What is sales negotiating?
A sales negotiation is a discussion between a buyer and seller, where the goal is to arrive at a mutually agreeable deal. The negotiation process often involves quite a lot of back and forth, with the buyer raising their concerns and both parties making some concessions and compromises. While the goal is a conversion, negotiations don’t always result in a sale.
Negotiating can be a highly stressful and challenging experience. It requires you to be well prepared, show empathy, be perceptive and ready to compromise strategically. To produce a mutually beneficial outcome, you have to somehow find a balance between accommodating your sales prospect and getting a deal that’s financially viable for you. Given how empowered and well-informed buyers are these days, striking this balance is certainly no easy task. Negotiating is a staple in sales, so developing your employees’ skills in this area is essential.
Why is negotiation an important aspect of sales?
It allows buyers and sellers to arrive at deals that are satisfactory for both parties. When done properly, it can also help buyers and sellers to build positive relationships, while preventing misunderstandings, conflict and frustration.
Aside from the short-term benefit of getting a good deal, negotiation can increase future sales and referrals, as you can earn a buyer’s trust and respect by communicating with honesty, empathy and composure. Whether you’re in B2C or B2B sales, negotiation is an invaluable skill for sales representatives, so it’s a good idea to make it part of your recruitment and training.
The four stages of sales negotiation
Before we talk strategies, let’s have a look at the sales negotiation process. It involves four key stages:
- Preparation: This is a major factor in a successful outcome. You can anticipate many aspects of the negotiation process if you spend some time researching and planning beforehand. Make sure that you know what you want to achieve and what your buyer might want, and to have an agenda for your meeting. It’s also important to have a strategy and to think about how you will deal with the tactics that the other party might use.
- Initial exchange: This is where both you and your buyer set out the terms and conditions for the deal at the start of the meeting. At this juncture, you should ask questions to find out about your prospect’s goals and any hard negotiating points where they are not willing to make concessions. This will guide the rest of the process.
- Collaboration: Now it’s time for the bargaining to start. Both sides discuss the points of disagreement and collaborate to identify where concessions and compromises can be made.
- Commitment: Both sides reach a verbal agreement on the terms, and formalise the deal by putting it in writing. It’s time to get the contracts prepared, approved and signed.
Nine strategies to improve your employees’ negotiating skills
To enhance your chances of success, it’s helpful to have some strategies. Here are ten strategies that you can incorporate into your sales training, so that your sales team can negotiate with confidence.
1. Be prepared: make a plan
As mentioned above, preparation is key to success in sales negotiations. So, let’s look at exactly what you should include in your plan:
- your objectives and your prospect’s objectives
- how you will open
- your BATNA (best alternative to a negotiated agreement) and a reservation price (the minimum price at which you are willing to accept an agreement)
- possible trades
- your prospect’s budget
- an analysis of your leverage, i.e. how much your prospect wants or needs what you’re offering.
2. Be prepared: agree on an agenda
Another key step in preparing for a negotiation is to set and agree on an agenda before you meet. Prepare your agenda in writing, then send it to your customer and ask them if they agree with it or if they’d like to add or change anything. Taking this initiative will allow you to lead the discussion more effectively. In the agenda, make sure you give a review of the background and objectives, and identify the issues that need to be addressed.
3. Listen carefully
Listening skills are essential for a negotiator. To get a deal over the line, you must be able to identify and address your prospect’s concerns. So, allow them to initiate the conversation and listen to them carefully before you ask any questions. Try to understand what they are apprehensive about. For example, they might be concerned that your product or service won’t live up to their expectations, or perhaps they’re worried about justifying or taking responsibility for the purchasing decision. They may not say these things outright, so listen out for the hints they give about what their real concerns are.
4. Where possible, make the first offer
This strategy is based on the psychological concept of anchoring. The idea is that how much someone thinks something is worth is influenced by the first number that is given to them. In other words, the number acts as an anchor, which impacts a person’s future decision-making. Research shows that making the first offer can give you the upper hand in negotiations by allowing you to guide the discussions in your favour. However, making the first offer is not necessarily beneficial in all situations. Dropping the wrong anchor could harm you. You must first know what the ‘zone of possible agreement’ is. This is the bargaining range in which the minimum targets of both parties overlap.
5. Highlight what your prospects could lose
This strategy utilises the psychological phenomenon of loss aversion. People tend to prefer to avoid losses than acquire gains of the same size. So, try to emphasise what your prospect stands to lose. For example, revenue, credibility or competitiveness. This could be more effective than highlighting their opportunity to make gains in terms of saving money, improving their reputation or gaining a competitive edge.
6. Be ready to trade
It’s a good idea to make a list of trades in advance and assign each trade a value. Get creative with your list and make sure it’s comprehensive. Here are some other points to bear in mind when you’re trading:
- Avoid bargaining on single issues. Think about the big picture when you offer to trade something and try to bundle issues together.
- Take your time. After offering a trade, invite the buyer to respond. Don’t be too quick to agree. Instead, take your time to consider it and make sure the prospect is aware of the value that you are sacrificing.
- Encourage the buyer to see the big picture and think about how the trade will impact their objectives and fit with their requirements.
- Make your concessions smaller and smaller as the discussion progresses. This will send a signal that you are becoming less willing to make concessions.
7. Refer to independent standards
If there is a large disagreement between you and your prospect on price, terms or conditions, a great way to overcome this is by using independent and unbiased standards. These could include past contracts, third-party references or industry benchmarks. However, your customer could potentially interpret this as criticism of their thinking, so be careful about how you present the information.
8. Avoid ranges
When offering a price or a discount, it’s best to steer clear of ranges. If you tell your customer that you can knock off “20 to 25 percent”, they’re likely to push for the higher discount, as you’ve indicated you are willing to offer it. It’s better to give a specific figure and then bargain up or down, as necessary.
9. Know when to walk away
It’s not possible to achieve a win-win situation every time. If you’re not making any headway despite your best efforts, it might be time to walk away from the deal. Sometimes simply telling your prospect that you are prepared to walk away is enough to encourage them to cooperate. Here are some situations in which ending the talks could be in your best interests:
- your prospect is making demands that are unreasonable or not financially viable for you
- even your most generous terms and conditions are not enough to meet their needs
- your prospect is not showing any willingness to collaborate or compromise.
