Concession trading

Concession trading

Transcript

Imagine you are in a negotiation with a buyer and the buyer asks you a 2% discount for a product or service that they have been buying from you for many years. This type of situation is not uncommon knowing that buyers are required to deliver savings year on year.

What would you do? Give them the 2% or negotiate a deal?

Even if you have enough margin to give them the 2% discount, there’s an important reason why you should never ever give something without asking something in return.

What do you think happens inside the buyer’s head when they ask for a 2% discount and you just give it to them?

From personal experience, I know what a buyer would think, which is: “That went too easy. I should have asked for more!” and here’s the interesting perspective. Even though you think you have been kind to your customer by giving them the 2% discount, they are actually unhappy with the deal believing they could have gotten more.

So, to avoid these kinds of situations, here’s the golden rule to what I call “concession trading”:

“Give the other party what they want, …. but under your conditions”

And it doesn’t matter how extreme their request is. Just make sure you always ask for something in return of equal or higher value to you.

So, if a buyer asks for 2% discount, your reply could be:

  • If you can increase the annual order volume by 50%, then I can give you a 2% discount on current prices or
  • If you can agree to a 3-year contract, then I can give you a 2% discount on current prices

The principle here is that you give the other party what they want, in this example the 2% discount, however you are assertive enough to ask for something that’s important to you.

This way you avoid a situation where a buyer keeps asking for more, because they will know you’ll ask something in return.

So, when you’re in a similar situation next time, try using the following words:

If you …, then I ….

If you give me “x”, then I can give you “y”

This way you ensure your proposals are always conditional.

Happy negotiations everyone!