Negotiate Wisely: Stop the Revenue Leakage Due to Unprincipled Concessions

Over the decades as the K&R team have assisted leading companies achieve business and sales negotiation success, the subject of ”unprincipled concessions” has been a constant. Simply put, unprincipled concessions are those that are not tied to a credible business rationale. Research shows that this simple business negotiation mistake can (and has) cost companies between nine and eighteen percent of their dealmaking revenues.

The below graphic illustrates why unprincipled negotiations are such an important issue. Let’s discuss the problem and what you and your team can do to make this a non-factor in your negotiations.

Negotiation Concessions Infographic

Read more

Negotiation Danger Zone

Keep Your Cool And Avoid The Negotiation Danger Zone

Negotiations can be exasperating. You believe you are offering the other side a great deal, and they seem offended. You want to create a win-win outcome, and they treat you like the enemy. You thought they were ready after weeks of discussions and now they seem totally cavalier. And now you are frustrated. On some deals, when adversarial tension builds, even if the deal eventually gets done, there can be lingering emotional consequences that will impact the outcome.

This scenario is the “negotiation danger zone,” and it often leads to two types of problems. The first is that an agreement that should be completed for compelling business reasons fails to close because of emotional tensions, or it closes under one-sided terms. The second is that the manner in which the negotiation is conducted clouds the future and leads to problems downstream.

Maurice Schweitzer and Einav Hart of Wharton recently spoke about this in a Knowledge@Wharton interview. These scholars said that more harmonious bargaining, rather than adversarial negotiating, can yield better long-term results. This is especially true if the people involved have to work with each other after the deal is closed.

That is, in fact, the case in many business conversations — for example, those about whether to implement a vendor’s technology solution or hire a key employee. The parties have to work together after the deal is done. This is why I tell my clients that the ability to stay calm in the midst of tense or unpleasant negotiations can generate significant benefits and help them avoid pitfalls. I’ve seen many deals collapse because the seller or buyer — or both parties — lets the emotions of the situation get the better of them and ruin any chance for a long-term, mutually beneficial and profitable relationship.

A couple of years ago, one of my clients entered into an agreement to manage a state’s building operations. The negotiations were extremely tense: The state representatives made frequent condescending remarks and refused to listen to rationale about operational responsibilities. I encouraged our client to stay calm and detail both parties’ responsibilities in the governance provisions of the contract, including a practical operational dispute resolution mechanism. By doing so, they were able to transition to performing on the contract with confidence, and the natural operational tensions that occurred over the subsequent year were addressed cooperatively by the people involved in the project.

Contrast that with a similar situation where on numerous occasions the customer yelled and used foul language to pressure a vendor into using a specific subcontractor. The vendor conceded, and the subcontractor failed to perform; not surprisingly, a year later, the dispute between the vendor and the customer is still ongoing.

Any of us who has been in the negotiation arena for some time knows that negotiation counterparts can appear arrogant, inflexible, condescending and sometimes even mean. Whether this is part of their personality or they are using this behavior as a tactic because they believe a better result will follow doesn’t actually matter. What matters is how you react.

You can be polite and firm and stay true to your intention by refusing to react to a negative negotiation environment. Refrain from being pressured into giving unwarranted or “arbitrary concessions.” Our experience shows that arbitrary concessions routinely cost companies revenue and often lead to a deteriorating negotiation environment. Deals coerced under pressure often become pyrrhic victories, as they can negatively impact all involved.

The opposite of arbitrary concessions is what I refer to as principled concessions – concessions that are only made with a credible business rationale. Principled concessions are not based on emotional pressure. Your job as a cool-headed negotiator is to understand the business rationale of the party asking for a concession and only make the concession to the extent that it is justified. Arbitrary concessions can create an imbalance in your relationships, while principled concessions can add trust and credibility. Most importantly, they can relieve pressure and help you move the deal to fruition more quickly.

Relieving Negotiation Pressure

Another technique to cool overheated negotiations is to find ways to relieve the pressure. Sometimes this means stepping back and not responding — perhaps you can tell the other side that you would like a little time to consider their input or questions. It could also entail going out for a bite or a social activity. Humor can also work, but you don’t want to come across as flippant, and you should be conscious of context and culture.

In all cases, remind yourself that despite any posturing, the people on the other side wouldn’t be there if they didn’t see a potentially positive business outcome.

The right mindset can go a long way toward negotiation success. I recommend acting and being seen as a problem-solver, not an opponent, and as someone who is there to serve, not to sell. It’s generally harder for the person on the other side of the table to react negatively to someone whose primary missions are to serve and solve problems.

