Building a position of strength
Herb Cohen, the negotiator who helped broker the release of 52 US hostages from Iran in 1980 on behalf of the US government, famously said, “To negotiate, you've got to care – but not that much."
In business that can be translated as, “negotiating strength comes down to what you have to sell”. If you have a really good product or service that's priced sensitively, a solid customer base and a good reputation because you service your customers well, then you often find yourself in a very strong position for negotiations.
In this situation, the concept that 'you care – but not too much,' would mean that you can afford to walk away from new sales if they aren't worth the effort because your 'sales pipeline' is so strong that you have sufficient customers willing to pay the full price to meet your targets.
However, when you're building up new sales, you may not be in a position where it's easy to walk away.
The best way, I believe, people can build a position of strength is to gain trust by doing what you say you'll do. Once you gain trust, negotiations are generally smoother.
Discounting may weaken your position, as people might believe you need their sale. A strong sales strategy is often the antidote for engaging in discounting driven by desperation.
Asking the right questions gets the best deal during negotiation
To negotiate effectively you must ask good questions and listen carefully to the answers.
Many people come to a negotiation with their own goals in mind without considering what might be important to the other party. The key is understanding that negotiation is a two-way process.
Effective negotiation requires research and asking good questions to understand what the other party wants.
Perhaps the biggest priority for your customer isn't getting the lowest price, but rather speed or timing or quality. You may want to reframe your questions, so you learn how you stack up against your competition.
When you ask good questions, you can find out what kinds of pressure your customer is under and how you can make that go away.
Perhaps their biggest orders come at the end of the month. If so, you could offer a guarantee that you can deliver your goods to them before those orders come in. Or maybe their company has made a sustainability pledge. If so, you might be able to promise your business will have carbon accreditation before the end of the year. That means that they can then add your part of their supply chain into their own sustainability calculations, to help them meet that pledge.
Ultimately, your negotiation will work best when you have a strong case to present, and to do that, you need to ask enough questions so that you are presenting a case that's relevant.