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Dealing With Tough Customers

By Arun Kottolli

Real life situation

What do you do when your customer plays hardball? How would you react when your customer gives you an ultimatum “ That’s it take it or leave it “.  This is one of the most dreaded moments for a vendor where he has to decide either to bend down or walk away from the deal.

This is not what you had planned for. As a salesman, you have invested a lot of time earning customers' goodwill and trust, you have done relationship selling, consultative selling, you have been persuasive and good humored. As you approached to close the deal, customer suddenly throws a fit demanding the deal to be done in his way. You are left with a lousy choice: do a bad deal, or walk away from the table. 

This is not a new situation, this kind of dilemma has been seen before and has been almost a common feature ever since civilization began. Yet many a salesmen are uncomfortable in dealing with this. As a result, they make a poor decision and often succumb to the threat by compromising or accommodating even the outrageous customer demands, even when they incur a loss while doing so! 

The best response to this situation is a kind of assertive pacifism. Refuse to fight, but refuse to let the customer take advantage of you. Don't cave in, don't counter attack, duck dodge, parry, but hold your ground. Never close the door, never walkout and keep exploring new options.

Situation Analysis

The immediate next step is to analyze what is on the table, i.e., what’s being offered as the final best offer by the buyer and compare the final offer with our “Reservation Point”  ( The lowest price, least possible deal or the lowest we can go) and also compare the offer with our “Target Point”  (Target point is what we were expecting as the best possible deal) If the given offer is within those two points as illustrated, then it will be prudent to accept the offer, but not close the deal.

If the offer is below our reservation point,  then it may be in the best interest to walk away from the deal. However, we need to know a little more about the customer and the situation to determine if it is prudent to walk away. By this I mean, we need to know the real reasons behind the customer’s final offer: 

We also need to know the impact of the current deal on the overall operations, and on the long term strategy of our company 

Once we are certain on the real reasons for their final offer, we can determine if it is in our best interest to accept or reject the offer.  

If the offer is below our target point, and the outcome of this negotiation does not affect other negotiations and if this deal has little impact on our strategic goals, it is best to reject the offer but do not walk away from the table.  

Even when the other party makes a “take it or leave it” statement, there is still room to negotiate. As explained in the next section. 

Scenarios 

“Take it or Leave it” scenarios indicate:

The next key step in that moment is to analyze the situation and classify it into one of the above three reasons for it.   

Power Play Approach

If the counterpart represents a fortune 100 company, and has enormous power compared to the vendor, then its likely that he/she may resort to power based approach. The best solution to counter the power play will be bring the main issue back by talking about mutual interests. Bring out our interests in the deal, and ask directly about their interests. This will bring the negotiations on the issue of interests and opens the door for exploring all the interests of both parties which can be negotiated.

One must note that the other party has a motive to satisfy their interests. Often times their interests will be more than the final price and this dependency on the need to satisfy their interests will make the other party continue to negotiate when we talk about their interests in the deal. 

Another approach to counter the power play would be an appeal to fairness. By openly stating that the current offer made is not fair and stating reasons for it, will make the other party reconsider his/her offer. Saying something like “This offer is not fair because* …”

Such statement will make the other party justify their offer or reconsider their offer. This statement will assert your company's interest, and will bring back the focus of the negotiations on meeting the mutual needs. The best negotiating stance is not a single minded emphasis on customer satisfaction but a concentration on problem solving that seeks to satisfy both parties.

At the end, if the customer continues to play hardball and refuses to negotiate any further, then we have to evaluate:

1. If the offer was better than our Reservation Point
   
   

2. If the deal has long term strategic impact and the offer price is close to out Reservation point, or even just below it, then we accept
   

Then we accept it (make it appear that you are reluctant & yet you are doing to please the customer)

Another way to counter the power play approach by the client would be to display our  power. This is typically seen in negotiations between equals or when other party also has legal protection and cover to counter the client’s power play.  