In summary, you can relieve adversarial negotiation pressure and master the negotiation danger zone by:

1. Keeping your cool and focusing on what needs to get done for a deal to work for both sides.

2. Avoiding arbitrary behavior and concessions that could jeopardize the success of the relationship after the close.

3. Using mechanisms (e.g., humor) to relieve the negotiation pressure during the process.

I leave you with a quote about keeping your composure from the third U.S. president, Thomas Jefferson: “Nothing gives one person so much advantage over another as to remain always cool and unruffled under all circumstances.” Follow Jefferson’s advice and you can be a more effective manager, sales rep and negotiator.

Note: this article originally appeared in March, 2020 on You can view the original post here.

sales psychology

Discounting, Sales Psychology And Behavioral Economics

Not long ago, I spoke with an IT service provider (our client), who related an impactful discussion with a telco customer’s procurement director. The company offered a $5,300 discount as an incentive to begin the implementation of a customer relationship management (CRM) system for $53,000. Here is a summary of the dialogue:

Vendor: It’s a smart decision for you to move from managing your customer data with spreadsheets to an automated CRM system. To get started sooner, we are prepared to give you a 10% discount.

Buyer: Can you explain that please?

Vendor: Our understanding is that starting phase one ASAP is critical because your people are managing hundreds of customer relationships with a spreadsheet-based system, and your sales per customer need to improve relative to the industry.

Buyer: So, the 10% discount is solely on the $53,000 price tag?

Vendor: Yes.

Buyer: But this is just an initial deployment. You know the deployment plan is for 250 seats by end of year one, 1,200 in year two and full deployment of 2,500 seats by end of year three. By that time we will have invested over five million with you and others! And you are offering a $5,300 discount. That’s just a rounding error! The discount should be $500,000!

At this point, it was clear that the discount strategy had backfired. There are multiple reasons for this.

The Importance Of Perspective.

The 10% discount ($5,300) may have been attractive in context to the original cost of $53,000. However, the customer viewed the transaction against their total investment for the solution, which from their viewpoint rendered the discount as trivial — less than a fraction of one percent. Instead of being a positive, this was viewed almost as an insult. While predictable, the customer’s reaction was not rational because a savings of $5,300 is the same whether it is a savings applied to $10,000 or $10,000,000.

This reaction is an example of what behavioral economists, such as Dan Ariely, call predictably irrational. We have all experienced examples of this. For example, my cousin recently drove 20 miles to a supermarket because of a 50% off sale. He bought $100 worth of groceries for $50. The next day he bought a $1,500 grill from the local hardware store because it was “only” $75 more than the one at Home Depot, which was 10 miles away and “not worth the trip.”

Lack Of Rationale For The Discount.

The client’s indignation points to the vendor’s loss of credibility for failing to recognize the full context. If the customer has a business reason to make the purchase sooner, then the discount is not needed to motivate a decision. Again, the rationale offered made no sense in this context.

Procurement’s Role.

Procurement’s role is not only to fulfill strategic internal requirements, but to do so at the lowest cost possible. Therefore, it’s not surprising that procurement wanted to expand any discount discussion to the overall investment the customer would make.

Emphasis On Discount Rather Than Value.

The customer was making a significant investment to improve their business. This would have been a much better focus to get the deal done and cement a credible relationship.

Shifting The Perspective To Value

As a result, when debriefing our client, we decided to focus on the value-based leverage of their solution. We spoke with our client and asked three essential questions:

  1. Why is the telco making an investment?
  2. Why would they make the investment with you?
  3. How much are the answers to the first two questions worth to the client?

From these questions, our client realized they should win because their differentiation had a direct impact on the very reason the telco was implementing new CRM systems in the first place: Their sales per customer were currently lower than their competition’s. Our client had differentiation because they had implemented similar systems for them before, and there was proof they could implement the new solution six months sooner than others could. The value of the six months was between $8 and $15 million, at least 2.5 times more than the cost of the entire solution for three years.

We suggested that they call the person who had evaluated their solution in the first place, with whom they had a relationship, as well as the customer’s head of sales, to discuss the importance of implementing six months sooner. If the impact was anywhere close to the vendor’s estimates, no discount would be necessary, and getting the deal done sooner would be a matter of urgency for the customer.

Unfortunately, procurement had already received a discount and wanted it applied across a future rollout of the solution. We suggested that any discount promised for the future should be tied to a commitment from the customer. This would make the discount a “principled concession.” To make it easier, we suggested giving the customer some alternatives that we call multiple acceptable proposals (MAPs) for different levels of commitment. Ultimately this approach was successful because the customer felt they had control by having some choices, while the built-in concessions were principally related to each alternative deal construct.

