6 Tips for Effective Sales Negotiations
Effective Consultative sales negotiations serve 4 key objectives: Increasing Deal Size; Reducing Discounting; Improving win/loss ratios; and Realizing greater value (proposed vs. closed).
Tips for Effective Sales Negotiations
So, how do effective negotiators keep their goals intact through the contract? They:
1. Use Preparation Time
Sellers must come ready with relevant insights that demonstrate their detailed knowledge of industry-specific challenges. This shared knowledge “primes” the customer. Priming is the basic principle of prompting a person to think a certain way. This effect is helpful to sellers who want to encourage a customer to recognize the value of a proposed solution. This influence of the customer’s decisions begins with the first conversation. Effective priming helps customer’s change their mindset from “someone is trying to sell me something” to “this solution can get me to where I need to go.” Priming is trust building. The seller is helping the customer become comfortable with sharing information from their side of the table.
Building trust at this early stage creates an environment that’s conducive to successful consultative sales negotiations. The reason: trust signals fairness. This sense of equitable interests has been shown to bring efficiency to selling. Research published in Psychology & Marketing revealed that by “priming a consideration for fairness, a seller can increase a customer’s satisfaction without sacrificing profit.” Additionally, “Fairness-primed buyers consequently had a more positive attitude toward the seller.”
2. Lead By Opening
Effective opening starts by recapping common ground. This strategy helps reassert the relationship while ensuring the seller is up to date on all relevant information. The seller is setting the stage for the crucial next step: being the first to position the offer.
Research from Northwestern University reveals that “there is virtually no research that supports the claim that letting the other party open first is advantageous. In fact, it can backfire—and lead to a worse outcome than you imagined.” The reason is found in the anchoring bias.
When sellers make the first offer, they create a center of gravity, an “anchor.” Therefore, the outcome of the negotiation is likely to hover close to the original figure. Social psychology researcher Robert Cialdini Ph.D. explains, “The best persuaders become the best through pre-suasion—the process of arranging for recipients to be receptive to a message before they encounter it…what we present first changes the way people experience what we present to them next.”
Additionally, the decision to make the first offer is as important as how the seller makes it. Avoid the timidity that accompanies compromising language. Stating “I want to be around this price” signals willingness to move from the offer. Remain resolute.
Finally, make the offer complete. A piecemeal approach of staggered negotiations only works to prolong the process and frustrate the customer. With a complete offer, sellers can deliver a concise solution without the need to continue talking, a classic precursor to negotiating with oneself
3. Control By Converting Demands Into Needs
Once the seller has made the offer, it is important to control, or protect, the position. In many cases, a seller, upon hearing a request for a lower price, will protect their pricing by suggesting a reduced solution. However, this strategy doesn’t represent control. Protecting the seller’s position means maintaining the scope of work and the pricing. Many negotiators move to trading too soon without a full sense of customer demands, needs and priorities. As a result, they do not have a fully informed trading strategy and, after offering a trade may witness the customer coming back to nibble for more.
How do sellers manage this challenge? They investigate the customer’s demands. These demands are an expression of an underlying need. By drilling deeper, the seller can uncover these needs. This approach is important because needs (“I need more flexibility in the payment schedule”) are much easier to discuss and resolve than demands (“I can’t pay that much”). The power of a consultative approach is that it effectively reveals these needs through questioning.
Finally, sellers should neutrally acknowledge the customer’s responses to show that they are listening and understand. As a seller listens, they need to begin to think about how they might reinforce value to persuade the customer. Once specific needs are understood, they may identify multiple options for meeting the need do not necessarily require concessions.
4. Trade to Protect
The seller’s trading strategy will determine how well they maximize their outcome. Effective trading means protecting essentials without unilateral concessions that leave money on the table. Sellers make this work by first understanding how trading is different from concessions.
Simply put, a concession occurs when one gives something up and gets nothing in return. A trade is an exchange; the seller is giving to get. However, trading cannot occur in an adversarial setting. In such an environment, a customer, otherwise willing to trade, may resist at the behest of their ego. Moreover, studies have shown that strong-arm tactics are simply ineffective. Findings published in the Harvard Negotiation Law Review “serve to shatter the myth that adversarial bargaining is more effective and less risky than problem-solving.” The author continues, “the research indicates that a negotiator who is assertive and empathetic is perceived as more effective.”
Trading will be necessary for nearly every negotiation. Therefore, it’s crucial to know the true value of the trades. Knowing this means understanding, and expressing the specificity of the trade to avoid misunderstandings later.
5. Seek Commitment To Close
When sellers move to close, they must start by reinforcing perceptions of value. Summarize what the customer gains, then check that the terms match the customer’s understanding. This is a crucial part of the conversation because maintaining momentum is what brings the deal to a close. If sticking points persist make them contingencies and instead gain conceptual buy-in. Sustain momentum with specific, actionable next steps in unambiguous language. Until the seller has a signed contract they have not closed, they have only reached a commitment.
Commitment is loading the gun; closing is pulling the trigger.
Additionally, closing is important in preventing over negotiating which can exhaust the customer. However, sometimes closing is not possible. Why? Deadlocks happen.
When an agreement cannot be reached, sellers must consider the best option before walking away. This minimally acceptable outcome must be clear to the seller before negotiating. If this best option is formulated in the moment, it’s likely to leave money on the table.
6. Act To Solidify
Follow up is critical. The seller must reinforce trust and credibility even when negotiations are complete. Research published by MIT Sloan Management Review explains that “Formal contracts are often ineffective in taking care of the uncertainties, conflicts, and crises that a business relationship is bound to go through over time.” The research continues, “trust and confidence, have been pointed out in several of the studies as being more effective for the development of relationships than formal contractual arrangements.” When a seller follows up they continue to demonstrate their competitive distinction, maintain momentum and customer respect.
Sellers can begin with an internal debriefing to evaluate the extent to which they met their goals. Every negotiation involves something unexpected, no matter how small. This reflection is an opportunity to consider such events and how to improve in the future.
Externally, sellers need to send a written summary thanking the customer for their time with a possible outreach from a senior leader. This summary should include specifics such as delivery dates, payment procedures, and next steps. These actions help solidify the seller’s reputation which reinforces the customer’s knowledge-based trust. Every time we follow through on a commitment we build knowledge-based trust.
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