Sales negotiation is a fine art. You can quote a price, send over a contract, and be celebrating a new deal in your mind’s eye, only to receive with a dreaded email: “I’d like to discuss some of the details of this contract before I sign.”
Even with thorough qualification and expectation management throughout the sales process, deals can still end up on the negotiation table. That’s why every salesperson needs to be a dab hand at negotiation.
What is Sales Negotiation?
In a nutshell, sales negotiation refers to a conversation (or a series of conversations) between a buyer and a seller aimed at reaching an agreement. Negotiations typically involve some back-and-forth, with both sides ready to make concessions.
Sales negotiation can be one of the most stressful and anxiety-inducing parts of the sales cycle. It requires significant preparation, empathy, good judgement, and a strategic willingness to compromise.
The key is striking a balance between accommodating your prospect and securing a commercially viable deal. It’s a tricky tightrope to walk. Reaching a mutually beneficial outcome is easier said than done, especially with today’s empowered and well-informed buyers.
The fact that negotiation is such a staple of sales makes understanding and navigating it essential, even if it can be frustrating at times. So, let’s delve deeper into why negotiation is so important in sales.
Why is Negotiation Important in Sales?
The value of negotiation in sales is multifaceted. Perhaps most importantly, it helps buyers and sellers reach agreeable deals. Without it, salespeople and prospects are more likely to encounter conflict and frustration when trying to determine fair prices and mutually beneficial outcomes.
Negotiation also helps salespeople build lasting relationships with their customers. It gives both parties the space to have a constructive conversation.
If sellers can remain composed, consultative, and understanding throughout the discussion, they can position themselves as invaluable resources their buyers can rely on for help and expertise, even after the sale is closed.
Now that we’ve established why effective negotiation is essential, let’s explore some skills you can learn to hone your negotiation abilities.
1. Prepare Yourself: Knowledge is Power
Never go into a negotiation blind. These aren’t conversations you can wing. You need to be thoroughly prepared with a solid grasp of some key deal elements.
Firstly, you need an in-depth understanding of your prospect’s business, their buying power, their pain points, and the alternative solutions they’ll consider if your negotiation falls through.
That last point is crucial. You need to understand both your and your prospect’s BATNA (Best Alternative To a Negotiated Agreement) – the walk-away point that determines whether a negotiation is worth continuing.
If you don’t understand where that line is for both parties, you’re giving up significant leverage and setting yourself up for a potentially unprofitable deal. As mentioned earlier, avoiding blind negotiation starts with thorough research on you and your prospect’s circumstances.
2. Define Your Concessions Clearly
According to the RAIN Group, cost is used twelve times more often than quality as a metric for negotiation success. So, you need to have a good feel for your position on price concessions. Otherwise, you might give up too much too quickly.
In the heat of the moment, a 30% discount or an extra six months of support might seem perfectly reasonable. But only when you get back to your desk and start drafting the contract do you realise you’ve agreed to terms that are unacceptable.
Clearly defining the limits on price reductions, freebies, or other add-ons before you meet with your prospect will ensure you reach a mutually beneficial agreement.
3. Speak Last: Let Them Show Their Hand
You’ve presented your deal, and the prospect wants to negotiate. Let them initiate the conversation. Salespeople often jump in and offer a discount or adjustment straight away to be accommodating.
But there’s a fine line between being accommodating and being overly eager. You want to give your prospect some space to express their thoughts and reveal more about their position before making concessions.
It pays to listen first and speak second during negotiations. You can’t know what your prospect is thinking if you don’t let them speak their mind. Stay calm, let them reveal their position, and use silence to your advantage.
A bit of awkward silence isn’t necessarily a bad thing in negotiation. If you don’t embrace it, you might lose your footing and concede more than you need to.
4. Avoid Price Ranges: Be Specific
If the customer asks for a discount, don’t offer a range of options. Saying something like, “Well, I could probably reduce the cost by 15 or 20%” sets you up for an overly aggressive concession.
5. Don’t Split the Difference: Be Strategic
Offering to “split the difference” on price can seem like a quick way to find common ground, but it often backfires. Imagine your product or service costs £10,000 and the prospect wants a 50% discount. Countering with £7,500 might seem fair, but it’s a rash concession.
Instead, offer a smaller discount that keeps the price closer to its original mark. The prospect is more likely to accept, and your profit margin takes a smaller hit.
6. Finalise Terms at the Right Moment
Negotiations can be complex and involve a lot of back-and-forth. Ideas are bounced around, and potential terms are discussed one by one. While some options will be agreed upon, others will be rejected.
For this reason, don’t commit anything to writing until the meeting concludes. Wait until all parties have verbally agreed to the terms before drafting any legally binding contracts.
7. Speak with the Decision-Maker: Don’t Waste Time
This may seem obvious, but many salespeople waste time negotiating with the wrong person. A company might have several individuals who attend negotiation meetings, but lack the authority to make final decisions.
Negotiating with multiple people up the chain of command can put you at a disadvantage when you finally reach the decision-maker. They might be aware of a discounted price quoted earlier, making the rest of the negotiation an uphill battle.
8. Give and Take Makes a Healthy Deal
Strong salesperson-customer relationships are built on mutual respect and trust, not the salesperson bending over backwards for every customer demand.
Salespeople shouldn’t simply accept every request without making some counter-offers. By keeping the negotiation a win-win for both sides, the salesperson and client remain on equal footing, fostering a productive long-term relationship.
9. Value Goes Beyond Price
Price is the most commonly negotiated element of a sales deal, so salespeople should be prepared to discuss discounts. However, discounts aren’t the only way to sweeten the deal.
Price is tied to value, which is ultimately a customer’s perception of your product’s benefits and satisfaction. Consider offering additional features or freebies instead of a lower price tag.
Of course, this isn’t a one-size-fits-all approach. Sometimes, a discount is the best option. When making concessions, consider the deal holistically. Additional perks might not always be a better option than financial concessions.
10. Keep it Light: A Positive Atmosphere is Key
Negotiations can get tense, but it’s crucial to maintain a positive atmosphere. These conversations are meant to lead to agreeable and productive partnerships.
Imagine any other relationship – you wouldn’t want your interaction with the prospect to be filled with resentment or negativity. To avoid hostility, keep the conversation light and friendly throughout the discussion.
11. Stay Calm: Composure is King
Maintaining composure is paramount in negotiations. Getting flustered or frustrated can alienate prospects and undermine your ability to be seen as a helpful, agreeable, and consultative resource.
Remember, negotiation is largely about building relationships. If you lose your cool, prospects will be less likely to want a long-term partnership with you. Stay calm for everyone’s benefit.
12. Walk Away When Necessary: Know Your Limits
Salespeople shouldn’t accept every demand thrown their way. If a prospect’s demands become unreasonable or unprofitable for the company, don’t be afraid to walk away from the deal.
A customer who only signs with drastic contract amendments or a significantly reduced price is likely to cause problems down the line. These changes often indicate the prospect doesn’t see much value in your offering, and dissatisfaction is likely to follow. In these cases, walking away benefits everyone involved.
Conclusion
As mentioned earlier, negotiation skills are as crucial as they are challenging to develop. If you maintain composure, lead with empathy, understand your offering’s value, and effectively communicate it, you’ll be able to thrive in any negotiation you encounter.
Ready to close that deal? Great! Find out exactly how here.
