"Let us never negotiate out of fear, but never fear to negotiate." -John Fitzgerald Kennedy
I’ve witnessed people who are naturals at negotiating, and then see those who are completely uncomfortable in that environment. In terms of your company’s sales representatives, you need them to not only be comfortable negotiating, but it must also become second nature to them. In essence, your sales people have to want to negotiate with customers. In doing so, they must secure the order, satisfy the customer request, and protect your company’s interest and gross profit objectives. So, are there some basic tips to negotiating?
1. Stop, Use "Uncomfortable Pauses" To Illicit a Response
Have you ever noticed how silence speaks volumes? Uncomfortable silence is a fantastic tactic in negotiating. Some people just can’t stand it when they aren’t conversing. When you take the time to pause, look confused, or even take the time to find the right words, you’ll notice how uncomfortable the other person can become. More often than not, they’ll offer up information in anticipation of your question. It works, and works extremely well.
Using pauses as a tactic will often get your customer to divulge additional information. It also portrays the image that you are thinking through their answer and proposal. At the very least, your prospect doesn't know what you're thinking and when they don't know, they are left to their own assumptions.
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Silence speaks volumes and pauses are great negotiating tactics.
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Not speaking will often force your customer to divulge information.To learn more about defending your pricing and handing customer threats in negotiation, please see: Five Sales Competencies Every B2B Salesperson Must Master
2. Match a Concession with Concession
When it comes to negotiating, it really is a give and give process. Don’t allow it to become a “give and take”. While your job is to satisfy your customer, giving them everything they want, and receiving nothing in return, is not the right way to do it. When you agree to a concession, ask for a concession in return as a step to meeting their requests.
For instance, when your customer demands lower pricing, and you finally acquiesce, make sure you get something in return. This could be higher volume, orders for other products, prompt payment, a contract on supply or something else your company needs. Take the time to make a list of concessions to match your customer’s requests.
- Make a list of concessions you want as part of the negotiation.
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Match concession on price, with a concession of your own.
Concessions are the ultimate "what-if" scenario: What if I offer this? - What if they offer that? Ultimately, if you keep that "what-if" question in your mind, you'll make managing concessions a much easier process. To learn more about managing your list of concessions, please go here.
3. Establish Your Company's Bottom, Middle & Top Line Price
If your customer wants your company to sit down at a table and negotiate, then they fully expect you to come to the table prepared with your own needs and requirements. If your customer relationships are strong, then your customer is interested in getting the deal done. In preparing for the negotiation, set your bottom price, your middle price, and your top price.
The bottom price is that price you must not go below. You’ll start at the top, and if you do reduce price, you’ll employ the tactic from step #2: - Match a price decrease with a concession request. If you’re systematic in your approach, then any decrease in price will in turn provide you with another benefit. You might just get your first price, probably will end up in the middle, but absolutely can not go below your bottom price.
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Establish bottom, middle and top price.
4. Protect Your Price and Gross Profit Objectives
As mentioned before, you job is to secure the order, satisfy your customer, and secure a price that is in line with your company’s gross profit goals. It’s not an easy task, but it can be done, and is done all the time. Don’t be afraid to negotiate and protect your pricing. Don’t immediately acquiesce to a customer request of lower pricing. You don’t need to be difficult, but you also can’t make it easy either.
Regardless of your first price, your customer will always claim it to be too high. Defend the price if you think it’s warranted and in line with the market. If you are offering a competitive price, and know it, state it. Regardless of whether it’s the best price in the world, if your customer is a strong negotiator, they’ll claim it to be too high.
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Defend your price and gross profit goals.
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Don’t give in to price reduction requests immediately.
Perhaps the single greatest way to improve your negotiation abilities is to practice, practice and practice some more. When you take the time to practice negotiating, and then have a de-brief at the end of the role play, it allows everyone taking part in the negotiation, to see what worked well, and what didn’t. Take the time to set up your own mock role play. Have one party play the role of customer, while the other party plays the sales role. Provide each with their own set of criteria and objectives.
The party that plays the customer should have objectives to secure as part of the negotiation – a specific price, preferential terms on payment, discounts, lead time, etc. The sales party will be given a list of their own requirements as part of the negotiation – attaining a minimum price, volume, payment terms, extension of lead time. This role play is best done in large groups and is an excellent way to improve your skills in negotiation.
- Develop your own negotiation role play with “customers” and “sales”
- Give each party separate criteria and debrief after the role play.
Consider this the first in a series of posts on the importance of negotiating and how to improve the negotiation mindset.I hope you find these tips useful. Successful sales negotiation wins business at higher gross profit levels. Win the day!
The above video explains how you can expose your overseas competitor's offer and is from the post: Stop Losing Business to Overseas Competitors: Define Your Customer’s True Purchasing Costs
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