This scenario presents many lessons, including the following:

  1. Don’t offer discounts as an “incentive” unless it is necessary as a principled concession to solve a problem, (e.g., you are at a price disadvantage and the competition delivers a comparable outcome). This was not true in this case.
  2. Ask the three questions listed above to discover whether you have value-based leverage. The answers will reveal whether any discounts or incentives are required and whether your opportunity is real.
  3. When you provide value to the customer rather than dictating terms, offer them choices that contain some different business outcomes. This will enable them to make a value-based decision by comparing credible alternatives. You will give the customers a feeling of control while staying principled in your discussions.

In the meantime, ask: Why? Why you? How much are you worth to them? And, of course, offer your customers options that are value-based so they can make informed decisions.

Note: this article originally appeared January 2020 on You can view the original post here.

keep cool tense negotiations

How to Keep Your Cool – Even in Tense Negotiations

I have written quite a bit about how to sharpen you and your team’s professional negotiation skills to close larger deals, faster. However, there are many times professionals lose otherwise quality deals because the seller, the buyer or both, can’t keep their calm when the discussion becomes tense.  We have recently seen a client get so emotional in a discussion that the other side would have walked away had cooler heads not prevailed.

Rudyard Kipling talked about this as a virtue in his famous poem If: “If you can keep your head when all about you are losing theirs and blaming it on you.” Great aspiration, but how to accomplish this with rude, inflexible and humorless negotiators?  What if they are even downright nasty? Consider this scene:

The chief negotiator for Dewey, Cheatum and Howe is sarcastic and condescending. In the middle of a tense negotiation, he says: “Gee. Harvey, I’d make this offer if I thought you and your team could understand it.” He is a nasty piece of work. “Arrogant” and “obnoxious” come to mind. Plus, he fails at personal grooming. Add “offensive” to the mix.

Perhaps I’m exaggerting to make the point but what should you do if confronted by such a scenario? The natural inclination is to tell the person off. But being the smart negotiator that you are, you say to your team, “SO WHAT?” Yes, you would rather do business with people who are pleasant. Yes, you would rather do business with people who are not rude and arrogant. Who wouldn’t? But if you’re doing business with someone who is annoying or mean-spirited, stay cool and focus on the merits of the transaction.

Keep Your Focus

I am not advocating for avoiding minor conflict, as heathy disagreement is a necessary part of the negotiation process. Perhaps the individual in question is truly unreasonable or mean-spirited – such people exist. However, any worthy negotiator on the other side—although we like to refer to them as “business partners” or “customers”—will attempt to recognize and understand your strengths and weaknesses early in a negotiation. From that point on, they will try to take advantage of your weaknesses and get around your strengths.

The key point here is to always keep your emotions in check and strictly focus on the merits of the transaction. Ask yourself: “Does this deal make sense for both parties?” If the answer is “yes,” then go about your business and make the best deal for yourself and your company.  Remember, as long as the deal makes business sense for them also, they would look very bad to their peers and superiors if they didn’t get it done. Or, to put this a different way, concentrate on the merits of the deal, not on the behavior of the person on the other side. (Footnote:  Of course, there are limitation when the other side “crosses the line” by going beyond merely rude to clearly offensive, in which case you need to judge how and when to bring it to their and their management’s attention.)

It’s Both What You Say and How You Say It!

Often—in negotiations as in our personal lives—it is not what you say, but how you say it. Our interpretation of words in a specific situation and the way we respond to them depends on our experiences, values, and emotions. Sometimes people use different words to mean the same thing. However, many words carry loaded overtones, connotations that are different from their dictionary meanings.

For example, the words “cheap” and “thrifty” have the same denotation (dictionary meaning): frugal. But wouldn’t you rather be called thrifty than cheap during a negotiation? (Or at any time, for that matter!) Cheap has a negative connotation of “tight-fisted”, while thrifty has the positive connotation of “wisely economical”. Similarly, the words “stubborn” and “resolute” both mean persistent, but stubborn carries a negative connotation of “obstinate” and “pigheaded,” while resolute carries a positive connotation of “purposeful” or “resolved.”

As a negotiator, it’s important to be sensitive to the use of words, otherwise you run the risk of offending someone. More importantly, their behavior toward you may conform to the negative tone you’ve set and you won’t have a clue why! One of the best ways to not lose your cool is to never give the other person a reason to be upset in the first place.

Sometimes, personalities simply don’t mesh for a myriad of reasons.  Following the principles outlined in my book Negotiate Wisely in Business & Technology, you can reconfigure the negotiating team with compatible personalities. This alone can improve your odds of eventual success.

One final thought

When all else fails, it may be worthwhile to find a way to relieve the pressure during a tense negotiation. This can come in two forms: planning events during the negotiation and specfically, within a tough meeting to change the tone. Ways to relieve the pressure include social activities, informal meetings, off-hour activities, and humor. Changing the environment and getting away from the business conference room can be a very effective way to improve a situation that’s gotten testy under the pressure of getting the deal done.

