After 22 years consulting on over 25,000 business negotiations in over 46 countries, we’ve heard a lot of negotiation tactics. All are attempts at commoditization and driving more concessions from the seller; some are more difficult than others.
A recent client was negotiating with their largest customer, a $60b Fortune 50 firm in the manufacturing business. Our client produces bleeding edge tools and software for manufacturing. In fact, they very often have tools that increase yield and reduce defects ahead of the market. This position gives them real power in negotiation. However, during the negotiation, their buyer, in a very angry and aggressive manner ended the negotiation proclaiming:
“If you don't give us what we want, we will fund a start-up competitor to you!”
This was easily among the toughest verbal tactic we ever had heard. The buyer had the resources to do so. Executives in our client organization were scrambling.
We immediately assembled key members of our client's account team, including knowledgeable engineering and finance representatives, and in 30 minutes we could feel the panic diminish and the courage rise. As we guided the conversation, some key facts helped:
- How long would it take to find this start up competitor?
- How would this impact business in the meantime?
- What would the due diligence look like and at what cost?
- What is the reality of the investment needed?
- How long before bug free tools were ready for commercial use?
- What would commercial terms be between the manufacturer and this new start up?
Negotiation is very often thought of as a soft skill. We are asked regularly for “tips and tricks” for negotiating. Our clients are frequently faced with angry, threatening buyers who walk out of the room, don't return calls in the middle of the negotiation, declare the negotiation over, threaten and yell! Most want a list of tips and tricks to counter these tactics. Here is our list:
FACTS. WIN. EVERY. TIME.
In reality, the example from our client, and many more like it, are nothing more than verbal tactics. Because our client could meet their customer's needs with higher confidence and lower risk than their alternative (funding a start-up), their customer's tactic was irrelevant. We've seen this countless times. Panic and countering a trick, or an aggresive tactic, with another aggressive tactic rarely works. Repeatedly, it puts pressure on the relationship instead. What does help? Facts. A rational negotiator who has more data and seeks to calmly educate all parties at the table wins!
We call this “changing the conversation.” We have choices about how to react to aggressive tactics and our research continues to prove that using rational, fact-based analysis is always the better choice. Rigor and cadence around negotiating may not be as entertaining as hostage negotiation tricks, or exciting as tips from high end sports agents, but winning deals and protecting margin is a pretty sound end game.