From the dawn of humanity, we can assume, there was someone who was creative enough to make a needed product – perhaps a chiseled wheel, or a grass-thatched roof – and someone who wanted to acquire that item for a good price.
It wasn’t until the 1500s that this process earned the name – negotiation – that we know it by today. Derived from Latin origins, the initial meaning was “to navigate a difficult journey,” and if you’ve ever been a seller on the receiving end of a haggle, you certainly would agree that this phrase is applicable!
A more contemporary definition comes from Chris Voss, who was the leading FBI hostage negotiator for more than 10 years. He sees negotiation as a collaborative process in which several parties are faced with difficult aspects of the same problem, and the job of negotiation is to work with the other party to solve that problem together – in layman’s terms, a “win-win.”
But achieving detente – in a way where everyone feels satisfied with the outcome – can be elusive. And especially today, in a post-COVID world where sales teams are fighting to earn or hold a premium price on their product or service, finesse has never been more important.
According to research by consulting firm Simon Kucher & Associates, 80 percent of the world’s companies are facing price pressure, and about 60 percent are in the midst of a price war. This comes as sales organizations are trying to fill their pipeline, the company’s coffers – and their own bank accounts.
So how can you triumph at the negotiation game?
Let’s take a look at the five most common reasons why negotiations fail – meaning, that don’t end in our favor – and a few methods you can employ to prepare yourself for the “difficult journey” ahead.
Most Common Reasons for Failure
- We fail to thoroughly prepare: We see too many sales professionals rush into a negotiation with price alone on their mind. They steel up their spine, thinking about how they’re going to protect the price, without really understanding what other terms are acceptable or safe for the client.
- We compete rather than collaborate: People are fearful of being taken advantage of, whether they’re a novice negotiator or experienced. That fear leads sales professionals to make ambitious, and often outrageous, demands that are perceived as unreasonable or coercive by the buyer.
- We let our emotions get the best of us: When we get into a heated negotiation and we’re trying to make something happen – whether it’s for our company or for us personally – we tend to let our emotional biases work into the process. Research shows that when we get angry, we can make overly risky choices; when sad, we tend to overpay. This creates an emotional overhang that will break down the process.
- We take ethical shortcuts: This may be surprising, because, though we tend to believe that it’s only the most ruthless among us that behave unethically, it’s more widespread than we might think. When people have a financial stake in landing the buyer, it turns out most are willing to cut corners, with little feeling of regret.
- We have misaligned incentives: When the salesperson isn’t properly compensated for success, they may not feel the same allegiance to holding price. As an example, many sales professionals are paid on gross revenue – so to give up 3 or 4 percent off the top is not a significant impact to their earnings; but the company ends up losing 10 to 15 percent of their profit – much more of a loss than the salesperson.
With all of this in mind, here’s our advice on how to best prepare for a negotiation:
1. Define the Problem:
We at The Brooks Group believe in something called the “value formula” – it’s a way to think about your project prior to presenting the proposal. You should define ahead of time the specific benefits of your offering to the buyer compared to what could potentially inhibit a sale; what are the perceived emotional costs of doing business with you, etc. It’s kind of like the “devil’s advocate” position – truly getting a sense of what your buyer might be thinking.
The reason the value formula is so important is that it frames your discussion. The items identified as perceived benefits will come in handy when someone starts pushing for a discount or sets a maximum price that they are willing to pay. Often, simply going back to the facts, and slowly working through those, rather than devolving into bluster, is the most effective path.
2. Know and Believe Your Value:
If you don’t believe, with conviction, in the price you want to charge, or if you don’t believe in the fact that you’ve got a lot of perceived benefits in your value statement, then you’re not going to be in a very strong position to negotiate.
Probably the most successful negotiation I ever had was with selling a car of mine. After having it detailed, I didn’t want to sell it, and my wife encouraged me to only accept a full-price offer. With this in mind, I no longer had an incentive to take less, because I really believed in the value of that vehicle. I ended up getting full price after one of those driveway negotiations that you do on Craigslist.
3. Understand the Behavior Styles of All Parties (DISC):
At The Brooks Group, we believe in the power of assessments. We use something called the Brooks Talent Index to analyze sales professionals’ behavior patterns, comfort zones, and how they will react to certain situations. We also teach the DISC profile empowering salespeople to use it to analyze which profile best represents the person across the table.
For example, if the person across the table from you is a “D,” dominant, they’re probably going to come very hard at you in negotiations. If I am an “I,” my natural tendency might be to give up sooner versus someone who is an “S,” steady, who will work through the process. If I’m a “C,” controller, I may want to get something done but will still have a key focus on the details, being better positioned to support my positions. So, make sure that you understand the behavior patterns of all the personalities at the table – not knowing this could hinder your outcomes.
4. Be Prepared to Respond to Buyer Techniques:
There are several ways your buyer will attempt to get the upper hand:
Comparison: “You all sell the same thing. What makes you different?”
Threat: “I’m just not going to pay that.”
Quick Compromise: “Let’s just split the difference.”
In these scenarios and others like them, you must be prepared and remember that if you’ve done your discovery, and you understand their budgets and other dynamics, you can respond appropriately.
5. Use “Tell Me” Questions:
YOU want to be the person to steer the discussion. Research shows that the best negotiators aren’t those who hold their position firmly, but those who asked the right questions and get the right information so that they can really build a more creative and collaborative deal.
6. Listen Actively:
Be sure to really listen to what the buyer is saying. Summarize it by recapping the key points to make sure they’re understood. This kind of summary doesn’t just allow you to make sure you heard the conversation correctly, but sometimes, the buyer may realize that their request may be unreasonable.
7. Define What a Good Deal Looks Like:
Ultimately, your buyer will be asked one question by their boss – “Did you get a good deal?” Knowing what, for them, represents a good deal will help us in the conversation. Though we might not think that that’s our responsibility as a seller, we do want the organization to feel good when buying from us.
8. Know When to Walk Away:
Finally, there is a time when a break is needed – whether it’s to cool off if you’ve gotten emotional, or whether it’s to rethink your position – or sometimes, it’s to just totally walk away because it’s not going to be a good deal. This underscores, for your salespeople, the importance of sales funnel – so that you don’t feel pressured to close this deal, knowing that there are many more in the pipeline that can help you make your month, or your quarter, or your year. The more pressure you feel to make a deal, the more you’re willing to give up. All of those are things that I think you can be working with your teams on to help them sort of grasp and in check and analyze the process.
