Inflation is a top concern for people and businesses alike. In the last several months we’ve seen nearly 40-year high inflation rates with the Consumer Price Index (CPI), a measure of prices for goods and services, at 8.2% in September and 7.7% in October, according to the Bureau of Labor Statistics. Inflation provides an easy excuse for any supplier/partner to try and raise prices. Discussing inflation in the same breath as negotiating prices between buyers and sellers is unavoidable and needs to be addressed.
A negotiation between a buyer and a seller is a nuanced process that can be stressful for both parties, and adding concerns around inflation and pricing may appear to make the task even more daunting. But could it actually make it easier? Inflation really is an objective measure that both parties can review independently and agree to. It’s knowing this type of information that can help you perform at a higher level during negotiations, even within this complex environment.
Negotiation is an essential part of the sales process and therefore critical for salespeople to know how to do it well. After all, the goal of negotiation should be to come to a mutual agreement that benefits both parties – isn’t this what successful salespeople strive for as well?
Here are some important things to keep in mind while negotiating price increases.
Preparation Plans and Outlined Trades
Similar to any negotiation deal, you should always come prepared. Even though inflationary pressures are building, stick to the tried-and-true methods of preparation, patience and poise. Preparation includes thinking through the precedents (what has happened before) that might impact this negotiation, the alternatives that both parties have, and the interests that motivate each party. The more insight you have into the buyer, what they are looking for, and their expectations, the more likely you will reach a successful result.
As important as it is to understand their limits and motivations, you must understand your own. This is why it is such an important process to think through and write down your limits (walkaway), priorities, and what you would be willing to give away – in a trade. By now, inflation is well documented and should not surprise any of your clients, so the questions instead move to how much does the price increase, how long will you lock in a certain price, etc. Come prepared to these conversations with supporting data (i.e. real time sales figures, inventory numbers, production output data, etc.) to separate the emotional impact of the price increase and transition towards the objectivity of passing along the price increases that your company and everyone else is facing.
As far as tradables, use your list of priorities to try to exchange your items of lower importance for theirs of higher importance. This is precisely what allows for a win-win solution. Remember, this means that you must create your list of priorities and probe the other side for theirs – don’t make assumptions.
Listen to Your Buyer
Asking great questions is critical to understanding your buyer. While many of us think speaking first and often provides control over the discussion and the upperhand, it’s actually the person asking questions that can most direct a conversation. Your technique here is to ask questions and genuinely listen with curiosity, rather than merely waiting to speak. Take notes and don’t be afraid to say “let me think about that” or “I’ll get back to you”, that’s better than responding incorrectly or not listening at all.
Negotiate a Win-Win
As we mentioned above, it’s the trading of one side’s highly important items for the other side’s less important items, and vice versa, that creates win-win negotiation results. To do this, you must be empathetic and equally focused on the other party’s interests as your own. Negotiating too hard and taking a win-at-all-costs mentality might get you a win now (and likely not even) but it’s certainly not a lasting long term strategy. You prioritize your objectives above all, but must always be thinking about those of the other party too.
Keep Composure
Try to give yourself time to start with “small talk.” Avoid jumping right into business as the human element – your connection – plays a role in the likelihood of working together to reach an optimal outcome. And then, start with points of agreement. All too often we start with areas to negotiate, but it’s best to first build momentum and get to these.
The goal is not to keep emotions out of negotiation but to create a connection with the other party, a bond, and then manage our emotions (and hopefully theirs too) so that we are able to achieve optimal results on both sides.
Veteran negotiators understand inflationary times are nothing new. It has happened before and will happen again. Keep this perspective, along with preparing for the negotiation, thinking about the other party and giving yourself time to build rapport. You’ll find more success in reaching better agreements.
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