As a sales person over the last 29 years I have learned a lot about Negotiating with customers. Some Negotiations are smooth and go forward without much deliberation, other times the process can be a long difficult process. Preparation is a necessity no matter which occurs. Negotiation is your opportunity to demonstrate your commitment to long-term relationships to maximize value for both parties. Negotiation is beyond price… it includes the entire value proposition. Practiced and applied, negotiation skills can increase the level of trust and credibility you and your company have with your prospects and customers. Tough negotiations are often a part of the selling process and preparation is the key to success. Here as some important factors to help guide any sales person through the process.
1. Do your homework or advanced preparation. Ask questions before it’s time to negotiate.
Preparation is the most important attribute to success in any arena. If you wait until the negotiation begins, you’re going to get answers that are intentionally limited. Your counterpart or the buyer now has the upper hand and advantage in the discussions and negotiations. During the negotiation, people withhold information. Before a negotiation, ideally in a non-threatening needs assessment, learn all you can about what the buyer values and what alternatives the buyer has to doing business with you.
2. Understand what you are up against, know what the other party values.
We all have things that we value in business as well as in life. It’s absolutely critical to understand what the other party values. Don’t make assumptions. Assumptions are usually based on emotional inferences and are non-factual conclusions. Different people value different things at different stages in their lives. What mattered in the last round of negotiations may not matter as much this time. Do your research, ask questions, test the waters to probe and ascertain what matters most to the other party.
3. Needs versus wants versus nice to haves. Be prepared to anchor what matters most to you.
Both sides have needs, wants, and dreams in any negotiation. It is important that you understand what is most important to you and your organization prior to entering into the negotiation. Once you better understand what is most important, then you can prepare based on what you can negotiate from a position of strength protecting the areas that are most important to your organization. Do internal research; determine what matters most to others in your own organization. When you know what the terms need to be, you will be in a position to make the first offer and anchor any counter-offers that follow. For the most important terms of the agreement, it is usually better to make the first offer. Having a prepared strategy insures your ability to negotiate and avoid most critical areas that may force you to create an impasse.
4. Time can be your ally or your advisory, take control of it, manage urgency in your favor.
Most buyers understand the selling process enough to know that the best time to negotiate with a sales person is in the last two weeks of any month or in the fourth quarter of the fiscal year. Time pressure can work against you in a negotiation. If you have a tight deadline, chances are good that you will make overly-generous compromises just to get a deal done. Preparing ahead of time means you can start the negotiation sooner and avoid letting the other party run the clock down so that you will cave in to the time pressure. To manage the feeling of urgency, attach terms to the deadline – a percentage increase, for example, that expires or a range of selection that is only available for a limited time.
5. Know your own position and interests.
Your position is what you want to achieve in the negotiation. Your interests are the underlying motivations, the reasons why you’ve assumed this position, often referred to as the “need behind the need”. You need to know both so that you don’t miss an alternate solution that fully satisfies your interests even if it does not quite match the position you assumed. That may be okay, and it will give you significantly more flexibility if you have the “whys” in mind. Using open ended probing questions during a negotiation gives the buyer the opportunity to better explain their positions and the ‘why” something is important. It helps to know the position and interests of the other party. If you haven’t been able to determine this ahead of the negotiation, be sure to ask “why does this matter?” or “what would be the impact of having this question throughout the negotiation.” This will allow you to learn the significance and importance of the need during the negotiation.
6. Everyone likes something free or concession, build in a few giveaways and concessions.
Understand the customer’s needs prior to entering into the negotiation arena allows you to build in a few concessions that are attractive, but do not cost your organization to give them away. If you plan ahead, you can include a few terms in your initial offer that you know are expendable. This is called “log rolling,” and it’s a common practice in negotiating. When you plan ahead, you can avoid being pressured into trimming something that was vitally important. You know in advance the things that you must protect to preserve the value of the business to your organization. Instead, you’ve added some fat that can be trimmed without taking away from what really matters to you.
Think about equivalent concessions that show willingness to add value without adding expense to you. Unlike log rolling which amounts to giveaways, concessions are framed as if/then trade-offs. You pre-plan for these: are there things that you like to have in return for expected add-ons that the other party might request.
7. Frame the conversation so you set the scope of the negotiation.
Sales people are taught at a very early point in their careers to take control of the conversation with the customer to assure that they are in control of the sales. This is great theoretically, however, more difficult in practice. Control is accomplished by being prepared and having a strategy of what questions to ask and how to guide the customer to where you are trying to take them. This must be done without giving the customer the feeling of being manipulated or feeling that the sales person is being overbearing. Before the negotiation, frame the conversation so that you’ve set and communicated what the scope of the conversation will be. Open the negotiation by reiterating what you’ve already outlined. This is a little like setting the agenda for a meeting. It sets boundaries for what is on the table and what will be discussed.
8. Having an alternative plan or a back-up plan is sometimes a lifesaver.
Not all items on your wish list will become reality in a negotiation. It is important to have an alternative plan or a Plan B. It is important to know this before you walk into a negotiation. A strong Plan B means you have a good back-up plan, another customer who can and will come close to the terms you’re attempting to win in this negotiation. The lack of a backup plan puts you in the undesirable position of really needing this particular deal. You would, of course, make different decisions in a negotiation based on how strong or weak your alternative plan is. Learning the other party’s alternative plan is also helpful. If they have a strong alternative to doing business with you, you’ll know that you need to weaken their perception of that alternative and/or include deal sweeteners to widen the gap between doing business with you and with the alternative. If they have a weak alternative, you’ll know that you can hold fast to the terms you’ve set.
9. Determine your walk-away point.
Rather than making decisions like this in the heat of the moment, plan ahead and set parameters that you will stick to for where to start and where to end the negotiation. At a minimum, pre-determine your walk-away or reservation point. As a seller, this is the minimum price you’d accept or the minimum contract term. As a buyer, it would be the maximum price you’d be willing to pay or the maximum contract term you’d agree to. This is your walk-away point because if the terms exceed it, you will walk away from the negotiation. No deal.
10. Know who will do what during the negotiation.
When you will be joined by others from your company for the negotiation, plan ahead for who will do what in the orchestration of the negotiation process.. Will there be a good cop/bad cop dynamic? Who is the final approver of terms? Who fields questions? Who will make the initial offer to anchor the conversation? You’ll also want to be sure that everyone on your side of the table is informed and in agreement about the other nine preparation steps on this list. And, just to be sure you stay aligned, set up a signal so you can call a time out and regroup if needed. Their needs to be a captain in every group negotiation, someone designated to guide the team through difficult segment if that should arise in the process.
As sales professionals we are always looking to improve our skills and become the best at what we do. Preparation continues to ring out as one of the pillars that success is built on. I hope these 10 tips help you in your quest for success. To obtain additional information about my training programs go to www.veltonshowell.com.