In a recent workshop on negotiation, we asked the sales representatives “When that long awaited telephone call comes from your client, what steps do you take in preparing yourself to negotiate the contract or deal?” It was relatively easy to tabulate the data. One participant raised her hand and said that she does a quick review of her proposal.
We then asked, “Does anyone take a different or additional steps before negotiating?” There was silence. We then asked, “Do you speak with your sales manager?” A couple of people admitted that they check with their manager to see how much leeway they have in discounting price. Maybe the rest thought it was a rhetorical question?
In the ensuing conversation, five assumptions surfaced that shed light on our difficulty in reaching “win-win” resolutions for high profile, big-ticket deals. These commonly held assumptions about negotiation share at least one commonality: they are all MYTHS!
- Negotiations begin near the close of the selling process as both parties focus on the final terms for the contract. Negotiations begin when two parties exchange meaningful information about their needs, desires and capabilities. Negotiation continues throughout the sales process as each party helps the other adjust their expectations. While negotiations may yield a contract or purchase order, elements of the buy-sell agreement are always subject to change. Think of the negotiation less as an event and more of a thread that weaves together the buying and selling process.
Ask yourself this question, “ Is it easier to gain information from my client about his/her price expectation early in the selling process or when I am seated at a table attempting to reach final terms?” Most of us would agree that we should start early to explore price expectations and budget capabilities so there is less of a possibility for sticker shock or unrealistic assumptions.
- The Buyer, not the Seller, is in charge of the negotiation. Sales representatives often say, “They called us so it’s their meeting.” Nope! You’re the professional. You’re the one steeped in a “win-win” approach. The only way you can secure a strong mutually beneficial outcome is to develop a “win-win” strategy—one that is grounded in a firm understanding of your client’s priorities as well as your own, and an agenda that encourages open discussion of underlying interests and options.
It is also in the best interest of both parties that you take the responsibility for maintaining accurate records of every issue that has been discussed and all elements of an agreement. You need to share this record with your customer every time there is a phone call, meeting or email that impacts the negotiation process.
- A bad deal is better than no deal at all. No, a bad deal means a “Lose-Win” outcome. It may show up as a “W” in your CRM system, but it’s clearly an “L.” Because of the effect on flexibility, you must set expectations early so your customers won’t have unrealistic expectations as you attempt to finalize a deal. Don’t succumb to the temptation to “sell on value but close on price.”
- A discount is “OK” as long as you’ve elevated or “marked up” your price in the proposal. Think car salesman: they position their MSRP several thousand above their target price. One Global VP for Sales said it well: “A discount is like using an indelible marker on a white board—it’s hard to erase.” Elevating your initial price can put you at the wrong end of the price continuum when decision makers compare proposals. It also sets unrealistic expectations for discounts in future negotiations.
Consider this example. You have two possible sales with this customer—one in Q2 for $100,000 and one in Q4 for $500,000. If you make a 10% concession to get the Q2 deal, guess what discount your customer will expect from you on the Q4 deal? A $10,000 concession in Q2 quickly can become a $50,000 expectation five or six months later.
- It is best to start with the easiest provisions and deal with the most difficult after you’ve built “momentum.” This is a classic myth. If you begin with the easiest issues, you will find yourself with fewer options available when facing the more complicated, often high-priced concerns. In most complex business deals, you will want to package or “bundle” provisions that meet your customer’s highest priority concerns while still meeting some of the financial and non-financial objectives of your own organization. Many new sales representatives try to find an issue that they can concede at the beginning as a way of showing good faith. In reality, all this does is lead your customer into believing that they can get much more than they initially expected.
Parting Thoughts
Sometimes sales representatives feel that they’ve accomplished their mission if they can just beat back the competition and become the chosen vendor. That’s only part of the challenge. If you haven’t set a realistic foundation of customer expectations for price, performance, timing and service, you may find yourself facing a difficult struggle to close the deal.
Start early by asking questions that will help you understand your customer’s desired wins. What are their priorities, requirements, expectations, internal obstacles and key performance indicators? Your responsibility, as a partner, is to educate, counsel and guide your customer toward a “win-win” solution.
