Negotiating from a position of strength

Participants in our win-win negotiation programmes, often state that their main objective for attending the programme is that they want to feel ‘stronger’ in a negotiation.
In this short blog article we aim to provide some quick hints and tips to allow you to walk in to a negotiation feeling confident and prepared – and bring back good margins as well as closed deals!

The underlying problem?

Even confident sales people can find negotiations tough – after trying to keep the focus on value and competitive differentiation during the selling phase, the negotiation is often where the emphasis shifts to price and it’s easy to feel slightly powerless

To back this up, some recent research, from interviews with over 3,000 complex solution sales executives and buyers in the US and Europe suggest that over 70% of salespeople think that buyers are in a stronger position in a negotiation. Interestingly 70% of buyers think that the power lies with the sales executive – so maybe it is a human condition to assume the other party holds all the cards!

So – here are our top 3 tips….

Rule 1 – Feel that you can walk away from the deal

Many salespeople and particularly partners in professional services firms find this a really difficult concept – having worked so hard to get to this stage of the deal, walking away is the last thing on their minds. However, if you take it to the other extreme – imagine there is no way you can walk away – how can you stay firm under pressure from the buyer?

As I write this the UK are still in the midst of final Brexit discussions and all of us know why the UK government doesn’t want to rule out a ‘No Deal’ option – they need to pretend at least that they are prepared to walk away from the table….

Anyhow back to less divisive examples…

If you are going to feel you can walk away, then you must of course know what you are walking away towards! In other words what will you do if the deal doesn’t happen? The phrase often used to describe this is BATNA or ‘Best Alternative to a Negotiated Agreement’ – a term originally used by Roger Fisher and William Ury in their well-known ‘Getting To YES’ book.

Both you and the buyer will have a BATNA and its really worth spending time considering exactly what these are before starting the negotiation…

If your BATNA is strong you can negotiate with more confidence knowing that you have something substantial to fall back upon if a deal cannot be agreed. However, an uncertain BATNA can make you desperate to secure the deal at all costs – putting you in weak bargaining position, especially if this leaks out to the buyer. So anything you can do to strengthen your own BATNA will improve your position – as will of course understanding and weakening the buyers BATNA….

An example

Let’s look at the case of Jo, an employee negotiating with her boss for a pay increase. Jo starts off by considering her BATNA; ‘if an increase in pay cannot be agreed I will resign and look for a job with another company’. The strength of this BATNA depends on how easy it will be for Jo to find another position at the salary level to which she aspires. If Jo wants to strengthen her BATNA then a bit of research can help – for instance she could identify and then point out the market rate for her capabilities – or ideally already have an alternative offer in her pocket….

Of course her boss will also have a BATNA (eg finding somebody else to do Jo’s job!) therefore it is important for Jo to understand what this is and then weaken it during the discussion – eg by checking the costs of temporary staff versus the additional cost of her increase, the time needed to bring a temporary person up to an acceptable level of performance and the possible impact on customers and therefore business during this period of learning.

In a typical sale

In our negotiation workshops, we ask salespeople to identify both their and their organisation’s BATNAs (note these could be different) and how they can strengthen them. This often comes out something like this:

Typical Sales BATNAs

Use your companies resource (account management, support etc) on more profitable customers instead

Strengthen these by….

Being clear who these more profitable customers are, building a strong pipeline.
Making it clear how busy / successful you are “this product has really hit the mark with our customer base”

Typical Sales BATNAs

Avoid a reputation as easy discounters

Strengthen these by….

Making it clear that you are aware of your competitive position and believe you have given them a fair price

Of course – even if you are feeling in a weak position, it doesn’t mean that the buyer is in a strong position – both parties can be weak, or both can be strong. Good salespeople will understand the buyer’s position and seek to actively weaken this during the negotiation. For example:

Typical Buyers BATNAs

Do nothing

Weaken them by..

Refer back to the business case for the sale and the benefits they have (hopefully!) already acknowledged

Typical Buyers BATNAs

Do it internally

Weaken them by..

Make sure they understand the benefits of using you rather than a home-spun solution

Typical Buyers BATNAs

Go with a competitor

Weaken them by..

Spend time reinforcing the reasons why they chose you

Rule 2 – Estimate the Bargaining Zone…

The Bargaining Zone is the area or range in which a deal can be made which satisfies both parties. Each party’s ‘walk away price’ determines one end of the Bargaining Zone and is of course linked to the strength of your / their BATNA – for example if you are a professional selling your own services and you know from experience that you can fill your diary up if you charged £1,900 a day, your walk away price for a particular project might be £1,900…

For salespeople, their walk away price is often set by their companies discounting rules!

You need to also of course estimate the buyer’s reservation price – perhaps based on your knowledge of market rates and of course what their BATNA is. In the example above you might know that the buyer has paid a similar firm £2,500 and this might be an indication of their walk away price.

We find that even good salespeople rarely spend time considering what the maximum price is that their client will pay – all too often they are unduly influenced the buyer’s statements, which might of course not be entirely true!

The Bargaining Zone in this instance is the range between £1,900 and £2,500. There may still be some tough bargaining but any deal within this range will satisfy both parties.

Rule 3 – …But keep your Target Price at the front of your mind

Whilst its important to know your walk away price, if this is the only figure you have in mind, it has been shown that magically, that’s where the deal ends up! Partly this is because its easy to send unconscious signals when the customer offers a deal within the Bargaining Zone that you are comfortable with the figure, even if its someway from your ideal price.

So instead, in our programmes, we encourage participants to come up with an ambitious, but realistic ‘Target Price’ – a figure that might be slightly less than your initial offer, but one that would allow you to emerge from the negotiation feeling positive about the outcome!