There isn’t a company leader out there that believes his/her team has crafted a perfect negotiation strategy. Most organizations know their approach to customer negotiations could probably use some work. In a fast-paced selling environment, competitors are constantly pushing new solutions and “incentives” at customers, and those same customer’s demanding more “value” every day. You can’t afford to rely on an average approach to sales negotiation. You’ve got to get it right on every deal from the start of the sales process.
The term “negotiation” can apply to many use cases, hostage negotiations, diplomatic negotiations, buying a house or that last Craigslist purchase you made. While there are negotiation similarities in these situations, none of them share the unique characteristics of a sales negotiation. Sales negotiation must be specific and customized for your selling environment. There are three common mistakes organizations make when rolling out sales negotiation training.
1. Not Understanding the True Nature of “Sales Negotiation”
Unfortunately, many business leaders have a fairly narrow understanding of sales negotiation. They frequently see it as a tactical exchange between a single seller and a single buyer that occurs just prior to closing a deal. Any seasoned sales professional will tell you that this perception is far from the reality of what actually happens. Not understanding the true nature of a sales negotiation causes many to believe that any type of tactical negotiation training will help their sellers become more effective negotiators when they must respond, in the moment, to customer tactics. However, a sales negotiation has many unique characteristics that require a sales-specific approach to improving a seller’s negotiating effectiveness.
For example, the way a hostage negotiator manages a negotiation is much different than the way a selling organization needs to negotiate a deal. In a hostage negotiation, members of the team are concentrated on easing the crisis in the moment, moving on quickly to resolution, always staying focused on minimizing risk and getting the hostage out of harms way. They are concerned with fixing the situation in the present and don’t place any value in the continued relationship. In contrast, sales negotiators must value the current relationship and understand the significance of creating successful future outcomes and conversations. Sellers can try to negotiate through the moment, but if there is no strategy and process aligned to larger account interests, they won’t know where to go when the immediate tactical negotiation ends.
There are training organizations out there that tout their negotiation experience. If their negotiation experience isn’t related directly and exclusively to sales, we would advise you to use a partner who understands the true nature of sales negotiation and can translate their approach to it’s unique requirements. Without this understanding and experience with sales-specific negotiation, training your customer-facing team on a generic negotiation approach will simply not produce the critical sales results you need.
2. Thinking Only Reps Need Sales Negotiation Training
Too often sales leaders believe that to achieve better sales negotiation results, you only need to train sales reps. After all, they are the ones conducting the final negotiation with the customer, right? The truth is most sales negotiations involve many members of the customer-facing team from multiple functions, which play out over the entire lifecycle of a customer engagement. That involvement must be coordinated!
For example, Presales typically negotiates areas of focus for the POC (Proof of Concept). Services typically negotiates SLA’s (Service Level Agreements) for the implementation. Customer Success frequently negotiates details and timing for the roll-out and Account Management is charged with negotiating upsell and renewals. Even senior leaders that interact with the customer in critical moments negotiate. These are but a few examples of the negotiations that occur when securing and managing an ongoing customer relationship.
You would be doing a disservice to your company to only involve your sales team in the creation and execution of your negotiation strategy for an opportunity or ongoing relationship. Each function must:
- Have a clear understanding of the negotiation strategy for the deal (or overall account)
- Receive guidance as to how negotiation is to be executed for their part of the overall strategy
- Be aligned on all aspects of what a great outcome looks like for this deal/account.
Negotiation is happening almost every day and at multiple touch points when managing ongoing customer relationships. It is important that you build alignment internally with anyone who could impact the overall customer negotiation strategy (at both the overall account and individual opportunity levels). If account teams are not on the same page, an individual who doesn’t know the play could radically alter the entire negotiation strategy. Ultimately, what gets agreed to in these daily negotiations influences what gets focused on in the larger deal.
3. Thinking Negotiation Can Be Managed By Focusing on Tactics or Tricks
Sales leaders can sometimes focus their negotiation training and coaching efforts on using tactics or tricks, without providing the necessary connection back to the overall sales and customer engagement processes. Negotiation is not successful if you damage the customer relationship while getting the deal/agreement done.
Remember, how you sell is just as important as what you sell. The same rule applies to negotiation. Imagine how disingenuous it must feel to customers to be told the seller is seeking a long-term, partner relationship with them, while those same sellers are simultaneously engaging in a slew of old-school, manipulative negotiating tactics to close a deal by the end of the quarter!
Reps should negotiate hard on the problems, but soft on the people.
Its all about giving VALUE to the customer and laying the foundation for that long-term relationship both sides say they want, not just closing the deal. To be fair, some customers engage with their own slew of old-school, manipulative tactics to drive concessions. Naturally when they go low, we should go lower, right? What a missed opportunity to differentiate and demonstrate how we’ll manage the tough conversations that surface during our long-term partnership. Rather than defend against their tactics with a competitive tactical response, think of the short and long-term opportunity for both sides if that conversation can be changed! Overused tactics and dirty tricks have no place in a healthy ongoing relationship. Nor is there room for them in a modern value-based sales negotiation that’s intended to lead to that healthy relationship!
It is too important to leave your sales negotiation approach to chance. When companies get their sales negotiation approach right and avoid the common mistakes above, here is what they can achieve:
- Higher average deal size, price and margins
- Accelerate time to close
- More cross- and up-sell opportunities
- Higher renewal rates
- Leverage and preserve high-level customer relationships in negotiations
If you’re currently challenging your team to achieve these results take a good look at your negotiation process and execution to determine the areas you need help. Here are some questions to help you discover the gaps:
- How dependent have we become on discounting as our primary lever to close deals?
- Do our negotiations get focused on growth, revenue, speed, cost, risk or just scope & price?
- How has our definition of a “good deal” evolved and subsequently changed the priorities our reps negotiate for?
- How do we anticipate and account for competitor tactics in our typical negotiation approach?
- When was the last time you saw, in advance, a written and tested negotiation strategy for a key deal you needed to close?