Adapted from “When They Slice the Deal Too Thin,” by Michael Wheeler (professor, Harvard Business School), first published in the Negotiation newsletter.
Suppose that, after months of negotiation, you reach a detailed agreement with a customer and shake hands. A week later, the customer’s procurement officer calls to tell you that there have to be some “revisions” to the deal. They expect you to deliver the same service package faster than agreed upon and for less money. This is after you’ve lined up resources internally and gotten commitments from your own vendors. After investing so much effort to nail down the contract, you tighten your belt and try to make the new deal work, since you can’t afford to lose these key customers.
Unfortunately, by caving in to last-minute demands, you’ve inadvertently taught your customers to ask for a final concession.
Your customer might be playing the old “salami game.” That’s the gambit of putting an attractive proposal on the table, then taking back a series of thin slices, none of which seems important enough to blow up the deal. Ultimately, however, you’re not left with much.
Alternatively, the customer may simply suffer from poor coordination and decision making. For example, one of their team members may have been out of the loop when you and your counterpart scoped the original timeline.
Whatever their motivation, here are four ways to manage the problem:
1. Before negotiating, confirm your counterpart’s authority. If someone can’t sign off on a deal, then you, too, should be tentative about what you put on the table. Be clear about this. You don’t want to make firm offers in exchange for vague proposals.
2. When you shake on a deal, be explicit about its terms. If your counterpart says something vague, such as, “I’m optimistic that I can sell this to my people,” don’t be afraid to push hard for clarification. Better to get the bad news now than to announce the deal to your colleagues, only to backtrack later.
3. If the customer comes back with proposed revisions, treat them seriously. Real problems may need to be addressed. At the same time, any new burden should be shared fairly between your two companies. If budget is their issue, maybe your service package should be trimmed. If time is of the essence, then you should add a premium for your extra costs.
This type of quid for every quo will teach the salami slicers that they can’t get something for nothing. It also legitimates your negotiating behavior, showing that you didn’t pull your original price out of thin air.
4. With important long-term customers, make time to review jointly the state of your union at regular intervals. What can you learn from the prior year? How can you improve communication? What’s a better way of crafting these contracts? When you discuss process without the pressures of a specific deal, your companies will be able to work together with greater efficiency and creativity.