Inc. has attracted consulting engagements from over 100 marquee organizations in driving unprecedented growth through unique return on their strategic relationships. Nour has pioneered the phenomenon that relationships are the greatest off balance sheet asset any organizations possesses, large and small, public and private. He is the author of several books including the best selling Relationship Economics-- Revised (Wiley), ConnectAbility (McGraw-Hill), The Entrepreneur's Guide to Raising Capital (Praeger) and Return on Impact--Leadership Strategies for the age of Connected Relationships (ASAE). Learn more at www.NourGroup.com.