How many times in our early sales careers have we come back and told our managers that the deal is done, but the only problem is the price ? And that deal doesn’t close for another 8 months even after you slashing down your proposal twice.
I’ve done that too 🙂
B2B sales negotiation is a delicate dance that requires careful steps by both parties, and especially by the sales folks. Here’s my top 7 based on my last 10 years of working with 100+ clients around the world.
1. First Up- Reach an Agreement
The question here is – Do you move into the ‘concession’, ‘discount’, or ‘pricing’ conversation, too early in your sales cycle and without having any sort of value conversation OR without establishing an ‘agreement’ in principle with the prospect?
People want to know if you discount. They want to know the pricing model, and they’re curious about where they can poke holes. While they should be focused on the total cost of the project, and whether or not that’s within a justifiable ROI, the early discount questions can be a major blocker and distraction.
If you engage in real money talks too early, you may be opening yourself up to contentious, money-only conversations. Let’s first just make sure that your solution ( product or service) solves a problem, and that it’s financially worth solving.
Your checklist for value based negotiation:
- Can our product solve your problem?
- Can we provide demonstrated proof of ROI?
- Is there a quantifiable impact of our solution on your business?
- Are there any tech concerns about on-boarding or usage?
- Are you talking to the Power?
Once those questions have been definitively answered – and the deal to buy your product agreed upon – then can you start talking about discounts. Solve the problem first, get the agreement in principle, and then you can open up to negotiation.
Listening = Learning
2. Are You ‘Listening’ Enough?
A common habit of even those who claim to be a ‘good listener’ is to only listen until there’s a pause in the conversation to quickly jump in.
Truly listening means to hang onto every word your client is saying and only ask relevant questions to decipher their perspective and stance on the issue. If you don’t actively participate in the listening process, boredom quickly sets in– you may be nodding at your prospects’ talk but realistically very far from capturing or processing the information being given, as you’re busy fighting off the laziness.
A great way to ‘listen’ is to make it a habit to take notes while the prospect is speaking, which also helps you to repeat and clarify what they said, later on when you need to make your point.
Above all, apart from thoroughly understanding your prospects’ perspective on the issue at hand, ‘listening’ conveys to the person that you respect them, which in turn builds ‘trust’ and confidence between both the parties.
3. Give up something only if you’re getting something else of equal or greater value in return
Of course, you’re not just discounting for the sake of discounting – giving away too many (or too big) discounts will invariably hurt your company’s bottom line, so make sure you’re getting something back in return. Some things you could ask for in return after agreeing to the deal include a referral to another likely customer, signing earlier to make the end of the quarter, or agreeing to be used in a case study.
It’s not just about tit for tat. It has to be win-win.
4. Introduce as many non-monetary points of negotiation as possible
As mentioned earlier, information early in the buying process is a valuable asset, and a great example of a non-monetary point of negotiation. Steering the discount negotiation away from pure monetary agreements will allow both parties to get value without significantly hurting your revenue. Some examples of non-monetary points of negotiation include:
- Professional services, such as a full-service training program, where our customer support team will help you and your users get fully onboarded and up to speed.
- A shorter contract than typically required of new customers.
- A mention of your company in our blog, giving you free marketing publicity
- Concessions on certain contractual terms, such as auto-renewal
You might be overlooking some real areas of value for your customers if you focus solely on the money. Not every favour you do has to cost you money in order to create benefit for the prospect. Be creative and you could be surprised how many of what you considered to be “easy gives” could actually mean a lot to the other person.
5. Be aware of the differences between a trade-off and a concession
A trade-off conversation might go like this: “If you give me a 5% discount, we’ll sign right now, two weeks earlier than we had planned to, and let this deal come in before the end of the quarter.
A concessions conversation might go like this: “Give us a 10% discount, or we’ll take our business elsewhere.”
6. Negotiate with the decision maker
One common mistake made by sales is to negotiate with people who are not the decision makers. If you’re not sure about who’s sitting across the table, you can always politely ask who the final ‘signing authority’ is.
This helps you to be wary of not laying all your cards on the table. If you negotiate with others with ‘full steam’ or say using up your ‘last resort’ – then when you begin negotiating with the real decision maker, there’s a high chance that he/she will start the conversation based on the discounted price quoted or agreed earlier – which can act as a leverage to insist on a lesser quote, pushing you further into a tough spot.
7. Slow down: know when to walk away!
Oftentimes, sales managers in a hurry to clinch a deal, are caught in the moment and make the mistake to strike a deal, which is later not found to be in line with the company’s principles and has jeopardised the bottom line.
If the prospects’ demand is too high, if they’re asking for massive price reduction or radical amendments to the contract, which is not profitable to the company then you need to pull out and walk away. It’s crucial to think twice and draw the line, and not succumb to the pressure.
Over to You
Negotiation is like a ‘high-stakes’ dance, where both parties need each other. If one person takes an unexpected step, stumbles or even walks away, the other partner cannot continue.
Food for thought: selling the value is the first act– if you can sell that, there is absolutely no need to enter into the second act of ‘negotiation’.