3 Common Misconceptions About Sales Negotiation
Categories: Sales Negotiation
There are several misperceptions about sales negotiations that have carried over from outdated, old-school beliefs about negotiating with customers. The three most common misperceptions are routinely combined to limit the negotiating effectiveness of customer-facing teams.While noted here as gaps in leadership’s thinking about modern sales negotiation, these three misperceptions also provide guidance on how to elevate sales negotiation beyond an individual skill to an organizational competency. Things that register as either threats or opportunities are often separated by a very thin, but powerful line. In the case of these three common misperceptions about sales negotiation, the line is very clear and bold. On one side of the line is wasted time, money and results. On the other side change, alignment and success… all of which are dependent on our willingness to challenge those old misperceptions we might not even know we subscribe to.
Let’s shed some light on how to get to the next level of sales negotiation effectiveness.
Misconception #1: Deal Negotiation Strategies are Created & Executed Independent of Company Growth Strategies
We find that often companies fail to align their negotiation strategy for closing a deal with their overall company growth strategy. Company leaders need to provide guidance on which strategic priorities should be negotiated in every deal, especially if that guidance has changed due to adjustments to their growth strategy for the overall business.
Maybe you can relate to this example: Company XYZ is moving to a subscription-based business model (from their historic on-premise, product approach). Over the years the company’s sales team had become accustomed to selling multi-year, software licenses and services. The sellers’ efforts used to be laser-focused on getting a big up front commitment, for a multi-year deal and closing it by leveraging discounts to get the deal done by the end of the quarter, with no regard for the renewal until some distant point out in the future. Now the strategic focus on recurring revenue contracts creates a shift in priorities that must be operationalized in the negotiation strategy at the point of sales execution for each new deal. There is a new definition of what constitutes a “Great Deal”. As a result, there is typically a big gap in understanding the specifics of how that new definition of a great deal gets translated into new priorities to negotiate for, which in turn has a huge impact on negotiating effectiveness.
Given this example, you can see how any shift in growth strategy – a change in your offering resulting from an acquisition, a change in emphasis (selling subscriptions vs. product), a shift in your branding, targeting new markets– all demand alignment between your deal negotiation strategy and your company growth strategies.
As an senior leader, when your company transitions into a new growth strategy, you’re responsible for ensuring your sales team always understands the answer to this fundamental question, “What are we negotiating for?”There should be evidence and elements of your company’s growth strategy reflected in your sellers’ negotiation priorities and in their final negotiated customer agreements.
Here’s a great question to present to your executive leadership team:When considering the last 4 big deals we’ve closed, would we be able to identify strategic priorities for our company within the details of what was included in the final negotiated agreement for those deals? If not, then ask yourself if that is due to your sales team being stuck in old negotiating habits or because of a lack of guidance on new negotiating priorities… or both?
How can you expect to realize your growth strategy at the point of sales execution if your sellers aren’t equipped to negotiate consistent with the focus of your strategic priorities?
Misconception #2: Negotiation Only Occurs “in the Moment”, Just Before a Deal Closes
Most companies historically view sales negotiation as an in the moment, tactical exchange between a customer and a seller required to close a deal. We find this to be an extremely narrow and limiting view of sales negotiation. Negotiation should be thought of as a dynamic organizational competency executed by many players/functions on both sides, over the life of an ongoing customer relationship. Customer-facing professionals in pre-sales, solution architects, implementation, account management, customer success and yes, even senior management all engage in customer negotiations on a daily basis… and they do so with many people on the customer’s side that do not work in procurement.
Companies that treat sales negotiation as a late sales stage activity, that occurs just before closing a new deal are getting it wrong. In reality, sales negotiation is a daily activity that plays out over the entire lifecycle of the sale. It starts from the very first conversation and continues throughout the ongoing customer relationship. As such, most are surprised by how impactful these daily negotiations are at setting the tone, expectations and unintentional concessions that get grandfathered into the final stages of trying to close a new deal or secure a renewal.
Providing guidance for daily negotiations aligned with the strategic priorities of your growth strategy, across the entire customer-facing team, is a critical aspect of creating organizational negotiation competency… and most organizations completely miss on this sales execution best practice!
Misconception #3: A Negotiation Strategy Is Only Valuable For Reps
As mentioned above, multiple functions and teams are involved in sales negotiation alongside the selling organization. As a leader, you would be doing a disservice to your company to focus solely on involving your sales reps in the creation and execution of your negotiation strategy. Each organizational function must have a clear understanding of your overall customer negotiation strategy, as well as to how it needs to be executed for their part of the customer engagement.
Additionally, non-sales members of the customer-facing team typically have insights, relationships and position that sellers don’t have. Their perspective and position within the account typically represent untapped negotiation leverage. All members of account teams must be involved and aligned to truly build organizational negotiation competency. Consider what you are risking or the opportunity cost if they aren’t?
Exposing these three common misperceptions of sales negotiation brings three best practices to the surface, that collectively represent a big opportunity for improving sales negotiation effectiveness.
- Align deal negotiation strategy with overall company growth strategy
- Consider sales negotiation as a best practice that plays out daily over the lifecycle of the entire customer engagement
- Treat sales negotiation as a core organizational competency for the entire customer-facing team