Don't Negotiate With a Gun to Your Head

"I made him an offer that he couldn't refuse." Those words, from the movie The Godfather, have become proverbial for business deals where negotiating isn't possible (or, from the perspective of one party) even necessary. This reveals a great truth - that negotiating is the application of power to reach an agreement.The reason that the offer cannot be refused is that all the power lies in the hands of the person holding the gun, who naturally gets the best of the deal. The same is true in all negotiations, which always reflect the relative amounts of power that the two parties bring to the table.

In my previous post, I explained that you should strive for a collaborative deal that benefits both your firm and the customer's firm. But that's only possible when you come to the table as an equal - with the same amount of "power" as the customer.

At first glance, that seems impossible because the customer, as the person with the money, appears to hold all the power. Since, "he who pays the piper calls the tune," you have no choice but to be at the customer's beck and call, right? Wrong. That only happens when you neglect to put yourself in a position of power prior to the negotiation.

Entering a sales negotiation from a position of weakness is a recipe for a bad deal - for your firm. Here's what often happens:

1. The customer makes a demand.
2. The sales rep doesn't want to lose the sale, so he runs back to his management to see whether he can get that demand met.
3. After a lot of extra work, he gets internal agreement, and then runs back to the customer with the "good news," expecting to close the deal.
4. Surprise! The customer has another demand, usually bigger than the original one.
5. The sales rep runs back, and after even more hard work, gets agreement.
6. Back to the customer, hoping to close the deal.
7. Surprise! Another demand!
8. Etc.

What's worse, "special agreements" and "relationship saving" discounts have an annoying habit of becoming public knowledge, spawning demands for similar deals. Over time, that can damage the profitability, and even the viability, of an entire company.

And that's not all. Regardless of the final outcome, the sales rep discovers that he's completely lost the respect of both the customer's and sales rep's management, because the rep has revealed himself to be not a competent professional but a low-level "doofer" who always has something that he needs to "do for" the customer.

The sales rep, by neglecting to develop a level of power equal to that of the customer, has gotten into the position where the customer can make an offer that he can't refuse. In my next post, I'll explain how to accumulate power during the sales process, so that you can negotiate without feeling like you've got a gun to your head.