If life is like a box of chocolates, then a business negotiation is definitely like a chess game. It’s about making a move and anticipating the next move of your customer. That’s the analogy we use in our complex negotiations implementation track, which we recently offered to a customer in the packaging industry. Let’s have a look at how we improved this customer’s negotiation outcomes.
A few days into the implementation track, we already received encouraging customer feedback:
Thanks to the Perpetos workshop on Complex Negotiations, we were able to close a difficult negotiation that had been going on for several months, and we brought a good result home.
Of course, this didn’t come out of nothing. Just like a chess game, the negotiations had a well-prepared opening, middlegame and end game. Here is what happened.
Opening: price pressure
Our above-mentioned packaging company was suddenly confronted with one of their long-term, high-volume customers who after a leadership change decided to bid and test the market. The customer wanted to reduce their current raw material prices by 5% and even succeeded in obtaining a price offer that was 12% below our packaging company’s proposal.
The customer was not opposed to a 3-year agreement per se. However, they did not want to be tied to automatic material (price) increases. Instead, they preferred to negotiate and test the market annually. In chess terms, the customer had made its opening move.
Middlegame: a well-conceived game plan
Was giving in to price pressure the only option for our packaging company? Far from it. This is how they handled it differently. For starters, the packaging company’s sales representative prepared his case using our Game Plan Template, which focuses on the customer’s needs and helps to map out all possible scenarios prior to the first customer meeting.
Next, the sales rep assessed the balance of power. Based on that, he came to an understanding how he could influence that balance and determine his starting position. His plan A was a 3-year contract with a 16% price increase. Plan B included a 3-year contract with an 11% price increase and 10 M$ of new volume.
The sales rep started the meeting with one simple question: “What has changed since the last time we spoke?” The question brought him a ton of new information about the buyer’s priorities and additional responsibilities. During the discussion, the focus was not so much on selling the packaging, but it shifted towards the added value and services provided by the packaging company. The sales rep also made sure that all open issues were closed at the table. This boxed the buyer into a position where he did not have any leverage relating to service or quality.
End game: giving and taking
Despite expecting a 5% price reduction, the customer did sign a 3-year contract with a 16% price increase. In exchange for this concession by the customer, the packaging sales rep agreed to reduce the increase to 11% for business or additional volumes coming from a new plant.
Both buyer and seller came out better from the negotiation. This may sound easy, but in practice it’s not. It can be hard to sit in front of a customer who believes the market is softening and who demands price increases based on outdated material indices.
You could also argue that all the above is obvious. So, why would you need a training or implementation track for that? Our answer to that question is: anyone who has been sitting in front of a customer lately, anyone who has sensed the heat of the moment, will know that these things aren’t obvious. We don’t always apply what we have learned, especially when we’re in the everyday rush. People do not change their behavior overnight, especially salespeople, who can be a bit stubborn. (I’m allowed to say that, because I am one.)
Tools for negotiation success
At Perpetos, we develop tools, we provide handles, and we give tips to put all the above advice into practice and to embed it in your daily sales approach. Implementation is the most difficult part of a change process. That’s where we go the extra mile. We do not just train people, we help them to implement change as well.
Here is some feedback we received from participants of our recent implementation track:
Negotiation is a chess game indeed. No matter how close your relationship with the buyer is, they can never be completely truthful. Preparation is so important. Confidence in the value you can provide, makes all the difference for your mindset.
When a customer makes a request, it’s OK to push back and ask something in return.
I need to dig deeper and find the underlying request. Never just assume!
Great session, it gave me the tools I need to take this to my customer.
In our next blog, we’ll discuss some more lessons from the field. We’ll share the key takeaways from the implementation track followed by our packaging company. These lessons were learned during several workshops we had with the EU and US leadership team and global key account managers.