Fable Friday negotiation tip: “Does anybody else want two cents worth of licorice?”

In an old Spanky and Our Gang episode, the kids go into the general store and the first to be waited on by the old man behind the counter asks for two cents worth of licorice. So the old guy slides the ladder over, painstakingly climbs up to the top, finds the licorice jar, takes out the candy, puts the lid back on and climbs back down.  He bags the candy, takes the money and waits on the next kid, who asks for two cents worth of licorice.

So of course the guy has to go through all this again, but this time, just as he’s about to put the lid back on the jar, he calls down to the others, “Does anybody else want two cents worth of licorice?”  The kids shake their heads no, so he climbs down, rings up the sale and asks the next kid what he wants. “I want three cents worth of licorice.”

Gregory at Medtronic 10-2010 CroppedYou probably remember this old gag but I’m retelling it here to offer you a useful tip in negotiation.

Let’s suppose you are about to wrap up a complex financial transaction, say a big loan or major investment sale. Before you go back to your company and engage other resources to package the deal, make sure to ask one final question of your customer:  “Let me make sure before I leave today, that I have all the deal points that are important to you. Sometimes customers focus only on price and don’t consider everything. I want to know what else will be important to you other than price.”

Now you can see what might happen if you don’t ask this question. You go back and put everything together, which includes your margin for profit. The customer reads your proposal and then tells you he wants something extra, or some covenant removed, either of which might cut into your profit, or increase risk or delivery time.

You can even take this tactic one step further. Say to the customer, “I’m concerned if we don’t get all the issues on the table that are important to you now, there’s a risk that you may have concerns later on that will be difficult to address without reconfiguring the entire deal.”

Here’s a common example. In a term loan you will have included a prepayment penalty, since your pricing at origination is based on the loan being paid monthly to maturity. If the customer looks at the proposal and says he would like the option to prepay and doesn’t see why he has to pay a penalty, you can accommodate him, but you’ll have to change the rate, and now you’re back-pedaling rather than controlling the deal.

So as a good negotiation rule, try to anticipate what the customer may ask for and make a list of them.  After all, this isn’t your first deal.  Decide in advance how to pre-empt customer demands by explaining the business issues up front.

You don’t want to come down off that ladder, then climb back up it for three cents worth of licorice, do you?

Think Like Your Customer

About Gregory LaMothe
I teach people how to sell things. I own the company ActionSystems. Visit my website at www.actionsystemstraining.com.

One Response to Fable Friday negotiation tip: “Does anybody else want two cents worth of licorice?”

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