How many Sales people really understand NEGOTIATION? Sadly too few.
Many enter the negotiation cycle without realising they are in a critical part of the Sales Process. Indeed negotiation is not always related to Sales situations. For example we have all had the discussions with our siblings along the line of: “Can you take me to the pictures tomorrow?”, responding with: “Only if you tidy your bedroom”. Indeed a primitive, but often effective negotiation, and indeed one (if carried out) can lead to a ‘win – win’ outcome!
It is vitally important to recognise when the sales process enters the ‘negotiation phase’. Failure to recognise this may be detrimental to your desired outcome, and do the salesman a disservice.
So, what is negotiation?
I have over the years heard many definitions, but the simple ones are always the best:
“The exchange of tradables to facilitate an agreement”.
And what are tradables? And more importantly, how many sales men can list them?
Tradables are the areas where a Salesman or a Buyer can ‘give a little’. The obvious one is price, or more accurately, cost of goods/service. But there are many others too. They can include aspects such as product/service specification, payment terms, delivery and quantity.
Let us look at some sales examples.
The buyer says “Yes, I like the look of your resistors, and if you can get the price down by 10% then we can do business.”
The inexperienced salesman, who does not realise that the negotiation phase has just been entered is inclined to say “Yes” in great haste to close a deal. However, the more experienced salesman who has a clear understanding of his tradables may respond in one of the following ways:
“Of course, but I will need you to commit to a 12 month agreement for me to guarantee this price”
“We can meet this price, but we will have to provide the product without the wired connectors”
Another example would be:
Buyer – “If you can guarantee delivery by the end of the month then we can place an order now”.
Again, the inexperienced may jump at the offer, but the more measured approach would be “Of course, but we will need to engage our team in overtime to meet the deadline, therefore it will attract a 10% price premium”.
Salesmen naturally believe that the Buyer has a the upper hand, particularly as he may have a choice of suppliers. However, if you have reached the negotiation phase, it can be assumed you are winning the competitive battle. At this point the sales man should never underestimate the strength of his proposition.
It is not unknown for a negotiation to break down irretrievably, although with thorough preparation by both sides, this is an unlikely outcome.
The outcome of a negotiation and subsequent business deal fall into three categories. The first, a ‘win – win’ is the most desirable, both sides feel good about what has been achieved, and it is a great foundation for further business between the two parties.
A ‘win – lose’ is where one company is delighted with the deal, and the other is regretting the agreement, and feeling ‘stitched up’. Frequently the ‘delighted party’ is oblivious of the thoughts of the ‘aggrieved party’. In this case, unless some remedial work can be done on the relationship, it is highly unlikely that the parties will do business together.
The final outcome is a “lose – lose” outcome. Both parties feel the deal was poor, and such outcomes should be avoided at all costs. However, they do happen due to business pressures, expediency and other compelling issues. Indeed it is highly unlikely that these parties will do business again with each other.
So how do we ensure that outcomes are ‘win – win’.
Simple – preparation is key. A salesman MUST know and understand his tradables. A buyer may have different tradables depending on what he is buying. Both parties must accept that transaction value can be talked up as well as down.
Typical tradables for a salesman would be (and these can be traded up and down):
Product finish (specification)
Packing and delivery costs
In summary, the best salesmen recognise their tradables, they can recite them at a moments notice, and they recognise the simple signs of negotiation. Furthermore, they have an empathy to the needs of their customer in order that all outcomes are ‘win – win’.