Four Steps for Negotiating Winning Solutions
Mention the word ‘negotiation’ to some people and their eyes light up at the prospect of negotiating a solution that is a win for everyone. Others break into a cold sweat, fearful of what they might have to concede to close out a deal.
I can vividly remember watching market traders in a middle eastern market haggling with tourists. The traders clearly enjoyed the process, they liked doing business and usually made the tourists feel they had got a ‘win. The traders love to negotiate, and they are good at it!
Negotiation in a B2B or B2C environment is no different. In sales the objective is to negotiate a deal that will do three things, a deal that:
- Is a win for both parties
- Is mutually profitable
- Will bring the customer back.
So, how do you achieve this?
Search ‘negotiation skills’ and you will find a plethora of ideas on how you should negotiate and in the right circumstances they probably all work. However, I would suggest there are 4 steps you must complete to conclude a successful negotiation:
Step 1: Time the Negotiation
Step 2: Understand the ‘Field of Play
Step 3: Choose your tactics
Step 4: Execute and close
Let’s take a look
Step 1: Time the Negotiation
Negotiation starts when the selling stops!
Make sure that this is something you control. Only negotiate when you have reached a point in the sales cycle that you can say:
‘So, all we have to do now is agree and finalise the terms and conditions’
Essentially the customer stakeholders have agreed to buy your proposition. Any issues around feasibility or value have been resolved and subject to finalising terms, the deal is done.
Make sure you don’t get dragged into negotiating before you reach this point. Negotiating means you may have to give ground on price, payment terms, service terms etc. Do not give things away in the sales process that could be valuable trades when the time comes to negotiate.
Step 2: Understand the ‘Field of Play’
The ‘Field of Play’ is a term that describes:
- The Positions: the business, competitive and people on both sides of the negotiation
- Core and non-core issues: have to be agreed to conclude the negotiation. Core issues are at the heart of the deal and will be the hardest to negotiate. Non-core issues will be less crucial but professional negotiators will often a non-core issue as an ‘early trade’ to test how tough the other party is going to be in the negotiation process
- Opening Moves: potential moves the other side might make to test the other side and create time pressure
- No Win Situations: this is when both parties leave themselves nowhere to go in the negotiation process. Make sure you identify any issues that are so sensitive to both sides that they could cause a ‘No Win’ and deadlock if badly handled
- Timetables: this means defining the milestones, agreement dates and live dates that drive the negotiation.
Step 3: Choose Your Tactics
There is no finite list of Negotiation Tactics and there are no rights and wrongs. In my view, the most powerful negotiation tactics are:
- Best Possible Result
- The Delay Move
- Not Possible
- Compensated Movement
The challenge is that when you negotiate you should:
- Plan to use the tactics that will be the most effective to negotiate the issues you face
- Employ tactics you have the skills and confidence to use in a balanced and professional way
- Think about the tactics a customer may use against you and how you will counter them.
Most importantly, remember the first time you negotiate with a customer acts as a precedent for all future transactions. If your tactics make you appear:
- Fair: you set the foundations for a long-term relationship
- Unreasonable: you may win the negotiation, but the customer may go to other providers in the future
Step 4: Execute and Close
You have understood the field of play, planned your targets and you are ready to negotiate. When you meet the customer make sure you have:
- Defined Limits
You know the issues that have to be negotiated, so for each issue define the limits you are prepared to negotiate and do not go beyond them
- A Give-Get Plan
Think about what you want in return every time you make a concession. Try to put a monetary value on each negotiable, this may be a specific value, or it may be the value that something would bring to your company. As an example, an upfront payment of €100k may reduce a month’s interest charges on an overdraft facility. What would that be worth?
- An Early Trade
Test the customer with an early trade. Identify a non-core issue and trade something that may be really valuable to the customer but means very little to you. How can you maximise that value in the negotiation process?
Next, you need to think about how the customer stakeholders are likely to behave in the negotiation process.
Without question pressure exists at this stage and people react differently to pressure, so:
- First: make sure you are ready to read the signals that people will give in the negotiation process.
- Second: focus on the two factors that create pressure for negotiators:
- Contract Detail
- Determination to Gain Agreement
Some stakeholders will focus on detail, some will focus on getting a fast agreement. Take the time to think about what the priority will be for each stakeholder as this will give a clue to their likely behaviour.
Finally, when everything is agreed ask for the business and if you cannot get an agreement set a final date to agree on the deal. Put the onus on the customer to act!
So, four steps to negotiating winning solutions. Test them the next time you need to negotiate.
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