What's the most effective way in today's economy to increase your margins, close more deals and improve your team's success rates without spending a lot of money in the process
Answer: Creating, implementing and managing negotiation best practices. Negotiation is one of the last significant areas in sales that remains largely unmanaged. Frankly, the vast majority of sales professionals just don't consistently and systematically use proven, research-based strategies here.
Instead, they largely rely on their instincts when they reach the negotiation stage. This often leads to: a. money left on the table; b. bad habits and inefficiencies; and c. failure to capture critical intelligence your company can use in future negotiations.
Research over the last 30 or so years has tested various negotiation strategies, and it's now become fairly clear which techniques work and which don't. A sales manager's challenge is to first establish the effective research-based strategies as best practices. These should include the following golden rules of negotiation:
1. Information is power—so get it! Many sales professionals enter negotiations with arguments intended to persuade their customers of the value of their product or service. Unknowingly, they're giving up power from the first time they open their mouths. Negotiation power goes to those who listen and learn.
Crucial intelligence to obtain and retain includes your customers' fundamental needs and interests and strategies they have previously used. Consider the power of knowing your customer regularly walks out of negotiations … but comes back to the table 90 percent of the time.
2. Maximize your leverage. How much do you and your customer really need the deal? What are your and your customer's alternatives (or plan Bs) if you don't close? What can you do to strengthen your leverage? Finding the answers to all of these questions can be the key to success.
3. Employ "fair" objective criteria. The quest for fairness is a key element in many negotiations. And fairness often boils down to relatively objective and independent standards, such as market value, precedent, costs/profits or expert opinion. If both sides can agree on a fair standard, your deal likely will close.
4. Design an offer-concession strategy. To avoid leaving valuable items on the table gratuitously, design the right offer-concession strategy. You can't do this without understanding the patterns and psychological dynamics impacting concession behavior.
A crucial sales element here involves making sure your customer walks away feeling like they got a good deal. So don't just start at one price on big deals and refuse to move. Instead, start higher and provide a discount. You have to make them feel special.
5. Control the agenda. Effectively controlling the process is one of the most challenging elements in striking a great deal. Understanding when and how to use deadlines and the psychological tendencies underlying them will give you a leg up in your negotiations.
The next step is to ensure your team implements and you manage to these best practices. How can you do this?
First, require that your sales professionals complete a best practices-based strategic negotiation plan prior to their significant negotiations. Second, ensure they update their plans during their negotiations and that you receive reports of their moves. And third, track and retain all their strategic plans and crucial intelligence that's been gathered.
Overall, you can do some of this with word processing and/or spreadsheet programs, plus notes fields in CRM solutions. Specialized software solutions are another valuable option.
Bottom line: Get your teams negotiating strategically based on proven research-based methods. That's the best way to maximize your likelihood of negotiation success, both in this economy and the next.
Marty Latz is the founder of Latz Negotiation Institute (www.NegotiationInstitute.com) and ExpertNegotiator Planning & Management Software (www.ExpertNegotiator.com). He is also the author of Gain the Edge! Negotiating To Get What You Want. Reach him at Latz@ExpertNegotiator.com, or by calling 480-951-3222.