Leverage from Being Small

It seems absurd to think that being a relatively small client gives you leverage but in many cases it does -- provided what you want is reasonably easy to grant.  Companies generally develop a low cost approach to managing small clients.  The person (or service department) managing your account likely has a large number of similar clients -- more than they can possibly spend much time with.  The model works because most of your peers don't ask for service and (in many cases) because the customer service reps are empowered to meet small requests quickly so that the client is retained and expense is kept low.

This comes up quite often in personal business, such as banking, cable, etc.  You may not be able to avoid paying standard fees at your bank, but if you incur a one-time fee you can often negotiate it away just by asking.  Similarly, if there are two cable providers in your area and the one you don't use is offering a sweet deal, you can likely get your own provider to match it or to provide you with something similar.  Your leverage comes from providing the company with a choice -- make you happy at little cost or risk you switching to the competition.  Not only don't they want you to switch, they don't want to invest a lot of expensive staff time retaining you.  (In these negotiations it helps if you say that you're considering switching as a result of whatever it is you're not happy about or whatever special the other company is offering.  Agents sometimes only have the ability to grant your request if you indicate that you might switch.)

This type of leverage isn't limited to getting six months free HBO.  Consider my negotiation on behalf of a small healthcare non-profit we discussed under Negotiating with a bad BATNA.  My client represented well under 1% of revenue for Blue Cross Blue Shield of Massachusetts.  I wasn't even negotiating with the decision-maker there, but rather with two of his subordinates.  So how could my (implicit) threat to end our contract with them have any leverage at all?

Consider the situation the Vice President in charge of reimbursement was in.  He was engaged in a massive struggle with Massachusetts hospitals to halt and even reverse the long trend of rate increases.  He didn't want to lose small partners like us, particularly if we were profitable partners, but he also didn't want to spend any bandwidth on us.  My goal, therefore, had to be to make sure that when our case got to him (and we were asking too much to think it wouldn't), two things would be apparent:

1. Giving us what we wanted was strongly preferable to losing us.
2. Losing us was a real possibility if he said no.
3. Trying to keep us while giving us less than what we wanted would be costly, in his time.

I didn't just make sure that his subordinates understood that using us was saving them money.  I prepared a powerpoint slide (designed so that they could go over it with their VP) that showed how much we were saving them and then compared that with operating losses our organization was incurring.  The message was clear -- we weren't just asking for money, we needed it to make our business sustainable.

Next, I provided a strong narrative for my counterparts to use in selling the increase.  Internal negotiations amongst the various people in an organization are critical, so I helped my counterparts with their task of selling the increase to senior management.

BCBS came back with an offer of 3%.  This was better than most providers were getting that year (most hospitals were having rate reductions) but we turned it down and said that we felt we needed to escalate to the VP.

(As a side note, I'd been very open with my BCBS counterparts both about what we needed and my awareness of their constraints, so that when I escalated it was expected and came across as a natural next step in the process rather than me going over their heads.  Now they were in a key way my allies -- an escalation like this is much better for them if it goes quickly and seems justified, so from their perspective it would be much worse if the VP turned us down than if he concludes that this is a worthy exception.  In the former case he's doing their jobs; in the latter they did their job correctly and now he's doing his.)

I revised the powerpoint presentation with feedback from my BCBS counterparts and they presented it to the VP, along with a list of reasons (ranging from financial to our non-profit status and work with poor communities) why we should be an exception to BCBS's determination not to give out rate increases that year.  They came back with a substantial increase, no doubt in large part because the VP saw that as a better option than continuing to negotiate or risking losing us as a partner.

Being small often means that your counterpart doesn't need you it also means that granting you what you're asking for probably doesn't cost them very much.  If you can frame the choice so that it feels reasonable and present your counterpart with the ability to make you happy quickly and easily, there's a good chance that doing so will be their best option.