The only way to feel strong and confident when negotiating!
By Ian Hirst, Greenbank CEO
A senior partner in one of our recent negotiation workshops summarised neatly why they were there – as they said “Winning sales is easy enough, but winning profitable sales is getting more and more difficult”
Not a surprising statement given the challenging business environment and for many sellers it does seem that procurement functions are getting stronger and competitors are more prepared than ever to reduce their rates to win business.
Going into a negotiation with these 2 things in your mind of course isn’t going to help – so what can you do if you want to bring back good margins as well as closed deals?
The underlying problem?
Even confident sales people can find negotiations tough – they may be great at keeping the focus on value and competitive differentiation during the selling phase, however negotiations are 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?
This requires a shift in mindset – ie rather than focus on what you are going to lose, instead focus on the positives should the deal not 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 (ie you have good alternatives) 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.
BATNAs in a typical business negotiation
In our negotiation workshops, we ask salespeople to identify both their personal 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 | Strengthen these by… |
|---|---|
Use your valuable resources (technology, consultancy, support etc) on more profitable customers instead | 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”
|
Avoid a reputation as easy discounters | 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:
Rule 2 – Estimate the Bargaining Zone…
Typical Buyers BATNAs | Weaken them by… |
|---|---|
Do nothing | Refer back to the business case for the sale and the benefits they have (hopefully!) already acknowledged |
Do it internally | Make sure they understand the benefits of using you rather than a home-spun solution |
Go with a competitor |
Spend time reinforcing the reasons why they chose you. Making it clear that you are aware of your competitive position and believe you have given them a fair price |
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 walk-away 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 it’s 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 it’s 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, 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!
In the example above, this might be slightly higher than £2,500 – say £2,650 – allowing you some bargaining room, whilst still ending up with a deal at the ‘right’ side of the bargaining zone…
Greenbank and Selling on Value
Over the last 20 years, we have worked with professional services firms, technology companies and sales organisations of all shapes and sizes to develop and sustain a new client-oriented approach to selling – changing the focus of their sales conversations, proposals and pitches, with tangible, measurable results. If you would like to explore how Greenbank might support your organisation, we would be delighted to begin the conversation…. so give us a call Ian Hirst (+44) 7812 074359 or use the contact form below to get in touch.
About Greenbank
Greenbank are an innovative, ‘boutique’ consultancy delivering completely tailored leadership, negotiation and sales development programmes to clients ranging from top 5 global firms to tech start-ups.
We are now delighted to be running truly blended programmes, which make the most of both virtual platforms and interactive face-to-face workshops, to deliver motivational, cost-effective development.
We also have our own industry-leading, multi-lingual, 360° assessment platform, Navigator360 which provides our clients and other training providers with a completely flexible approach to gathering powerful confidential feedback.
If you would like to discuss how we can help your own sales or leadership teams, then we would be delighted to have a relaxed conversation – please contact Ian Hirst or (+44) 7812 074359.