One Step Ahead. The newsletter for busy key account managers

How to Win Deals with One Simple Negotiation Strategy

We all have to negotiate with our clients sooner or later, but for lots of reasons, most of us avoid it if we can.

Anchoring is a simple tactic that can help you gain control of the negotiation and give you a bargaining advantage too.

traffic light

Why make the first move in a negotiation?

Research shows that making the first offer gives you a bargaining advantage. That's because when you start the negotiation, you control one end of the spectrum. Either the high price, or the low price.

It's called price anchoring.

Higher prices make people tend to think about the good things.

Lower prices make people focus on the bad things.

When you look at a cheap home, you think about the repairs it will need and worry that it'll be a money pit.

When you look at an expensive house, you think about all the summer pool parties you'll throw.

Weird how that works.

But if you're worried revealing your anchor price will make you lose power in the negotiation... don't.

In truth, there's no such thing as cheap, or expensive. It all depends on how much you - and your client - think something is worth.

Just don't start too cheap, or too high. It'll just insult your client and make them question your credibility.

And leave yourself some room to manoeuvre because no-one accepts the first price.

The misconception: You rationally analyse all factors before making a choice or determining value. The truth: Your first perception lingers in your mind, affecting later perceptions and decision —David McRaney
the kam club dark blue

The KAM CLUB

You’re only seconds away from the essential training, advice and support you need for an exceptional career in key account management.

anchor

How to use price anchors

Don't insult your client by starting with an offer that is way too high. Or by making a silly low-ball offer.

Either of these moves hurts your relationship and credibility. Your client might even decide that they don't want to continue the negotiation at all.

Open with a fair offer in the price range you want. Somewhere around wherever your client's best alternative to a negotiated agreement (BATNA) is.

If you're close to what your client will pay, you're more likely to close quickly. They won't feel like they have to give in when it's not necessary.

  • Start out low and work your way up. The client will want more, which is fine. For example, start at 10 and stop at 20, knowing that you'd be happy with 15.
  • Start out high and work your way down. Your client will want to pay less, but that's not a problem because you've left some wiggle room in your offer.

If you want to raise prices, don't go above 10% unless you have strong evidence to back it up.

Weber's Law of Just Noticeable Difference says that when a difference is 10% or more, we start to pay attention.

Fun fact. This idea works for most sensory experiences. We don't notice a change in brightness, volume, weight, length, etc. until it's at least 10%. Interesting huh?

Chess pawn

Clients use tactics too

Expect your client to do some negotiating of their own. Here are some of the ways they might respond.

  • Reject your offer. Don't get angry or defensive if your client says they need a better price. Say you're not on the same page and ask why and what price they want. After you do some more research and look over your proposal, you can get back to the negotiations.
  • Change the timelines. Your client might not agree with your timetable for the deal. Ask why the schedule you've come up with won't work and what a good plan would be.
  • Promise more business. They might hint there's more business they'll give you if you sharpen the price. Watch out for this tactic. Before you go any further with the negotiations, ask them to bring data to back up their claims and put their promises in a contract.
graduation cap

Free course on negotiation

Successful Negotiation: Essential Strategies and Skills. This is a free online course offered by FutureLearn. It's a nice introduction to negotiation and the situations where it comes in handy in our daily lives (not just at work). Discover how to plan and analyse negotiations and key tactics for success.

open book

What I'm reading now

Each month inside The KAM Club we pick a book of the month. I read it, write the summaries and record a companion podcast. Our current book is The Introvert's Edge to Networking

As someone how is most-definitely an introvert, and who has struggled with networking my whole career, I was excited to dive in.

The book has been eye-opening to say the least. The key points for me are that:

  • I need a plan. Who do I want to meet and why (quality vs quantity). Usually I just go into a room and wander around.
  • I need a short, unique message that explains what I do. It needs to spark curiosity so that person asking will follow up with, "What does that involve?"
  • I need to have some stories to tell so I can showcase what I do and who I help (but makes my clients the star, not me. I'm not the main character).

I'm enjoying the book so much I wanted to share with you the first chapters (normally exclusive for The KAM Club members only). Take a listen and let me know what you think.

calendar

Workshop: How to successfully execute a negotiation strategy

September 13. I've decided to host a workshop dedicated to negotiation, because it's an essential skill for all professionals. Get started on the right foot with a deep dive into your negotiation style, improve your persuasiveness, and build the skills to respond to conflict when it arises. 

Gain insight into win-win and hard-bargaining tactics and countertactics so that you and your client get your needs met.

Tickets are only £7 / $9 but One Step Ahead subscribers can get them for 30% off.

How to Win Deals with One Simple Negotiation Strategy

In other news

+ 20 Most Popular LinkedIn Learning Courses. LinkedIn have published their top courses so far this year. The best news is you can take any and all of them for free until the end of August!

+ When to Make the First Offer in Negotiations. Outstanding article from Harvard Business School that digs deeper into tactics you need to make the first move and close the deal. It explain how aggressive your offer should be, and how to protect yourself if you're not the one making the first move.

+ The Easy Way to Prepare for a Successful Negotiation. Listen to episode 9 of The KAM Club podcast discusses how to create a negotiation plan and some other negotiation tactics.

How to Win Deals with One Simple Negotiation Strategy

Quote of the week

"To sell your soul is the easiest thing in the world. That's what everybody does every hour of his life. If I asked you to keep your soul - would you understand why that's much harder?" ― Ayn Rand

Got an idea for The KAM Club podcast?

Do you have a suggestion for a topic you'd like me to cover in a future episode of The KAM Club podcast? Fill out this brief form and you never know, your idea might feature on an upcoming show.

Let me know if anything in this article caught your eye, I'd love to hear from you.

Have a great week

Warwick Brown

Warwick Brown


Warwick Brown is one of the leading key account management experts in the world. Through The KAM Club, a global membership community for key account managers, his blog that reaches 20,000 people every month, and a range of training and coaching services, Warwick has helped thousands of key account managers get better results, faster.
Go here to read Warwick's story from key account manager to entrepreneur. If you want to send Warwick a quick message, visit his contact page here.

Join 8,613 readers who are one step ahead.

Join a community of sales, customer success and key account management readers. Sign up for One Step Ahead, guaranteed to bring actionable tips that grow client revenue and retention, as well as high quality career, business trends and productivity insights - direct to your inbox. For free!

Account Manager Tips
>