Negotiation. One of the worst occupational hazards of the sales profession. Most will say: Not fun. Nobody ever looks forward to it. We want it to end up a win-win for both sides (but does it ever really turn out that way?). It is inevitable.
Inevitable? Does it have to be? Hmm.
Hear me out. If a sale is qualified properly (all items in the qualifying process done beautifully . . . meaning PAIN, Budget and Decision are all uncovered), and expectations are crystal clear (Ground Rules established). Why the need for a negotiation? Tough question but take it seriously. If we do our job and uncover ALL PAIN points. We have the budget (target pricing) or money conversation and we understand who the decision makers are and how they go about making decisions why are we negotiating. It does not add up.
Negotiations happen when sales are not qualified properly. Leave a gap or take a short-cut and you can be damn sure your prospect or customer will take advantage of it. Happens all the time.
Here in the Metro Detroit area we call it an epidemic. Based on our geography alone there is a gigantic glut of automotive suppliers. Many of these sales organizations have succumbed to belief that the negotiation is inevitable. The OEMs have done an excellent job of perpetuating this. Their annual productivity reductions/ expectations or “cost downs,” are standard operating procedure for the OEM’s. Is it fair? Fair is just another 4-letter F word. It is incredibly important for the salesperson to know the buyer’s productivity goals in the negotiation and include them in the proposal. Remember… it all comes back to their PAIN. No PAIN = No Dice!
Here are 10 things to keep in mind entering into any negotiation:
1. Define the concessions you’re willing to accept (if any) in advance
In the heat of the moment, a 10% discount or additional six months of service might seem perfectly acceptable. It is only when you get back to your desk and start drafting up the contract that you realize you agreed to terms you cannot or should not accept. Clearly defining the limits on price discounts, freebies, or other add-ons before you meet with your prospect will ensure you come to a mutually beneficial agreement.
2. Let the prospect go first
You’ve presented the terms of the deal. The prospect would like to negotiate them. You must let them start the conversation. In the spirit of being accommodating, salespeople are often tempted to offer a discount or an adjustment before the prospect even opens their mouth. But you have no idea what they are going to say! Just as in other areas of sales it pays to listen first and then speak. Be patient.
3. Don’t give a range
If the prospect would like money knocked off your product’s price, resist the urge to say, “Well, I could probably reduce the cost by 10 or 15%.” Who would accept 10% when 15% has been offered? If you are negotiating (big if) always quote one specific number or figure and then go higher or lower, as necessary. The word “between” should be avoided at all costs.
4. Avoid splitting the difference
Offering to split the difference can do more harm than good. For example, if the product or service costs $10,000 and the prospect wants a 50% discount, you shouldn’t counter with $7,500 although it seems logical to do so. If you offer a slight discount but still keep the number in the neighborhood of the original price, the prospect will likely accept – and the margin takes less of a hit. In other words, don’t WIMP OUT.
5. Negotiate with the decision maker
This tip might seem obvious, but you would be surprised how many salespeople make the mistake of negotiating with the wrong person. This means that when talks begin with the true decision maker, they’ll likely start at an already discounted price. A great outcome for the prospect, not so great for you.
6. Don’t put anything in writing until the conversation is over
Negotiations can swing back and forth and around again. Many ideas will be proposed. Some will be accepted. Others will be shot down. You will be wise not to revise the contract until the entire negotiation has ended, and all parties have verbally agreed to the terms.
7. Get something in return for concessions
Healthy salesperson-customer relationships are born out of mutual respect and trust. With this in mind, you shouldn’t accept every single one of a prospect’s demands without making some requests of your own. By keeping the negotiation a win-win for both sides, you and the customer remain on equal footing, which lays the groundwork for a mutually beneficial relationship.
8. Take the conversation away from money
The most commonly negotiated aspect of a sales deal is price, so salespeople go in prepared to talk discounts. Big mistake. Since price is tied to value, and value is tied to a customer’s perception of and satisfaction with a product, you might consider offering other add-ons or items in lieu of a lower price. Understand that this is not a hard and fast rule – the specific concessions you can offer depends on the situation.
9. Keep the conversation light
Although the prospect and you sit on opposite sides of the table during a negotiation, they will be partners if the deal is signed. Keep the talk light and jovial to avoid creating bad blood. You need to work together when the deal is done.
10. Walk away if necessary
You should not be willing to accept any curveball a prospect throws at you. If demands become unreasonable or unprofitable for your company, do not be afraid to walk away from the deal. A customer who only agreed to sign if the contract was radically amended, or the price was drastically dropped, is bound to cause problems down the road. Since they clearly do not see much value in the offering, it’s only a matter of time before they become dissatisfied. Get out for you and your prospect’s sake.
And another thing. Do not lose the war over a single battle. There is a lot more on the horizon for you at these accounts. No need to puff out your chest and win the battle and shoot yourself in the foot for the rest of the war. Happens a lot!
