The problem is that too often we see negotiations as adversarial or even a battle of wills. This perspective is misguided. Consider research from Harvard that concluded:
“The myth of the effective hard bargainer should be destroyed.”
The researchers learned that negotiators who took on the role of a problem solver were among the most effective. Developing these problem-solving skills means being able to reach a mutually beneficial outcome without relinquishing valuable terms.
3 Key Sales Negotiation Skills
Our four decades of work across industries shows that sales professionals can become effective negotiators by focusing on three key phases.
The opening of a negotiation sets the tone for the rest of the exchange. This tone should be one of cooperation. Therefore, sales professionals should begin by recapping common ground. The opening is an opportunity to highlight areas of agreement and create positive momentum. This approach makes clear from the outset that the negotiation will not be adversarial in nature. Reviewing common ground is also an effective way to check if anything has changed since the last conversation with the customer.
Once the common ground is clear, sales professionals can position their offer. For many, this is a counter-intuitive step. Conventional wisdom insists that an effective negotiator never make the first offer. Unfortunately, this thinking is based on a false premise. Academics at Northwestern University reveal 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.”
During the opening, the sales professional should seize the opportunity to make the first offer then handle the customer’s response.
Handling the customer’s response means:
- Acknowledging what they have said to demonstrate that the message is understood
- Questioning the customer to explore the details behind their response
- Summarising the findings to avoid backsliding later in the negotiation
Customer demands are inevitable in negotiations. Learning to deal with these demands is critical because if they are not handled properly, demands can lead to concessions or early trading that diminishes the value of the sale. To manage the customer’s demands, sales professionals must remember that a demand is simply an unserved need.
There is an important distinction to be made between demands and needs. A demand is non-negotiable. It is an ultimatum. A need, however, is a requirement that can be met in a variety of ways. The sales professional who can convert a demand to a need will succeed because they can meet that need in ways that do not require sacrificing valuable factors like payment terms, pricing, or the scope of the sale.
Sales professionals can execute a control strategy by:
- Neutrally acknowledging the demand without agreeing or disagreeing
- Uncovering the detailed needs that reside below the surface of the demand
- Shaping perceptions of value by reasserting the benefits of the solution and relationship
Trading is one of the negotiator’s most powerful tools. It is powerful because it guards the negotiator against one of the most common traps in a negotiation: making a concession.
A concession occurs when someone relinquishes something and receives nothing in return. When a sales professional narrows the scope of the solution to meet a customer’s budgetary needs, they are conceding. This trap seems like it would be an easy one to avoid because most sales professionals would never willfully offer something of value without an equitable exchange. However, offering a concession to get the deal through can be deceptively enticing as quotes loom large and the end of the month nears. Concessions stem from impulsivity.
The solution to this trap is a focus on trading. When a sales professional engages in trading, they are giving something and getting something in return. Put simply, trading is not unilateral — it is cooperative. Some sales professionals might suggest that concessions are, in fact, a useful negotiation tool. That is, they can make a false concession by giving up something that has little or no value to them in an effort to make the customer feel as though they are getting a “deal.” This approach, however, is counter-productive. The customer will not value something that was offered for free. To have value, the concession must have a cost at which point it becomes a trade.
To trade effectively, sales professionals must:
- Know what to trade by understanding the value of the items on the table
- Know when to trade by ordering the trades in decreasing values
- Know how to trade by using confident and clear language that is unambiguous
The value of equipping your sales team with training is clear. Consider McKinsey’s finding that “48 percent of fast-growth companies indicated that they invest significant time and resources in sales training versus only 22 percent of slow-growth companies.” That training becomes even more effective when it addresses the negotiation skills that preserve the financial scope of the sale as more sales professionals face pricing pressures stemming from increased competition and slowing business conditions.
To explore these 3 critical phases to effective negotiations in more detail, download the eBook: The Three Skills Behind Effective Negotiations.