Embracing the tension in negotiation
For most people, the word “tension” doesn’t elicit good feelings. The word connotes urgency and pressure, friction and nerves. So, it’s really no accident that sales reps usually want to flee from the tension in their sales negotiations. It’s just not a comfortable place to be.
But it’s actually the counterintuitive step of embracing the tension—not running from it—that sales reps should be taking. And, while it may seem to violate your most deep-rooted human instincts, it could be the difference between a great outcome, closing larger, more profitable deals, and a bad one—shrinking margins and missed quotas.
However, let’s translate this to selling terms. When salespeople flee from tension, it often means giving into customer demands and making multiple discounting concessions to advance the deal. But moving the deal forward at the expense of your margins is too big a price to pay. Here’s why.
Think discounting isn’t hurting you too badly? Think again.
According to McKinsey & Company, even a 1 per cent increase in discounting can result in as much as a 9 per cent drop in your company’s operating margins. What this means is that a series of seemingly small negotiating mistakes can cost your company big-time. So, if discounting has become a habit, it’s one you’re going to want to break.
Of course, avoiding unnecessary discounting is challenging in the face of mounting tension, which is always a factor in high-stakes sales negotiations.
Here are three tips to help you take the counterintuitive step of leaning into that tension and closing larger, more profitable deals.
- Don’t just “negotiate to close” – Pinning your pricing on late-game saves and last-ditch tactics is not the way to close deals with healthy margins. In all likelihood, thinking of negotiations as something that begins at purchasing makes you more inclined to give in to unreasonable customer demands early in the sales process just to keep the deal moving. If you do this, you’ll have nothing left to give later on when negotiations intensify, and you may have to resort to lowering your prices or making late concessions, which hurt your profitability.
Truth is, negotiations begin in the very first conversation in your sales cycle, and it’s incumbent upon salespeople to recognise this. The first question a prospect asks you should signal that negotiations have begun. Make sure your answers to these questions don’t involve unintentional giveaways that you’ll never receive value from.
- Identify the motives behind the demands – The intuitive response, when customers make demands of you, is to scramble to find ways to accommodate them. This is consistent with your natural tendency to decrease tension and keep your prospects happy by caving to what they want. In many cases, you may be more willing to confront tension internally with your boss by arguing why you should give your customer what he or she wants, so long as it means avoiding tension with that customer.
But skilled negotiators take another route. Faced with challenging demands and probing questions, they respond with authentic curiosity, getting to the heart of the underlying motivations that are driving those demands. By drilling down into the cause of customer demands, you put yourself in a better position to negotiate on the basis of value instead of strictly price.
- Exchange value…don’t give it away – Most sales reps want to feel like their prospects and customers are getting real value from you as the sales process unfolds. But this doesn’t mean you should giving away something of value without getting something of equal or greater value in return. Every time you give something away for free; demos, early price concessions, etc, you leak value away from your deal and damage your prospect’s perception of your value. That’s because buyers don’t attach value to “free.” They like free things, but they certainly don’t value them. And, by giving things away, you train your prospect to continue asking for more concessions at no cost to them.
Your concession strategy should center on one thing: Influencing value in the mind’s eye of your customer. While it’s not always comfortable, asking for something in exchange for your concessions is imperative for giving you the leverage needed to move deals forward and protect your margins. The result? You win more profitable deals and the perceived value of your solutions becomes stronger. Before your next important sales call, think about what demands your prospects may ask of you, then consider what you could ask in return from them. You can then use those things as leverage to exchange value and drive your deal forward.
On an intuitive level, embracing tension isn’t always easy or comfortable. But it’s essential to hitting your growth targets, having higher quality sales interactions, and making sure your prospects have a strong perception of the value you can deliver.
About the author
Tim Riesterer, is the chief strategy and marketing officer at Corporate Visions