B2B Street Fighting Blog

we all want more of the pie!

Posted by Marie Dudek Brown on Tue, Aug 21, 2012 @ 12:16 PM

we all want more of the pieCreating value is, of course, something that has to work for both you and your customer, or it doesn't work for either of you.  Salespeople like yourself have two very good reasons to embrace the concept of value creation.  First, it makes it easier for you to negotiate with buyers because it's easier to divide a larger pie than a smaller one.  And, second, it enables you to make more money by providing you with the ability to make bigger deals, and over time bigger deals mean more money.  However, even though creating a larger pie and a bigger deal is ultimately beneficial to both sides in a negotiation, buyers don't necessarily see it that way.  Because, as a rule, buyers are primarily interested in lower prices, they're less likely than you to be concerned about value-creating trades.  And that's why it's often incumbent on you - the seller - to show the buyer how and why creating value is advantageous to both of you.

There have been many situations in which buyers have presented sellers with value-creating trades.  A favorite comes from Henry Ford.  As legend has it, Ford was negotiating the purchase of door handles for his Model T with his usual supplier.  The supplier was asking for a 5 percent increase in the price that Ford, understandably, didn't want to pay.  As a result, they appeared to be at an impasse.  The carmaker, however, thought of a way out.

At the time, the door handles came to the Ford plant packed in wooden crates.  Ford told the supplier he could have his 5% increase if he'd agree to change the size and location of the bolt holes on the lids of the wooden crates.  Because it would cost him virtually nothing to make the change, the supplier was happy to do it.  Ford was happy as well because, as it happened, the floorboards of the Model Ts were also made of wood, and with the modification, Ford was able to use the crate lids as floorboards.  The trade did, of course, increase Ford's cost for the handles, but that increase was far outweighed by the savings he realized by eliminating the cost of raw materials and the processing of the floorboards.

Your takeaways:

  • Both sides benefit when value is created regardless of whether it's the seller or the buyer who comes up with the trade.
  • Even in a simple business deal, it's actually very easy to find ways to create value.
  • In more complex business negotiations, when there are more things that can be discussed between the two sides, there are even more opportunities to create value.

Tags: negotiation strategies in business

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