Winning New Business from Established Competitors

OK, so you are an established company and your growth hasn’t met expectations for a few years. How do you focus resources to accelerate growth, and where are those resources wasted?

Long before you arrive at the negotiating table, it is fruitful to prepare by engaging in a thought exercise that prepares you to best articulate your value — whether you’re trying to win new business or more business from an existing account. Once you’ve decided on a strategic path, the rigorous preparation and advance research to create credibility at the bargaining table can begin.

For many established companies the paths to growth are:

(a) adding new products or services through development or acquisition,

(b) selling more to their existing customers, or

(c) winning new customers for their existing products or services.

Now consider option (c). For example, you sell BAFOs, a new light-calorie, chocolaty, nutty snack. When would a customer who has never heard of BAFOs try them? Read more

Value Articulation

At K&R, we urge our clients to utilize Six Principles of Negotiation™. One of the most important principles is: “Concessions Easily Given Appear of Little Value.”™ This is why we constantly advocate making principled concessions and this is also why we recommend that, prior to the start of the negotiation, you plan for future potential concessions. So how exactly is value expressed to the other party in a negotiation? Here are five important ways of expressing value:

Money. Very little explanation is necessary when the value is expressed as currency. For example, a statement such as “You will receive $2,500” is a simple money-based value statement. Money is a universally accepted denominator so its value is instantly understood by both parties to the negotiation. Read more

Thoughts for the New Year

Email in-boxes are getting flooded with “Thanks for your business” and “Best wishes for the New Year” emails. While there is a certain mechanical nature to these, if you have a relationship, the sentiment is a reasonable one.

So…if you are one of our clients, you have probably already heard from us, but…

Thank you for your business. Our most sincere hope and one of the driving values of K&R is that we have provided a service which has had a positive impact on your business.

Whether you are our client or not…

Please accept our best wishes for success in the future, both personally and professionally. In addition to the daily concerns of our personal lives, we wish for improved conditions in the world on all fronts.

At year-end many people look back, and then forward.

We are in the midst of reviewing K&R’s mission, values, and our 2010 performance. Here is one set of data which could be useful to you if your business is in the planning cycle for 2011.
We looked at a random sample of evaluation forms received at K&R’s various Negotiation Training sessions, and here is what we found:

• Attendees’ overall satisfaction with K&R skills training is exceptionally high. On a 100 point scale, we rated a 93.8.
• 100% of our attendees believe that the skills we teach are useful, and 81% of them say they will use them within the month following the session. 26% say they actually use the skills within 2 days.
• 100% of attendees believe they will get a repeatable benefit from the skills.
• Attendees report that they expect to shorten their sales cycles by an average of 2.8 weeks.
• While not all people estimate a quantified outcome, those who do believe that their results will improve by 20%.

If you need a return on investment for your sales team that is essentially immediate, shortens your sales cycle, and can improve your financial performance by 20%, please consider K&R Negotiation Skills Training in 2011. If you don’t need that, then carry on as you are.

Happy New Year. (td)

Got a question? email a K&R negotiator directly at: info@negotiators.com

We Have Stuff. Buy it!

In our negotiation sessions, we often get into the discussion of how being so busy saying what you can do it makes you not busy enough saying what your client needs. In an example brought to us for comment, there was a good executive summary (well, not that good, but let’s pretend it was)… on page 18 of a 200-page proposal. If executive summaries show up on page 18, what comes first? Generally speaking, it is stuff about the seller and the seller’s offerings, and not about the client or the client’s needs. An executive would never reach it.

To make it worse, the “seller stuff” is in the wrong form. For example, the seller makes statements which are in concept like these:
• “Our coffee is fair trade.”
• “We roast and deliver daily.”

Instead of statements like these:
• “Your policy is to support reasonable returns for your suppliers. To support that, we offer coffee which we buy under fair trade guidelines.”
• “You told us your clientele is very sensitive to coffee freshness. We roast and deliver daily.”

We just reviewed a client proposal sheet for a multi-multi-million dollar agreement, and every line was about the supplier, not about the client needs.

