Most sales organizations are unprepared to conduct consultative negotiations as part of closing a deal. This lack of proper preparation and lack of understanding how to negotiate the best possible result for both buyer and seller can set both parties up for unnecessary disappointment and friction even if an agreement is reached.
Most sellers are unaware of what can be done earlier in the sales process to facilitate smooth negotiations long before that point of the deal is even reached.
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If the seller faces a situation where Purchasing or Finance gets involved at the end of the selling process, they need to recognize that these personnel have a mission to gain concessions and price reductions. If their first encounter with a salesperson or sales team occurs after all else has been agreed to, much of the battle has already been lost. The best way to avoid this outcome is to have early and frequent contact with these departments throughout the sales process.
Outside of these more problematic scenarios, the most important preparatory sales negotiation skill and strategy is to separate "common ground" (i.e. what both parties have already settled) from the list of negotiable issues. This approach efficiently narrows negotiations to the areas where agreement has yet to be established.
Therefore, it is is always a best practice to begin each negotiation session by confirming what constitutes common ground. Research has revealed that beginning each session with a review of what elements of the deal have already been approved creates a positive atmosphere for the rest of the discussion.
One word of caution: do not broach this initial step too casually. The very nature of this kind of recap is gives the other party an opportunity to question or re-litigate a previously discussed aspect of the deal. Providing this opportunity for input creates comfort and trust in the negotiation, but it also means that sellers must be prepared to acknowledge and discuss potential conflicts. Before reviewing common ground as part of beginning a negotiation process, take a moment to consider how any newly presented concerns might be addressed.
Once common ground has been analyzed, planning then should move to establishing three different positions on each negotiable issue:
(a) What is the best possible position the seller could hope to achieve?
(b) What is a reasonable target that the seller would accept?
(c) What is the seller’s "walk-away" limit on each issue?
This latter point is where planning each of these positions need to begin. The most difficult thing to establish is a limit on each negotiable issue beyond which there will be no movement on the part of the seller/sales organization. Each of these limits is literally a "take it or leave it" boundary.
The next step is for the seller/sales organization to conduct the same process from the perspective of the other side. Being prepared requires planning for what the buying organization is likely to ask for. Give thought as to what their non-negotiable limits are on each issue. This alone will highlight how contentious or cooperative the negotiation is likely to be.
An important note about price concessions: Particularly when outside consultants conduct negotiations on behalf of the buyer, or the customer’s Purchasing/Finance department take over, be aware that their primary mission is often to lower pricing. They typically do so by attempting to compare differences between offerings.
Regardless of who is leading negotiations for the buyer, the best approach for sellers is to gain a clear understanding of why the buyers chose the seller’s offering to enter negotiations over in the first place, and why the seller’s offering seems to offer the greatest expected value. This means that a vital part of preparing for and leading negotiations is to ask the decision-makers on the buyer’s side to articulate why they chose the seller’s offering, and to list three or four they are most looking forward to achieving. Knowing this information (even having direct quotes at hand) can arm the negotiator with items that make a difference in negotiations.
If price concessions are anticipated as critical to reaching a final agreement, there are important elements to consider. Prepare to make price concessions in decreasing percentages and not in the final price. If the ultimate limit in price reduction is established at 10%, begin the concession at, say, 4.5%. Any additional concessions then are planned in decreasing increments (i.e. 3.5%, 1.5%, etc.)
In addition to being equipped with the right sales negotiation skills and strategies, let’s back up and look at how the sales strategy and execution earlier in the customer’s decision journey could minimize and even eliminate the need for a formal negotiation in the sales process. As we review some of what research reveals, consider how you might answer the question. "Where does selling leave off and negotiation begin?"
Looking at how organizations make complex/important purchasing decisions, several factors are almost always extant:
Several different people from the buying organization will have a vote regarding what to purchase and whether to purchase or stay with the current approach.
Many of these voters will have different viewpoints defined by the role they play in the decision.
There is likely to be a cohort of vocal people on the buyer’s side of the process who have no vote but have a view that might be influential on the voters.
For each voter that believes purchasing a new solution is important, their journey will take them through several phases.
It is the cusp between each phase that matters most, and provides the seller with opportunities to minimize negotiable issues.
By coaching voters to navigate their buying journey through these cusps several positive outcomes are achieved. First the buyers see the seller as truly consultative. Second, clarity is a vital part of minimizing difficult negotiations. That is why the process and strategies outlined above are so useful. By helping each voter clarify what they need in each phase of the decision journey, not only does the decision become easier, but the seller is equipped with clarity on what each voter values. In other words, it shows sellers how much shared common ground exists between the various parties.
These are a few of the twelve strategies that a negotiator needs to master; a full review of which is beyond the scope of this blog. However, becoming fluent in each of these twelve strategies takes both training and practice. But leading negotiations by employing the strategies and skills described above will greatly reduce friction, delay and reduce negative sentiments in the sales negotiation process.
Tom Snyder is the founder of Funnel Clarity; a training and consulting company focused on humanizing sales. Snyder’s passion is helping companies achieve measurable sales performance improvement. Previously, Snyder spent 10 years with the sales training firm Huthwaite Inc, culminating in the role of CEO. He later founded Business Performance Partners, a sales and strategy consulting firm that evolved into Funnel Clarity. Snyder is a sought after international speaker and was named one of the Most Influential Sales Leaders. He has authored two McGraw Hill best sellers, “Escaping the Price Driven Sale” (2007) and “Selling in a New Market Space” (2010).
