Academic journal article ABA Banking Journal

Become a Better Negotiator for Your Bank

Academic journal article ABA Banking Journal

Become a Better Negotiator for Your Bank

Article excerpt

When working with customers to forge the inevitable compromises required in business, the need to negotiate comes up and few tasks cause more concern to bankers. Perhaps a key client is threatening to take business to a cheaper competitor. What can be done? To negotiate as well as save the account, we must bear in mind the factors that affect a negotiation.

First, what is the level of trust the two parties have with one another? If a customer has a good relationship with you, and likes you and the bank, she will be more willing to negotiate than the new executive who wants to make a name for himself by "taking charge," or who wants to cut costs on any basis. Too often, self-serving interests can make a negotiation go sour.

Second, what are the hidden or unspoken concerns that have led to the discussion? Is a client's business suffering from poor sales or economic turmoil, for example, and is this perhaps behind that request for a fee reduction? Probing for the underlying causes of a customer's request can play a big part in coming to an acceptable resolution.

Third, can you as the negotiator keep in control of your emotions, stick to the issues, and remember that holding onto the relationship is a key part of coming to an acceptable conclusion? The risk in a difficult negotiation is that you may be able to win the war, but harm the relationship which will ultimately makes your customer more vulnerable to the competition.

In planning a negotiation, a series of steps must be undertaken. You must think in terms of both your bank's and client's needs. Your company can not accept a substantial cut in fees, for example, but it may be able to take some kind of cut or it may be able to offer other bonuses that can provide an excellent added value to the customer.

Before you begin your negotiation, you and your management will have to come to agreement on goals and decide what is acceptable. This is step one.

In the second step, you must decide how flexible you can be. Does your company want to keep this customer at all costs? At what level of profitability can your company be happy with the relationship? If you meet the price, you send the message that you are charging too much to begin with.

In step three, you must perform a market analysis. If all the banks in this market are providing the same set of services for, let's say, $5,000 per month, and the upstart competitor will handle your customer for $3,000 a month, this can be an issue for negotiation. …

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