The shorthand for the first approach is “We have stuff, you should buy it.” For the second, “We understand your needs and our offerings support them.” The first requires the client to make the connection between what you offer and their needs and interests. The second puts the client’s interests first, and then makes the connection for them.

We used coffee in our example, but these errors are all too common in our primary client set, high technology hardware, software, and services providers.

In many cases, the client can make the connection. However, your odds of success will improve if you help them along the way. Don’t say, “We have stuff”. Say, “These are your needs, and our stuff supports them.” You’ll be more successful with your clients. (td)

Got a question? Email a K&R negotiator directly at ask@negotiators.com.

The FCC and Harvard Medical School

A short time ago, we wrote about news of a study done by the Harvard Medical School concerning the value of computerization in US hospitals.  A Computerworld article led with the headline: “Computers don’t save hospitals money”.  The article stated that in spite of promises to the contrary, IT improvements in hospitals do not improve care, and they don’t improve costs.  Now the FCC has gotten into the act, saying that broadband access will improve health care and save money. Do you believe Harvard, or the FCC?

First, as a negotiator, why do you care?  In short, it’s about credibility.  If you sell products, services, or ideas your credibility is directly tied to your success.  So if Harvard Medical School and the FCC disagree, it’s a credibility battle of titans.  When you are in a sales situation, your credibility has to hold up against alternative positions, or you may win the sale, but at a severely degraded price.

Let’s look at what the FCC has to say.  In Chapter 10 of their National Broadband Plan the FCC lists 11 recommendations related to health care.

Interestingly, one of the claims is that 61% of Americans are overweight or obese, which can lead to medical complications.  The cynical among us would argue that we need less broadband and more exercise to attack this problem.  Make us go to the library for research instead of looking it up on Wikipedia at our desk, and we’ll all lose a couple of pounds.  So let’s cut back on broadband as a national re-engagement with exercise.

OK, that’s not happening.  Moving on…

One of the things the FCC says is: “In its traditional role, the FCC would evaluate this challenge primarily through a network connectivity perspective.  However, it is the ecosystem of networks, applications, devices and individual actions that drives value, not just the network itself.”  This is a classic problem known to anyone that delivers infrastructure services or software.  What they sell (or in this case advocate) doesn’t solve any problems.  It only makes the system better able to incorporate problem-solving solutions.  This makes it harder to create a convincing value argument.  Your position becomes that by starting with your recommendation, and then putting other things on top, the client receives benefits that outweigh the investment.  However, you have to pay for the infrastructure now, with no guarantee that anything else will follow.  This is a tough sell.

The FCC goes on to say: “Health IT supports these priorities by dramatically improving the collection, presentation and exchange of health care information, and by providing clinicians and consumers the tools to transform care. Technology alone cannot heal, but when appropriately incorporated into care, technology can help health care professionals and consumers make better decisions, become more efficient, engage in innovation, and understand both individual and public health more effectively.”  The real issue here is credibility.  Do you, or do you not believe that these benefits will accrue?  Unless the belief is there, no progress will be made on the FCC’s proposal.

It’s all about two things.  First, the FCC needs credibility.  Then they need to make a convincing argument of value (benefit).  It is just like any other sale.   (td)

Got a question? Email a K&R negotiator directly at ask@negotiators.com.

K&R’s Value Selling Poll

If you voted in our recent poll about selling with value, thanks!  Here are some thoughts about what our respondents said.  First, if you know us, you already know that we find that a strong value argument improves your leverage position, and enables you to ask (and get) a higher price for your product or service.  That said, you also know that sometimes you can’t differentiate your value, and as a result you will sell as a commodity – price will be the main selection factor.  What successful sellers do is this: Read more

The Trouble with Value

A recent Computerworld article covered a study done by the Harvard Medical School about the value of computerization in US hospitals.  The article led with the headline: “Computers don’t save hospitals money”.  This is not good news if you’re a seller of Information Technology solutions.