For example, if we know that there is (or will be) another negations between the other party and us, where the client or the other party is the vendor, then we can also use power to counteract the current threat, as illustrated below:  

In a negotiations between Microsoft and Indosys, Microsoft is the potential client and has enormous power over Indosys and makes a take it or leave it offer. If Indosys happens to be the leading consulting firm for .net or a new Microsoft technology product, then they can counter it by saying that the current deal is unfair and will adversely affect the existing relationship. As a result Indosys may no longer actively promote .net solutions to other customers. However it is in the best interests to work out a better deal.  

This counter threat with appeal to fairness will open room for the counterpart to save face, and open the door for further negotiations.  

Frustration 

If the other party made that “take it or leave it” offer out of frustration, then it is best to adjourn the negotiation on that issue or the entire negotiation until the tempers are cooled down. This can be done by saying “Let me talk to my boss and get back to you on this. In the mean time can we talk about … (other issues and interests)” or say that you need time to think about their offer and you will get back to them at a latter date. The key here is to withdraw. Ask for recess, consult with your boss or reschedule the meeting. A change in time and place can change the entire landscape of a negotiation.

However, one must remember that, a good negotiator will not lose track of the main issues and all the differed issues have to be brought back to negotiation before the client loses interest.

Two Common Mistakes  

Business Customers are usually hard enough to handle without provoking them any further. Yet many a salesmen unintentionally annoy the customers to the point of exasperation. What's worse, the two most common mistakes crop up most frequently at times of disagreement, the very moment when poking sticks at the customer ought to be the last item on your priorities.

The first mistake is belaboring. Some salesmen will repeat a single point until customers begin to feel badgered or heckled. Chances are they heard you the first time. You can also belabor a customer with logic or with constant explanations that seem to suggest that the customer is none too bright.

The second mistake is rebutting every point your customer makes, which is certain to lead to an argument - point and counterpoint. Don't say "night" every time your customer says "day", even if you're convinced the customer is wrong.

Running Out of Time

It may be entirely possible that your counter part could have run out of time to close the deal and is in a hurry to finalize it. If this happens to be the situation, then valuate their final offer against the Reservation Point and if the offer is better than our Reservation Point, we can accept it conditionally on it and make room for further negotiation. This is called as Postsettlement settlement strategy i.e., the current settlement becomes the Reservation Point for future agreements to replace the current one.  

For example, A negotiator can say, I can accept your offer but would like to know if we can do any better. To illustrate this, consider a software development negotiation:  

I can accept your offer of $1 million for this deal, and we will provide 10 engineers on-site to implement it, the rest 20 will be off-shore, however if the situation demands a faster implementation or adding more features and/or providing training, then we can bring more resources to it and for that we have to work out a new agreement.  

Here the negotiator is not walking away from the table and while he/she is accepting the offer, the negotiator is making room for further negotiations and enlarging the size of the deal. Both parties seem to agree on a deal, and this gives the other party the time to continue negotiation.  

It is important to remember that you are committing to an agreement that works for both the parties. Concessions made once cannot be taken back, so one has to be careful while agreeing on a partial deal. 

If the final offer happened to be below our reservation point, and the client has made the final “take it or leave it” offer, then we can do one of two things:

1.  Leave it and forget the deal: The offer made will be a loss maker and there are no ways to make up for the losses. In such cases, it will be in our best interest to walk away from the deal.
   
   

2. Conditionally take the offer if the customer agrees to buy something else. E.g: I’ll sell you the car for $20,000 if you agree to buy extended warranty for $1,500  or I’ll implement the new database system for $1million if you can throw in a 5 year system maintenance contract. 

Conclusion

 A “Take it or Leave it” offer has potential to upset existing relationships between client and vendor. Every effort must be made to avoid such a face-off, and in such an event, a negotiator can still create additional room for further negotiation by understanding the situation, exploring all alternatives and redirecting the negotiations on other interests. Walking away from the table should be the last option and must be resorted to if required. But not before exploring all the other options.

* Studies have shown that the word "Because" triggers off a fixed action pattern in people. Even the toughest customer will stop to listen to the reasons stated after the word 'because'.