Barter negotiation is a tactic I simply LOVE ! I have used it countless times across my career and it NEVER failed me! I only wish I would have thought of employing it more often! For sure I would have won more deals… I strongly feel that nowadays, in these times of unprecedented crisis and turmoil, barter can be the “golden nugget” that may make many deals come true, despite the difficult economic environment. In this short post I will share with you how to best use of this tactic and close truly WIN-WIN deals!
Before anything else, let me say it loud and clear: BARTER is one of the most powerful and also extremely ethical and professional tactics! It is also a great example of how you can expand the pie if you work hard enough. In my point of view, the Barter tactic is very much underused. I have seen many deals that could have been closed, if the parties would have thought about using this tactic.
The principle of bartering is very simple: exchanging goods or services without using 100% monetary compensation. Instead, you are using something that is of value for the other side, yet it is not money/cash. Let me take one example: when you trade one thing (for example you buy something), you may be short of money/cash. So, what do you do? Do you keep pushing for a better price? Yes, of course, but up to a limit. What happens if you need to get a price that is 60% cheaper than the asking price because that’s the money you have? Most likely the other party will not go down so much, so you risk losing the deal. You can still save the deal if you can offer to the other party something he needs, in return for the money that you lack. This is called “partial barter”. The item you offer has a monetary value that you both can agree upon and that can compensate for the lack of cash. It may also be that you get into a “total barter”, which means that you don’t pay any cash, but you give something material (with a monetary value equal to the goods you buy) in return.
During this extraordinary crisis (but also during normal times), one party might be short of cash. Yet, it may have something of value for the other party and, if the two parties talk and try to find the common ground, the basis for a barter can be agreed upon.
Real life example:
While the company I was working for was promoting in Romania a high-quality German brand of cookware, I recommended the owner of the company to think of an endorser, so the consumers believe us more when we advertise the brand. He told me that the marketing budget is very small, and we cannot afford to spend anything on endorsers. Then I told him that I will go to one of the most luxurious hotel brand from Bucharest (let’s call it “DeLuxe Hotel”) and negotiate that they endorse us without us paying anything. He looked at me like I had smoked dope! But he ultimately agreed.
So, I rolled up my sleeves and set up a meeting with the hotel’s Director of Food and Beverage and with the Executive Chef. I showed them samples from several ranges that I felt were appropriate for professional use and proposed that we give them products for use in the hotel, in return for the formal endorsement (DeLuxe Hotel endorsement, as well as the personal endorsement of the Executive Chef for the brand).
In parallel, I negotiated with the producer of the brand (a German company) and got them to agree to pay all the samples themselves, in return for getting this endorsement that can be used globally.
None of these negotiations was easy, but after approximately 4 weeks we had a deal with both DeLuxe Hotel and the German producer. And let me say it again: with ZERO costs for the company I was working for!
How to do a great barter negotiation?
The first and most important thing you must do when you consider a barter negotiation is to truly understand the needs of the other party! How can you help him/her with his/her pain points? This is NOT an easy step and requires thorough, deep conversations to understand these needs. Think about the Iceberg Theory applied in negotiations: the motivators of the other side are NEVER visible, you must search for them!
Once you understood the needs of the other party, the second steps is to think at what you have and could help the other side solve his/her problems. Or think about any other ways in which you could help the other side.
The third step is to check the interest from the other side to take your help. Here do NOT talk about the value of your help. Just make sure what you offer as barter is of interest to the other side.
The fourth step is to do a very realistic evaluation of your help and present it to the other side. When doing this, please be realistic and do not over-inflate the value of what you offer. The other side is NOT stupid and will be for sure offended if you try to take him/her for a fool when doing this evaluation. Again, remember that you want a long term, win-win deal – and in this case transparency is key!
The last step is the implementation of the barter. It is of paramount importance that each side of the deal respects its obligations, as agreed in the barter deal. So, whatever you promised to the other side, you do 100% (or even more!!).
Without any intention of bragging, I have done many successful barters (several even “full barters”) when I traded media space for goods. These always worked because I always followed these 5 steps “by the book”, especially the last 2 ones: I always did a fair evaluation of the media space AND I implemented perfectly my side of the agreement up to the last detail (sometimes offering even a little bit more than what we agreed).
Two key things to remember about barter negotiation:
1. In any negotiation (but especially in the times of crisis, when cash might be tight for many companies), think of the power of the BARTER! Go through the list above and think whether it would make sense to approach the negotiation with the barter in mind – even if it may look like quite a straightforward deal!
2. Don’t sell yourself too cheap when doing such barter negotiation and don’t do ANYTHING in return for a short-term advantage, which will hit you back in a significant way in the long term, if you do the wrong partnership. In other words, always do the right thing for the business!