Purchasing and Negotiation Training

"Shorten your sales cycle & increase your win rate through competitive excellence"

Editor’s note: Stu Schlackman is a regular guest contributor to the blog.

In a negotiation, a party has a choice to enter or exit at any time; bargain or walk away, but ‘who has the advantage, the power to direct the outcome? If you beleive that the other side has all the cards, you will fare poorly. However, you can shift power in your direction with research and discovery of key information.

A Personal Example

In May of 1991 we bought a house in Garland, Texas. As an Orange personality style, buying and selling is an emotional competition.  I needed information to help us leverage our seemingly disadvantaged position. The house was ideal for us and in our 1st choice neighborhood so we did not to walk away. However, it was listed at $219,900 which was more than we wished to pay. We planned to start the negotiation with the most elementary of tactics “the price is too high”. We needed information to shift power and price to our side. The best way is to ask targeted questions. Specifically, we need information about (1) time, (2) economic considerations, and (3) sense of urgency.

Time

First we asked about time.  The house had been on the market for nine months. Digging deeper, we discovered the original price nine months earlier: to our surprise in was $259,900. The sellers had already dropped the price by $40,000 and the house was still unsold.

Economy

Just as now, in 1991 the economy was in a recession with supply far in excess of over demand so it was a “buyer’s market.” Conversely, with a recession, mortgage rates were dropping; would this bring in competitors for the purchase of this house who had an urgency to buy while the rates were low.  Other interested buyers would trigger my Orange competitive drive and increase our sense of urgency to close. Fortunately for us, there seemed to be no other bids on the house. 

Sense of Urgency

Lastly, we needed to determine the seller’s sense of urgency to unload this house. Asking the right questions to uncover the sense of urgency requires some thought.  Our last “casual” question to the selling agent: “why is the house not occupied?  Why isn’t there any furniture?” We found out that the owners had already moved leaving the house unoccupied for nine months. We further discovered that the owners were a retired couple who owned the house mortgage free.

Bingo! Knowing that they had equity tied up in a house in a down market and they were missing great equity buying opportunities, we asked ourselves ‘what was cash worth to them?’ We decided to offer $180,000, a price the seller’s agent said was much too low. But our questions paid off, shifting the balance of power to our side. We came to an agreement at $187,000 and the house was ours.

Information is critical when shifting power to your side. Every industry and business has other ‘trade specific points’ to consider. Learn these and use them to your advantage. The most important thing is to do your homework! The more information you have on the customer the more leverage you have to set the negotiation terms; knowledge really is power. Knowledge of personality styles will also impact the negotiation:

• Oranges will always negotiate since they treat life as a game. They will not give up easily.
• Golds focus on every detail, item by item. They will have the financial advantages figured out.
• Greens, with their thirst for research and drive to ask the tough questions, will find out more information.  Will it be key?
• Blues will build a relationship that will be very convincing. They naturally seek a win-win outcome.