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Tactic #16- The Ultimatum
Summary: Making a final, specific demand to
force a counterpart to make a decision.
From time to time it may be in your best interest
to “draw a line in the sand,” or create a rule that allows you to hold
your counterpart accountable. One tactic you can use is to tell your
counterpart the actions you will take if your conditions are not met.
Example
A client
calls a consulting firm and asks to tentatively reserve a date for a
seminar to be presented at her company in approximately six months.
Three months prior to the date in question, the consulting firm calls
the client and asks her to confirm the reserved date or the firm will
have to offer it to another client who has requested the same day. The
client is told that a confirmation is needed within twenty-four hours,
which makes the deadline her Ultimatum.
Counter
If you wish to complete a deal but need more time to get permissions or
approvals, one of the most effective counters to The Ultimatum is
postponement. In this specific example, the client might respond that
she cannot get the date confirmed within the twenty-four-hour time
frame, but she can have an answer within forty-eight hours, and ask if
that would be acceptable.
If the deal outcome is not important to her and she needs more time to
get approvals, she can simply walk away and find another seminar
provider.
This tactic is one of 101 strategies and tactics
featured in The Only Negotiating Guide You'll Ever Need, by
Peter Stark and Jane Flaherty.
Ask the
Negotiator
Peter,
Our company, like many, operates predominantly in a "bidding"
environment. I'm their sales manager. Management and operations want
me to negotiate with clients/prospects before a project goes out to
bid. However, government entities and many corporations require
three bids on projects over a certain amount. Our projects are
usually $1M+ projects with long lead times and long project
durations.
Secondly, I'm not involved in the pricing of our bids because I'm
not an engineer. Not that I don't have input, but our engineers
obtain material quotes, put together technical part of bid (design,
labor, hours, etc.) and management [including me] sets margin (5
-10%). We are losing about 60% of bids. We need to get more
competitive, align with current market margins because they are
squeezing. Some competitors low bid in anticipation they will
receive "change orders" once they get the job. That's not our
philosophy; which takes the higher moral ground, but we suffer when
we don't hit goals.
I've recommended obtaining three quotes on all major material,
trying to drive down vendors' pricing, hiring a procurement person
and/or paying an industry consultant to review bids; but until we
hit our numbers, they won't hire anyone, and our goals keep
increasing substantially.
I realize it's the old sales versus operations dilemma, but do you
have any recommendations or negotiating tactics for 1) trying to
negotiate with clients to not bid out projects, 2) trying to get
co-workers to refine the bidding process and 3) getting vendors to
offer lower prices than they offer competitors?
Thanks,
Not Winning Bids
Dear
Not Winning Bids,
First, a margin of 5 percent to 10 percent is low in the world of
business. Much lower and the job is going to be bid at zero margin
and that makes no sense. So, most likely, the problem is not your
bidding margins. Second, your team really does need to get two or
three bids from each of your major suppliers as well as negotiate
better pricing once you review the bids. A procurement person could
pay for his/her salary many times over putting strong negotiations
skills into action. I encourage you to review the bids you have won
and compare them to the bids you have lost. Are there any
differences in the type of work or types of customers where you have
been more successful?
Asking the customers to not competitively bid will probably not
work. It might be possible if your sales relationship with the
economic buyer is so strong that your customers do not feel a need
to bid out a 1M + job this is usually not the case. I would not
encourage your customer to seek just one bid on this type of
project. But, the idea is a positive vision and you would be a hero
if you could make that happen.
Last, you mentioned you have come to one of our negotiation
seminars. Your suggestions for improving your bids are on target. It
may be helpful to hold an on-site negotiation seminar for the rest
of your colleagues. Historically your industry has not had a
reputation for being good negotiators because of a lack of
competition. We have worked with many companies in your industry.
Negotiation skills training does help to improve overall margins,
especially on large projects like this one.
Best
Regards,
Peter
Ask the
Negotiator - Are you involved in a
negotiation and not sure what strategies or tactics to use?
Send in your toughest negotiation
challenge and our team of expert negotiators will outline a specific
plan to ensure your success. Please send your negotiation
challenge to mailto:patti@pbsconsulting.com.
If your challenge gets published, we'll send you an autographed copy
of The Only Negotiating Guide You'll Ever Need, by Peter
Stark and Jane Flaherty ($14.95 retail)
WOW!!
To view this month's issue of The Master
Negotiator, the premiere on-line newsletter for negotiators,
follow this link:
The Master Negotiator, Volume 2, Number
9 Dealing with the Untrustworthy Counterpart
To view previous Negotiating Tactics of the Week,
follow this link:
Negotiating Tactics of the Week
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