Within a meeting, relieving the pressure may involve taking a break or the use of humor. Assuming you are one of those people who can deliver an amusing (non-offensive) line, this can be a great way to get everyone back to a more positive mindset. I agree with actor Ted Danson’s comment, “Humor can bring people under the tent. And a good joke can deflect some of the intensity surrounding a serious subject.”

I wish you great success in keeping your cool and succeeding in all your negotiation environments.

The Expanding Purchasing Power of the Non-IT Buyer in Technology Purchase Decisions

How to Adjust Your Sales Strategy for More Complex Terrain

In our recent executive brief, “Six Ways to Shorten the Sales Cycle,” one of the prime takeaways is the importance of tailoring your technology sales and negotiation process to the increasingly complex customer decision landscape. In great part, this is due to the expanding involvement of multiple people (and functions) in the decision process.

IDC underscored an important sub-trend to this reality in their Spring 2018 update to the Worldwide Semiannual IT Spending Guide: Line of Business: “Businesses are forecast to spend $1.67 trillion on technology (hardware, software, and services) in 2018. Roughly half of that spending (50.5%) will come from the IT budget while the other half (49.5%) will come from the budgets of technology buyers outside of IT. The former includes IT-funded purchases as well as joint projects funded by IT. The latter includes business-funded purchases as well as joint projects funded by line-of-business (LOB) buyers and “shadow IT” projects funded by the LOB without IT involvement. LOB technology spending has been growing at a faster rate than IT spending for a number of years. The compound annual growth rate (CAGR) for LOB spending over the 2016-2021 forecast period is predicted to be 6.9% compared to the 3.3% CAGR for IT spending.” Read more

BATNA (best alternative to a negotiated agreement) Woman tears agreement documents in front of agent who wants to get a signature

Why You Need Better than BATNA: Formulating a Defensible “Walk Away” Rationale in Negotiations

Either through becoming emotionally invested, getting pressure from leadership or being unable to analyze key factors that should indicate retreat, business negotiators often find themselves spending long amounts of time on deals of diminishing — or even illusory — value.

One of the cornerstones of negotiation theory is BATNA (best alternative to a negotiated agreement), advanced by Roger Fisher and William Ury of the Harvard Program on Negotiation (PON) in their book, Getting to YES. Read more

Using Your “Incumbency” to Create Positive Leverage in Negotiation

Some concepts are better expressed using an example. Our client was at a crucial juncture with their customer — a European bank. In just three months, the time frame was expiring on an agreement to provision identity access management. That project had been running for three years, and had progressed substantially as forecasted. So a renewal to continue with the work was being discussed, plus, our client wanted to extend the scope of services for 24/7 identity and access management, which they believed the customer could use.

This project was extremely complex, and it was incumbent on our client to express the value delivered to that point. This is extremely important: Nobody owes you recognition of your value. You have to make the case!

Being successful in this situation meant Read more

Further Thoughts on the “Master/Servant” Dynamic in Negotiation

In January I penned this post about the new plateaus of opportunity that open up for both buyers and sellers when we make the mindset shift to becoming a true strategic partner, rather than just a “run and fetch” vendor that recites features and delivers quotes.

There is a fundamental problem (one that is not necessarily limited to contract negotiators): Even people who build long, otherwise successful careers in demanding positions don’t consider themselves professional negotiators — even though they do it every day! They do it internally with their colleagues, externally with clients and vendors, and even at home. Read more

Negotiation Examples: How Avoiding Unprincipled Concessions Kept the Customer’s Respect (And Won More Revenue)


When competition starts putting the pressure on you, it’s natural to look at price-cutting as the primary way to keep the business. But in the long run, this is a mistaken impulse, unless accompanied by a sound business rationale such as a reduction in scope, change in terms or outcome from the deal. One of our engagements with a client that served a European industrial (the customer) with technology solutions definitely illustrated the value of avoiding such “unprincipled concessions!”

Unprincipled concessions are “giveaways” not tied to a credible business rationale. Our research shows that this simple business negotiation mistake costs companies between 9 and 18% of gross revenue and significant profit. (See our infographic on the topic for a more detailed discussion of this vital principle and how it can be applied.) Read more

Breaking the Master/Servant Sales Relationship

There is a world of difference between being a vendor that takes orders and being a valued peer or co-strategist. The former defaults to a defensive or reactive position, missing opportunities to help their client, increase the value of an account and build a more durable, mutually profitable relationship.

Moving from the master/servant paradigm isn’t about gaining the upper hand in a brute power scenario, but rather about moving to a peer-to-peer relationship where mutual benefit flows from mutual respect and acknowledgment of exchanged value. From our experience, the master/servant trap is an easy one to fall into, even with some of the world’s top-tier service organizations. After all, if the customer orders, the vendor sells and delivers. Read more