FRANKFURT SCHOOL

BLOG
How to know when your price is rejected – Part 1
Executive Education / 26 June 2018

  • Share

  • 2629

  • 0

  • Print
Derek Blazensky
Expert at the Systematic decision-based negotiation seminar
Derek Blazensky – Special Guest at the Systematic decision-based negotiation seminar. He has had 3 careers in Silicon Valley: software development, product marketing, and venture capital. Derek was director of product marketing at Adobe Systems before managing Adobe’s corporate venture fund. He co-founded Cardinal Venture Capital, a $125M venture fund investing in enterprise software and mobile computing. Today Derek is Partner and Co-founder of The Pareto Group, which provides negotiation coaching services for venture-backed technology companies.

To Author's Page

More Blog Posts
Are you fit enough for alternative M&As?
Executive Education / 19 April 2024
Erforschung der Auswirkungen von KI auf die Zukunft der Arbeit
Executive Education / 6 March 2024
Key strategies for business development in the dynamic world of business
Executive Education / 29 February 2024

Our negotiation system relies on making effective decisions, and often that means saying “No”. “No” is effective because it provides clarity. Likewise, we get clarity from our opponent when they say, “No, we can’t accept that.” But sometimes things aren’t that clear.

Exercise: Am I hearing “No?”

Let’s examine some classic statements to see if your opponent is really saying “No.” Your company, SimCo., has recently presented a €1,000,000 proposal to a new customer, BigTech. BigTech has indicated there’s plenty more business ahead once the partnership is started.

Select all the statements below by BigTech that indicate they have clearly rejected your price:

  1. We were surprised by your price. We need you to do better.
  2. In order to stay on track with our next meeting, you’ll need to come with a lower price.
  3. Our internal model shows your costs are very low to provide this to us.
  4. I can’t take this price to my boss.
  5. Our current vendor has given us a much better price than what you’re giving us.

Well, none of these statements is a clear “No.” These are all statements that push you in different ways to make compromises and lower your price. Reading a simple “No” in these statements can be costly and unnecessary First let’s examine what BigTech communicates in the first three statements.

“We were surprised by your price. We need you to do better.”

This is not a rejection, but a statement of preference. The preference is dressed with some emotion to make you feel as though you offended your customer. Your customer wants you to think about the relationship where surprise is unwelcome and doing better is rewarded.

An effective response is to reverse and mirror by asking,

“Surprised?”

Pause. Listen. Let your opponent explain their surprise and allow the negotiation to continue.

“In order to stay on track with our next meeting, you’ll need to come with a lower price.”

This is not a rejection, but a stronger indication of lower price preference because it includes a thinly veiled threat: If you don’t lower your price, the next meeting will be canceled or delayed and it will be your fault.

An effective way to defang a bully is to ask them to explain and then test their decision with this:

  • How will that work if you cancel our scheduled meeting?
  • What do you hope to achieve by canceling?
  • What happens next?
  • It will be helpful for us to have clarity. Are you officially rejecting our price?

“Our internal model shows your costs are very low to provide this to us.”

This is not a rejection of your price, but a technique to get you to disclose your internal costs. Once you disclose your internal costs, your opponent will eventually demand that your cost become their price (with a smidgen of margin to keep you in business supplying them). They will promise to help you lower your costs, having you believe those cost savings will accrue to SimCo. Hint: this story always ends with the cost savings accruing to BigTech.

Never provide internal costs and treat them like all other proprietary confidential information. An effective response is to refocus BigTech on your mission with a sequence like this:

  • We don’t share our costs, just like we don’t share other company proprietary information.
  • We’re not responsible for the accuracy of your internal model and can’t help you with that.
  • How else can we help you understand what we will provide and how we will provide it?

Are you interested in the examination of the other two statements and the conclusion? Wait for part 2. And if you want to learn even more about negotiation register for the seminar Systematic decision-based negotiation.

0 COMMENTS

Send