When consulting, clients often ask when should I negotiate with my best customers?
To answer this question we need to understand the difference between persuasion and negotiation.
A useful definition of persuasion is: changing the attitude or behavior of others. To persuade customers we have a range of methods of persuasion. At one extreme we have simply asking customers to change an attitude or a behavior. Next to this on the range, is the most popular method persuading with logic—marshalling facts and arguments. Further along the range is persuading with emotion. Some in business underestimate this method. However the most powerful tool in persuading with emotion is to tell stories. As your best customer listens, they feel the frustration, the anger and the delight in a story about overcoming a problem. With the right story your best customer imagines themselves in the story. Asking, persuading with logic and persuading with emotions are the gentler tools of persuasion. These gentler tools invite the other party to decide if they will change their attitude or behaviour. When these tools are not enough, we must use three tougher tools.
The three tougher tools are: to negotiate, to tell customers to change their behavior or finally at the other extreme of persuasion to force customers to change their behaviour. Many would claim we never force our best customers to change their behavior. But this is not true. Typically we force our best customers by imposing some commercial consequences— increasing prices or increasing lead times. We may change our minimum order size or frequency of deliveries and advise the customers that they simply cannot have something any more (Tell them). Or we may add an extra charge for something we no longer want to do for the customer (Force them, do this or else …). Just as in any relationship, you should rarely use the tougher tools of persuasion (tell and force) because whenever you use them you always risk seriously damaging your relationship with your best customers.
Before you use the two most extreme tools of persuasion, we have a far more flexible and customer–friendly tool: to negotiate. A useful definition of negotiating is: to resolve differences to reach an agreement. With your best customers, we recommend first try the three gentler tools (ask, persuade with logic and persuade with emotion), then for the tougher situations turn to negotiation.