There’s a lot to be afraid of these days. Pundits will tell you the economy has been through worse times, and they’re right. But never before has the economy changed so much, so fundamentally, in so little time. Industrial revolution? A snail’s pace compared to what’s happening with the internet today. So when things go wrong, it’s easy for fear to sneak up on us.
To steal a line from the wise and powerful Yoda, “Fear leads to anger. Anger leads to hate. Hate leads to suffering” –and in the case of negotiation, to financial ruin.
Easy for Yoda to say, he could just wave his little green paw and have people do whatever he wanted. But what do you do when a key client comes to you and demands price concessions at exactly the time you can least afford it?
I’m asking you, seriously, what do you do?
Do you drop your price to keep the client? If so, not only will you be taking a hit on the bottom line, the new price becomes the jumping off point for any future negotiations. In other words, this ‘temporary’ price decrease will, like it or not, become permanent. And what about your other clients? If you have price parity agreements in place (or even if you don’t), they’ll expect equal treatment.
But if you don’t drop your price, you run the very real risk of losing this client. And the long-term only matters if you can make it that far. Not to mention that in this economic climate, your client likely has real concerns and challenges of his own.
First of all, let’s address the fear. You’re afraid. Rightly so. And your monkey brain isn’t wired to distinguish between fear of losing your business and fear of hairy carnivores. So your palms sweat, your heart rate rises and your fight or flight responses take over. You’ll likely get frustrated and angry (fight) or meek and passive (flight). Pretending you’re not afraid is not going to work. You are afraid, and telling your inner primate that you’re not is only going to get him to shriek louder. So what to do?
Accept that you’re afraid. Become conscious of the unconscious processes going on in your mind and body (sweaty palms, elevated heart rate, and so forth). The more you engage the rational part of your brain in observing and cataloging processes, the less engaged your shrieking monkey brain will be. There are interesting studies out there about how engaging the neocortex subordinates the limbic brain, but for our purposes, just look at the monkey. It’ll help.
As for balancing price concessions vs the risk of losing the client? Don’t. At the risk of going to the Star Wars quote well one too many times, “It’s a trap!”
Look at it this way: your client is more than likely legitimately concerned about his own business challenges in this economic environment, and is likely more than happy to talk to you about them, (because that’s his justification for hitting you up for a price break in the first place). So listen. Ask questions. Don’t go on about how times are tough for everyone — he doesn’t want to hear it. As I mention in another post, until people feel they’ve been heard, understood and valued, they’re not ready to compromise.
But the more you find out about his particular situation, the more you can start finding ways to help him that don’t involve only price breaks. In other words, you can start finding other ways to solve his problem without making yours worse. In Negotiation theory, we talk about ‘trades’ and ‘creating value’, but it’s really just a way to give him something that doesn’t mean much to you but means a lot to him in exchange for something that means a great deal to you and less to him.
A couple of examples are in order:
Payment structure: If his business is seasonal, you may find that tweaking a payment schedule to allow him to pay more when times are good and less in the down months helps him enormously, while perhaps not inconveniencing you too much.
Referral: I can look at giving you a discount if you can help me land more business. As a buyer, he likely knows a lot of people just like him, and is in a unique position to recommend you with a great deal of authority. If he’ll work with you to bring in another client, offer him the volume discount over the whole that he wouldn’t otherwise qualify for. “What volume discount?” you ask? The one you just made up to justify a price reduction without resetting the norm for his future purchases, the same one you can now better afford because of the extra business he brought in.
The point is that you’re not taking value off the table, you’re working with him to create value for you both. And you’re not devaluing your service or product, you’re telling your good friend that he can enjoy the lower price so long as he does what comes easily to him anyways.
But the shrieking monkey part of your brain isn’t qualified to have this sort of conversation. So instead of ignoring it, accept it for what it is, give it a banana and thank it for its service. But the grown-up brain is working now.
(This article is in response to a request from a blog follower. I’m especially grateful, as his question jump started me past a bit of writer’s block. If you have any feedback, or better still, suggestions for future blog entries tackling a problem you might be facing, I’d love to hear them!)