7 Rules of Sales Negotiation
Rule #1 Win first, then negotiate
Do not negotiate with your buyer until they name you as their VOC (Vendor of Choice). Look out for explicit and implicit cues whether they have done so.
Until that point, you’re not negotiating. Rather, you’re dealing with price objections and bidding against your competitors. And, you’re making some concessions as a differentiation tool but you’re not in a sales negotiation with the buyer.
Rule #2 Play to Win
Forget about win-win. What you’re looking for is a win for your team. Gain a clear picture of negotiation chess board before you enter the game.
Rule #3 Protect Relationships
If you want to retain your customers in the long run, one thing you must not do is to use hard-noised tactics and cheesy negotiations. This requires mastering sales EQ and a focus on empathy and outcome.
Rule #4 Emotional Discipline Wins
The person who exerts the greatest amount of emotional control has the highest probability of win. Mastering sales negotiation begins and ends with mastering your own disruptive emotions.
Rule #5 Master the Sales Process
Gaining the leverage in negotiation, overcoming objections and closing the sale requires mastering the sales process inside out, step by step.
Rule #6 Never Give Leverage Away for Free
Think of leverage as the currency of negotiation. Any leverage carries value and it must be exchanged for value. Effective negotiators only let go of their leverage if they get something of equal or greater value in return.
Rule #7 Eliminate and Neutralize Alternatives
The more alternatives the other party has, the stronger their leverage at the negotiation table. Improve your power position and win probability by eliminating and neutralizing your buyer’s perceived alternatives.
Signs that you’ve won the sales
“Jeb, we really want to do business with you, but…”. Jeb refers to this as ‘explicit’ sign. He loves these words because they mean he has won. He’s the Vendor of Choice. He’s the person they trust most to solve their problems.
In other cases, there is an ‘implicit’ sign. This is much harder to detect. It requires you to pay attention to your intuition and apply deep listening. When looking for implicit cues, pay close attention to these behaviors:
- Stakeholders are willing to match your effort to make and keep micro-commitments.
- Positive signs and a ‘whisper’s in your ear’ from executive sponsors and coaches.
- The buyer has eliminated other competitors.
- The buyer has no other viable alternative.
- The buyer shows interest in installation, transition, migration or delivery dates.
Don’t let red herrings distract you from your objective.
A red herring is something that takes attention away. Take for example – at the start of the sales process, the buyer tells you they’ve been doing research online and seen that your competitors’ prices are much lower. And that they want you to match the price. It’s so easy to defend your pricing in these situations and lose your leverage.
Red herrings are common at the initial meetings. Red herrings often seem innocuous like these:
- “Look, before we go any further, I need to know that you’ aren’t too expensive.”
- “Your competitor quoted us this price. Can you match that?’
- “You need to know we don’t want to sign a long-term contract.”
- “Your competitor promised they could do ____. Can you do that?”
- “This is all the budget we have for this project. Can you work with that?”
When you’re thrown a red herring…
Do not take the bait. When you manage them poorly, you run the risk of giving away your leverage, skipping the sales process and ultimately weakening your power position.
Buyer: “We’re going to make a decision this week, so we need to get your information fast. How soon can you send us your proposal?”
Seller: “John, my competitors will be happy to just throw a proposal at you. It’s easy for them. They’ve got a generic box and expect all their customers to fit into that box. This is where we’re different. We build the box around you. All I’m going to need is a little bit of your time to ask some questions so I can understand you better. Then I’ll tailor a proposal around your unique situation. That way, you’ve the opportunity to make a true apples-to-apples comparison and choose the solution you feel is best for your company. How about we get together, tomorrow afternoon at two?
Do not give leverage away for free. When you give value, you must ask for and get something of great or equal value in return.
Here’s a simple framework to keep you in control of emotional impulses – PAIS.
- Pause – to collect your emotions
- Acknowledge – to let them know you heard them
- Ignore – to ignore red herring all together
- Save – to address it later in the conversation
Listeners listen for leverage.
In negotiation, the one who’s talking is giving away information and often, leverage. This insight gives you a distinct advantage at the negotiation table. To activate the self-disclosure loop of your buyer:
- Begin with easy and open-ended question.
- Use active listening.
- Avoid interrupting.
- Reward them for talking.
- Pause 3-5 seconds before speaking.
- Let them fill in the silence.
- Rinse and repeat.
Objections are not negotiations.
Objections occur before you’ve won, before you’re awarded as your buyer’s VOC. The objection “your price is too high” might be an attempt to negotiate. But remember, you can’t let negotiation happen at this stage. This is why when you hear the objections – you must slow down, clarify what they mean and minimize the concern. If you do it right, they will choose you as VOC. Then negotiate.
MLP – chessboard of negotiation
MLP stands for Motivation, Leverage and Power. The more you want an outcome, the more motivated you’re to make a concession. Motivation is often personal. Each stakeholder in sales has their own unique and personal criteria for success.
BASIC – stakeholder mapping tool
There are five types of stakeholders
- Buyers – people who are decision-makers with authority to say yes or no
- Amplifiers – people who see a problem or gap that you can fill
- Seekers – people who look for information early in the buying-process (e.g. subscribers)
- Influencers – people who play actively influence the buying process (either positively or negatively)
- Coaches – people who are willing to advocate for you and help you win
Once you have clearly identified your stakeholders, start answering:
- What are the success criteria of each key stakeholder?
- What does each stakeholder really want?
- What problems are they trying to solve?
- What are the emotional and measurable business outcomes (MBOs) of each stakeholder?
- What are their non-negotiables or deal-breakers?
Building stakeholder list and answering yourself these questions help you anticipate the gaps in getting key stakeholders on your side and where there is common ground.
Status Quo Bias – why buyers think no decision is the best decision
Here’s the obvious – humans don’t like to change. We live by the heuristic “If it isn’t broke, don’t fix it.” In evolutionary terms, it makes sense. The risk of being a lunch sounds much scarier than the reward of getting a free lunch.
Your job is to help your buyers move past their status quo bias through priming (negative implications of doing nothing) and micro-commitments (easy and bite-sized commitments for change, one step at a time).
Failing to plan is planning to fail.
Sales negotiations happen at the speed of light. Most of the times, you’re negotiating in the moment, in real time with little breathing room. This is why walking into a negotiation room without planning can quickly put you behind, especially when you’re faced with seasoned buyers.