Trust Triangle Selling March 2008 Newsletter

March 2008

Issue: 14

Ask Dan

It's good to have questions - now ask them! The only poor question is the one never asked. I may be able to feature your question in the next newsletter. Just email me at dadams@trusttriangleselling.com.

Q: Dan, our sales team is constantly leaving money on the table during negotiations. Can you send over some key best practices that I can share with my team before the next big negotiation? Thanks!

Mary F.
Naples, FL

A:   Mary, thanks for sending in your question. It sounds like your sales reps need to hone their negotiation skills.  My article below should be of help to you and your sales team.

THE 10 COMMANDMENTS OF NEGOTIATIONS
By: Daniel Adams

Imagine for a moment that you are preparing for a heated final negotiation to secure a very important deal for your company. What will you do if your customer asks you to: "lower your price by X dollars in return for the deal?"   Should you bring in your manager to assist? What will prevent your customer taking your negotiated offer and sitting on it forever? Or worse, what if your customer allows the expiration date of the offer to expire but still requires the negotiated deal? The answers to these and many other key negotiation questions can be found below in THE 10 COMMANDMENTS OF NEGOTIATIONS. In my twenty five years of selling I've consolidated some successful negotiation guidelines into ten best practices, or 'Commandments'. The Commandments are easy to comprehend; but following them requires sales discipline!

1.    Know Who You Are Dealing With
Do your homework; know your customer; know your competition. Make sure you investigate the personalities of all the players. Learn who your customers and competitors are as professionals. What is their negotiation history? What has been your competitor's sales strategy? What solutions have they offered? Where? At what price? And with what terms?

2.    Negotiate Only with Decision Makers
Sometimes an apparent decision maker is merely a 'gate keeper' in disguise. Ask probing questions to discover who is really in charge. One such question to ask is: 'Who has sign-off authority for an investment of this size? Refuse to negotiate with people who do not have the ultimate decision-making authority.

3.    Timing is Everything
Do not negotiate if your customer is not ready to buy. Make sure your deal is fully baked! If you negotiate too early you will end up negotiating two, three, four, or more times. If you drop the price any time before the final negotiation, you will end up competing against yourself; a major mistake.

4.    Preparation - Review All Possible Scenarios
Know all possible moves that the customer may make. Plan your move in advance in each instance. Be prepared to eliminate yourself from the negotiation, if necessary. Review the circumstances under which it would be necessary to walk away from the situation in order to secure long-term relationships and to protect your company's resources. A "Trade Matrix" is a great tool to help in the preparation for any negotiation. Create a table with the following headings:
Give, Value, Get, Can't touch this". In the Give-Value column list all the possible things you could provide to the customer along with the associated value. In the Get column list all the things you may want to receive in a negotiation. In the last column list things which are simply non-negotiable. After you compile the trade matrix, review it in detail with your manager long before the negotiations begin.

5.    The "Lone Ranger" Is Dead
A superstar never conducts a major final negotiation alone. There are many reasons for this:

Customers do not believe that a sales rep has the authority to produce a great deal. They think that unless a manager is involved they will not get a bottom-line deal.
Two sets of eyes and ears can better pick up the all-important nonverbal cues coming from the customer.
The negotiations can get heated. By allowing the manager, at times, to take on the bad-guy role, the superstar can keep his relationship with the customer untarnished ("I wish I could give that to you, but my management won't allow it").

6.    Understand Your Contribution Margin! Don't Drop Price!
As a superstar you should never drop the price; instead, offer additional products or services that equal or exceed the requested discount. The impact of a price drop on your net income would be substantial, whereas providing a product or service decreases your net income only by the wholesale or internal cost (not the retail price) of that extra product or service. When choosing which products or services to offer in a negotiation, choose those with high contribution margins such as software, maintenance, and warranty.

7.    Give Slowly and Reluctantly
During final negotiations, whenever you offer a price concession, do not make major reductions. Any major shift in price or position signals to customers that much greater concessions could be had for the asking. And believe me, they will ask.

8.    Never Negotiate Piecemeal
Insist that the buyer put all the issues onto the table before addressing any of them. That way, one can assess what's at stake and fashion an offer, which balances the totality of the requests with what the seller is able to concede. If the buyer presses, an effective reply is, "I may be able to ask my manager to make some small concessions, but until I can entertain all of your outstanding issues I will be forced to say "No" to each of your requests. Certainly you can understand my position."

9.    Be Humble-- Be an Advocate!
Avoid flaunting your superstar status during the negotiations. If you let slip the fact that you are a veteran negotiator who has been through this a million times, you will feel a brick wall rising up between you and the customer. Present yourself as a non-expert (only with regard to the negotiation process, not to your product or service expertise). You will be astonished at how much the customer wants to help you. The negotiation instantly takes on win-win feel when the customer does not feel vulnerable. Remind him that you are in this process together, working toward a mutually beneficial solution. Assure him that you will advocate for the best solution your company can offer.

10.    Finalizing The Agreement
It would be a major mistake to make an offer to your customer and let him "think about it" for an indefinite amount of time. Each offer must have a mutually determined expiration date.   Further, your offer must be all-inclusive. You must specify that any additional items not included in the offer will be available only at an additional investment. This way, you avoid piecemeal negotiation mentioned above, as well as negotiation after the fact. Finally, the sales pro knows that each negotiation must be followed by a negotiation follow up letter which clearly outlines: the agreement, the special pricing, the expiration date and the price which will be paid should the customer not meet the expiration date.

Having condensed the art of negotiation into 10 best practice steps, this aspect of your selling will hopefully progress more smoothly and easily for you. If you follow these concrete suggestions, you will be on your way to superstardom in your sales career! Good luck to you, and remember, "Close 'Em"!

Good Luck!

Dan Adams, Adams and Associates