First tip: Be prepared1. You can expect to hear about this, certainly if you are selling in the health industry, but generally if you are selling the value of Information Technology to people who either have trouble believing in the value of IT, or for whom it is disadvantageous to admit it (for example, buyers in procurement roles).  The article will be used in attempts to undermine your value arguments, and thereby reduce your prices. Read more

Negotiation Anosognosia

Wikipedia says, “Anosognosia is a condition in which a person who suffers disability seems unaware of or denies the existence of his or her disability. This may include unawareness of quite dramatic impairments, such as blindness or paralysis.”

The description could be applied to a negotiator who fails to recognize what everyone else can see – their product or service has value to the buyer.  In a recent account planning and negotiation review, a sales team came to us and basically said, “Our proposal for the customer provides $500,000,000 (yes, $500 million) worth of our product for $100,000.  They haven’t signed yet.  What should we do?”

This team was Anosognosiastic (if such a word exists).  They failed to see what many others could, including the K&R reviewers.  At a 99.8% discount the only thing left to do was wait.  What they were unaware of or denied was that this situation was brought about by a complete failure to attribute any value to their product for the customer.  If it had any value to the buyer, the deal would have been closed long ago – probably for more than the $100,000 price.

Don’t fail to see the simplest of your persuasive arguments, which is that what you provide has value.  If you fail to see this, you may be suffering from Negotiation Anosognosia.  (td)

Advance Fee Fraud – Again

In September of 2008, we wrote about the concept of “Advance Fee Fraud”, and how sellers fall victim to the tactic from buyers in various forms.  A couple of those include promises of future business “if you give me a good deal now”, or “if we do a successful proof of concept”.

Sometimes this practice is known as a “Nigerian 419 scam”, although that’s a bit unfair to Nigeria.  However, a recent article we saw on InternationalReporter.com brought it all back when it stated, “Nigeria dropped nine places to 130th position out of the 180 countries ranked on the global Corruption Perceptions Index (CPI) 2009 by Transparency International (TI), a global anti-corruption watchdog.”

Review our article – don’t let a buyer convince you (as a seller) to advance them a benefit in anticipation of a reward that may never come.

Principled Concessions™ – The short version

In our workshops, we teach the concept of a “Principled Concession™”.  Many people hear this and confuse it with the related but different concept of trading concessions in a negotiation.  They think of common examples like these:

  • “If you buy 2, I can discount the second one by 50%.”
  • “If we reduce the scope by providing service 12×7 instead of 24×7, we can lower the price by 20%.”
  • “We can finance your total $100M payment for this project, at a cost to you of $1M.”

These “offers” follow the least-acceptable form of changing your position.  It is a more acceptable form than this one:

  • “I’ve sharpened my pencil, and I can offer you an additional 12% off the price.”

It is easy to see that the first three are preferable to the last one.  The 12% price reduction in the last example implicitly contains a message that your profit margin is high enough to offer a discount.  The buyer is now challenged to take that information, and try to find out how much margin, through extended negotiating.  Instead of the goal which the offer is usually intended to achieve (faster closing), it actually creates buyer uncertainty, loss of confidence, and delay.

Let’s reframe the first three in the form of Principled Concessions™:

  • “If you buy 2, I can discount the second one by 50% – and you’ll be able to use both at the same time when needed to perform (whatever desired outcome you bought them for).”
  • “If we reduce the scope by providing service 12×7 instead of 24×7, we can lower the price by 20%.  However, your mission-critical revenue-collection application will take longer to restore during the unsupported hours, and your revenue could be impacted by $25,000 for each hour of delay.”
  • “We can finance your total $100M payment for this project, at a cost to you of $1M.  This will allow the project benefit stream (in $) to pay for the continuing costs, and you will avoid significant out-of-pocket costs, thereby freeing up that money for other investments.”

In each of these cases, we are describing the exchange in terms of outcomes to each side.  For the seller, this is money.  The buyer gets simultaneous use (for whatever purpose), risks losing revenue, or will free up funding for other projects.  In each case, the outcome description provides a business basis for the concession, and allows the buyer to make the decision on the basis of business value.  In the real world, the outcome descriptions would be even more robust, but these examples convey the intent.

So here is the formal definition of a Principled Concession™: A concession given with a specific connection to business value.  The alternative form is this: A concession expressed as an exchange of outcomes.   (td)