LinkedIn  Twitter  YouTube  Facebook

Sales Negotiation: Prepping to Avoid 4 Classic Pitfalls

Taking action without preparing for a variety of negotiation scenarios often leads to a missed opportunity

By STEVE BARRY

“Just give me my goals and get out of my way.”

Does that sound like any salespeople you know? Many salespeople, by nature or necessity, are action oriented. Instant action, particularly when action equals sales, compensation and personal gratification, is glorified.

But this action orientation inadvertently leads to a perennial weakness for many sales organizations: negotiation. Taking action without preparing for a variety of negotiation scenarios often leads to missed opportunity, whether in the form of blown deals or closed deals that leave money on the table.

To be effective negotiators, salespeople need to invest significant time in preparation. To paraphrase Louis Pasteur, “Opportunity favors the prepared mind.” Negotiation is much like remodeling a kitchen: the prep work takes the most time. It’s painfully tedious. It can feel like you’re not making progress. But, if you skip steps, it can cost time, aggravation and money in the long run.

It’s not that salespeople don’t conceptually understand this. They do. But their bias for action often trumps their desire to be prepared. The trick for successful sales managers is to broaden the definition of “action” so that it includes preparation for negotiation.

For example, if you asked salespeople to define negotiation, most would say that it’s the process in which they and their customers engage to resolve differences and arrive at a satisfactory agreement. It’s the end game. But what if the definition of negotiation from the salesperson’s perspective also included the actions of pre-defining their opening strategy and concession strategy? In that context, challenging issues such as price and the role of purchasing are deliberately woven into initial conversations.

This sort of “negotiation selling” requires customer insight, preparation and a degree of flexible choreography or “process negotiation” – thinking about how, where and when to introduce possible points of negotiation into the conversation. The stress of intense end-stage negotiations, in which the customer has the leverage, is greatly reduced and successful negotiations result.

But where do you begin? For starters, it’s important to avoid classic mistakes by asking yourself four questions that will go a long way toward being fully prepared for successful negotiations.

 

  1.     What type of negotiation do I face? Am I in a zero sum game with a one-and-done client who has fixed ideas about the value of the deal and is intent on winning at my expense? Or am I negotiating a deal with a long-term client whose ongoing positive relationship with me is as important as the results of this particular deal? The type of negotiation will have implications for how you proceed and what compromises you are willing to entertain.
  2.     What are the parameters of the negotiation? The answer(s) to this question will determine just how far you’re willing to go – or not – to close the deal. Imagine an achievable, best-case scenario in which you close the deal while balancing monetary and relationship considerations without making quick concessions. Then imagine a worst-case scenario in which you close the deal at the least-favorable terms you will accept. In between is an acceptable, likely alternative that will enable you to close a deal that’s beneficial to both parties. Knowing the extremes will help you identify an alternative that is closest to your best-cast scenario.
  3.     What are my interests? And what are my client’s interests? To reach an agreement that satisfies both you and the customer you need to determine each side’s interests and what is motivating each of you to identify those interests. For example, your client’s interest might be price. Determine why. Your interest might be terms. Understand why and whether there are any assumptions you could test. Knowing each party’s interests enables you to anticipate and/or address issues that arise during negotiations. Knowing that your client’s interest is price, for example, can help you to anticipate objections and make a persuasive case for your price.
  4.     How am I defining value? How about the client’s definition?  There are non-monetary ways to deliver value to the client.  The broader you can define value, the more latitude you have in negotiations, and the more you can deliver without cutting prices. For example, your customer might value more flexible terms. Or he or she might have logistical, resource or time-sensitive needs that you can address in ways that deliver value. For example, you could dedicate more resources to their account or meet tight deadlines without additional cost.

There are other important considerations, of course. You must know your own negotiating style and the implications that style has on cutting a deal. You must be intimately aware of your individual customer’s situation and his or her organization’s current state. You must be able to develop rapport with the client, provide and obtain information, and recognize opportunities to gain leverage. And, ultimately, you must be able to close the deal.

All of these considerations will be made easier by taking a more expansive view of what negotiation entails. Salespeople who thoroughly prepare in advance for the challenges they will face during negotiations can achieve greater success at the bargaining table.

Steve Barry is senior manager of strategic marketing at The Forum Corp., a global professional services firm and strategic learning solutions provider that helps develop the skills of many of the world’s most effective sales forces. For more information, visit www.forum.com.