Improving your sales negotiating effectiveness may be the answer to increasing sales, profits and your income. Although there are no “silver bullets” for negotiation success, there are predictable mistakes that sabotage negotiation success. Knowing these mistakes in advance and taking the action that top performing salespeople do to avoid them, can go a long way towards improving your sales negotiating effectiveness.
This article identifies the four most common sales negotiating mistakes and outlines several approaches for minimizing or eliminating their impact on the negotiation outcome.
1. Failure to plan.
People don’t plan to fail in a negotiation, but they often fail to plan. Many salespeople walk into a negotiation virtually blindfolded. They have only a vague idea of what they want and an even vaguer idea of what the other party wants or needs.
Solution: Know where you’re going and how you’re going to get there before you start. Before each negotiation:
- Schedule planning time.
- Identify for yourself, the buyer (or buyers), and the competition:
- Needs (must have)
- Wants (like to have)
- Currencies (things of value to the other party in the negotiation)
- Your best case proposal
- Options (listing alternative solutions that would be acceptable to both sides and what to do if no agreement is reached)
- Anticipate resistance, objections, and tactics.
- Identify internal obstacles and solutions.
- Visualize success.
2. Setting low aspiration levels.
Most salespeople take one of two approaches when setting their initial aspirations for a negotiation. Some salespeople lower their expectations in anticipation of buyer resistance. While others have unrealistically high expectations that aren’t defensible which often leads to large concessions or unnecessary lost sales.
Solution: You get what you expect, so expect what you deserve. Higher aspiration levels are generally a result of confidence and a great confidence builder is preparation. Good preparation can help salespeople discover a higher price that is realistic and defensible.
A good technique for increasing your aspiration level is to add five to ten percent to every proposal and then defend your price to someone (e.g., manager, another salesperson). If you can defend your price, you increase the chances of getting some, if not all, of the five to ten percent increase. If you can’t defend your price, you’ll need to do some more homework.
Stating your highest but defensible price establishes the upper limits of your price, but gives you the flexibility to adjust it based on the buyer’s response and needs. Remember, it’s easier to negotiate down than to negotiate up.
3. Negotiating price before the value of the product is established.
Discussing price before you’ve established the value of your product greatly reduces the options available to create a win/win agreement. Talking price up-front usually results in a “single currency negotiation.” These negotiations are generally not in the salesperson best interest because the only thing to negotiate is price. The options facing salespeople in this situation is either meet the price demand or lose the sale.
Solution: Sell the value of your product before you negotiate price. Before you discuss price, review and gain agreement on the buyer’s needs and buying criteria. Simply say, “Before I discuss the price, I’d like to review my understanding of your needs. To begin with, you’re interested in X,Y and Z?” Be sure to get the buyer’s agreement on his/her needs before you move on to the presentation and price. This can even be accomplished if you don’t get an opportunity to discuss your proposal with the buyer by starting your proposal with a review of the clients needs, and then presenting your solutions to the needs.
4. Not being ready to walk-away.
If you feel you “need to make a deal at all costs,” that’s usually what you’ll do. Not being ready to walk away from a win/lose negotiation, is like surrendering unconditionally to the enemy. Your plight is left to the compassion of the buyer and most of the time, sets a bad precedent for future negotiation.
Solution Don’t negotiate if you’re not ready to walk away. Before you negotiate, establish your walk-away price. This is the price or set of terms and conditions that absolutely must be met in order for your needs to be met. If your needs aren’t met, it’s not a win/win negotiation.To give yourself confidence and prevent yourself from being painted in a no-win corner, have a viable option to a negotiated agreement. In your own mind, decide what’s your best alternative to making this deal. If you have a good alternative, (e.g., selling to another account, making up the lost revenue next week) it’s easier to walk away from a bad deal.
If you’ve tried a number of options and still feel the proposed solution will not work for you, simply agree to disagree. One possible ending is to say, “thanks, but I can’t make this work for us.” Then give your rationale and keep the door open for future negotiations, as well as last-minute concessions by the other party. Remember, when you walk, the pressure to make the deal falls back on the buyer. This pressure often leads to the buyer altering their demands and creating opportunities for a win/win solution.
Negotiating successfully takes time, preparation and discipline. Avoiding the four mistakes and properly implementing the solutions outlined will help you win more sales while increasing profits and your income.
For more information on negotiation skills and selling go to: philfarisassociates.com