5 Tips That Lead To Better Negotiation
Sales negotiating is a part of everyday life, and it’s critical for more profitable sales and accelerated sales cycles. Poor negotiation techniques can cripple a company just as quickly as losing key customers. While most negotiating strategies seem like common sense, not many salespeople have a defined negotiation strategy or process. Most have never received any training in this area. These five tips will unlock your team’s ability to get the best deal possible.
Tie it Back to the Impact on the Company
When it comes to purchases, people are always searching for ROI for their company. For example, a company looking at a product that will save them 2 million in revenue a year, isn’t going to worry about a product or service that costs them $200K. Why? In that case, the gain outweighs the cost. However, many salespeople fail to uncover this vital piece of information.
When you are negotiating, it is important to understand your customer’s perspective. What will they gain, or what sort of effect will this product or service have on their revenue and profits. Start with:
- Identifying your customer’s problem clearly.
- Pinpointing the impact your product or service has on the customer. Quantify it if you can, for example, increased revenue, dollars saved, risk avoided, etc.
- Distinguishing what is essential to the customer when making this decision. What are their buying criteria?
Know the Correct Decision-Makers
Salespeople often make the mistake of negotiating with the wrong person. But it’s not their fault. Many companies are good at having the ultimate decision-maker pass them to a purchasing person.
Your salespeople need to know who the true decision-makers are and how your product or service will benefit them. The purchasing person or “middleman” is often tasked with getting the best possible price. Seldom do they understand the exact benefits of the product or service. This is where your salespeople need to know the difference between bargaining and negotiating.
When to Bargain vs. Negotiate
Bargaining is the argument of price alone. Negotiating applies to much more than price and may include several non-monetary items. All negotiation involves an exchange of value, agreements, and promises of performance.
Take the purchase of a car, for instance. Bargaining is asking for a $20,000 car to be sold at $15,000. All about the price; in contrast, negotiation is adding elements other than price to the overall deal. Items like oil changes or floormats could be included by the dealer while keeping the price the same. You are adding new elements to the exchange that provide value to both parties.
Apply this concept to the B2B world. You could fight over price or add other features to the deal, such as length of the term, service level, testimonials or marketing, and exchange of services. Frequently there are things that you can offer that are of value to the customer – at little cost to you. Good salespeople uncover those items. We like to say, “Never give anything unless you get something back.” For example, if you have to discount, get a longer commitment in return, reduce services, or agree that they will provide a testimonial.
Once your salesperson knows the difference between bargaining and negotiating, they are better suited to talk with the proper decision-makers.
Not Always about Price
Price is one of the most common aspects of a sales deal, so your salespeople should be prepared to talk price if it comes up. However, since rates is tied to value and value is often tied to customer perception or satisfaction with a product, a salesperson should not start with discounting.
According to Blue Corona, “80% of B2B buying decisions are based on a buyer’s direct or indirect customer experience, and only 20% is based on the price or the actual offering.” According to Walker, “By 2020, customer experience will overtake price and product and the key differentiator between brands.” How your salesperson makes, the customer feel is more important than the cost of the product or service.
So other ways for your salespeople to add more value are:
- Increase customer experience – technology to change the way customer service is addressed, capture customer feedback, create an emotional connection with your customers, etc.
- Compare value – customize a solution to meet the customer’s needs or create more transparency.
- Focus on long-term benefits – show how each dollar spent today will pay big dividends tomorrow.
- Offer something others can’t – when customers know that whatever happens, you’ll take care of it, their resistance melts.
What Happens When they do Ask?
When the customer does start to ask about price early in the sales process, don’t allow your salespeople to simply give a range of numbers. The customer will always fixate on the lower amount, and that becomes the start of your negotiation. Instead, provide context with your answer. For example, “We worked with one client that had this problem, and we only had to provide a small solution that cost them $X (small).
We’ve had other customers that had a much bigger problem to solve. We implemented a different solution that cost them $Y (bigger number). I don’t know what you need yet. Let’s talk more about your specific needs and determine the best solution is for you. You have now established that price is tied to which solution or service level they need, and sets up a more fruitful negotiation.
Know When to Walk Away
The walk-away point is your salesperson’s alternative plan of action when the conversations start to pass a point where the deal does not make sense. For example, your salesperson meets with a preferred supplier, the supplier says they cannot go above a price that is not even in the ballpark. You need to consider your walk away point, which could be to revisit the deal in six months or simply walk away. Knowing your limits upfront is key to not wasting time on deals you can’t win.
The process below is similar to one developed by Harvard Law School to produce the best alternative to a negotiated agreement:
- List all other options to the current negotiation – price, terms, offerings, service level, etc.
- Evaluate the value of each alternative
- Select the alternative that would provide the highest value to you
- Determine your walk-away point – calculate the lowest-valued deal that you’re willing to accept
Once your salespeople know their limit, they’ll be able to win more without accepting less.
Invest in Yourself and Your Team
One of the easiest ways for you and your sales team to be on the same page with negotiation is to train them. There are many great programs out there; however if you rather stick closer to home, Pivotal Advisors is happy to provide you with negotiation training.
There’s an art to negotiation. It starts with tying it all back to the buyer, knowing who the true decision-makers are, knowing the value of your service or product, and knowing when to walk away. If your team is knowledgeable in each of these areas, they’ll be in good shape for their next deal.