Blog Article

Negotiating with Senior Management

STEP #1: UNDERSTAND NEGOTIATING STYLES

Before getting involved in any negotiation, you need to understand that there are three basic “styles” of business negotiating.  According to Murphy, these are:

  • Style #1: Competitive. The negotiation seen as a win-lose proposition. Concessions by one side are viewed as a victory for the opposite site and the emphasis is on having your side win at all costs. Such negotiations generally damage customer relationships, because one side ends up feeling as if they got screwed.
  • Style #2: Cooperative. The negotiation is seen as a give-and-take proposition.  Both sides are trying to be fair to one another, and see the need for a long term relationship and thus the negotiation is all about compromise and on not losing too much. Such negotiations seldom damage relationships, but they don’t improve them either.
  • Style #3: Collaborative. The negotiation is seen as a win-win proposition.  Both sides see their goals as aligned and work together to forge an arrangement that moves both agendas forward. The emphasis is on finding a way for both sides to win, big time. Such negotiations are the building blocks of strong customer relationships.

Needless to say, collaborative negotiations are ALWAYS in your best interest, and in the best interest of the prospect.

However, you can’t be collaborative unless the other party sees the negotiation that way, too.  If a prospect is convinced that the negotiation is a competition, you’ll sometimes need to play that game, even as you gradually lead the prospect into a more cooperative attitude.

STEP #2: BUILD YOUR NEGOTIATING POWER

When negotiating final terms of complex deals, sales pros tend to feel as if the customer “holds all the cards.”  After all, he who pays the piper calls the tune, right?  Wrong.

Your goal throughout the sales cycle is to strengthen your position so that you enter the negotiation from a position of equal power.  There are seven ways to do this:

  • Tactic #1: Eliminate or thwart competitive threats. Convince the customer that your product or service is the only one that can adequately fulfill the customer’s needs.
  • Tactic #2: Develop multiple contacts inside the customer firm. Provide perspective by understanding the motivations and politics inside the customer’s firm.
  • Tactic #3: Exhibit the ability to see beyond the obvious. The customer can’t know everything about the firm, much less the market, so being an “outsider” gives you the ability to see situations more objectively.
  • Tactic #4: Create legitimacy from consistency. Know the strengths and limitations of your offerings, adhere to your firm’s policies, and be willing to explain why they make sense.
  • Tactic #5: Develop a theme of mutual success. A productive relationship is based upon mutual respect and understanding, and a sense of working together to achieve mutual goals.
  • Tactic #6: Generate a solution that matches the prospect’s needs. Your value to the customer skyrockets when you help the customer to crystallize needs and visualize the right solution.
  • Tactic #7: Differentiate yourself from other sales reps. Communicate clearly how you, as an individual, are a unique resource to the customer and use your own unique personality to your advantage.

The more of these tactics that you execute, the better you’ll be positioned when it comes to the final negotiation.  What’s more, these tactics also tend to frame the future negotiation so that it’s much more likely to cooperative or collaborative, rather than competitive.

STEP #3: PREPARE YOUR POSITION

Before you reach the final negotiation stage, prepare yourself for the negotiation process by asking yourself (and answering honestly) the following five questions:

  • Question #1: What are the parameters that need to be negotiated? Collect and evaluate information on leverage, values, sale prices, competition and other factors that will have an effect upon the negotiation.
  • Question #2: What are my realistic expectations for the results? Temper your aspirations with “feasibility” based upon what your counterpart has in mind, and reassess your expectations as the negotiating progresses.
  • Question #3: What are my all-important pricing parameters? When it comes to price, know the deal you want to forge, and be able justify it as being realistic.
  • Question #4: Will I “go first” or let the prospect “go first”? If you put your own number on the table, you put your counterpart into your ballpark.  But, beware, you might accidentally low-ball.
  • Question #5: Where do I have room to maneuver? Leave yourself some bargaining room, but make sure that you have a plausible rationale for the positions that you take.

STEP #4: BEWARE OF MIND-GAMES

If you’re negotiating with a top executive or decision-maker, there’s a good possibility you’ll be the recipient of a mind-game — negotiating tactics intended to throw you off-balance, so that you’ll make more concessions than you’d normally consider.  Here are the six most popular:

  • Mind Game #1: The Palatial Environment. Some execs have impressive offices, or invite you to a ridiculously luxurious venue, because they want you to be awed and grateful even to be there.  If you are, you’re as stupid as teenage girl who’s impressed by a neat car.
  • Mind Game #2: The “He’s Too Busy” Routine. Execs sometimes make you wait to see them, even if you have an appointment, in order to make you feel that the exec and his desires, are more important that you time and your desires.
  • Mind Game #3: The Underling Gauntlet. Execs often use underlings to make you feel like an underling.  If you’re not careful, you end up feeling “socially” bonded to the underlings and thus in a subservient position while meeting the exec.
  • Mind Game #4: The Way-Too-Sexy Assistant. This is old-school stuff, but it’s still practiced in some industries.  The idea is to dangle a sex object in front of you, so that you’ll focus on the possibility of having sex rather than cutting the best deal
  • Mind Game #5: The Meeting Extension. Execs often set low expectations of the amount of time they’ll be spending, so that people feel complimented if they spend more than that amount.  Don’t be complimented; the exec probably had a whole hour blocked off anyway.
  • Mind Game #6: The Big Wait. Execs sometimes delay negotiations hoping that you’ll get all antsy and want to close the deal just to get it closed.
  • How to deal with this kind of nonsense?  First, realize that the only reason the exec is pulling this crap is because they’re desperate to cut a deal.  Second, realize that you don’t have to react.  The rule of thumb in negotiations is that you must treat the prospect as if you were his or her equal.
  • For example, if you’re negotiating with a billionaire — guess what? — you’re the kind of person who negotiates with billionaires.  That makes you as important as the billionaire because otherwise you wouldn’t be involved. Get it?

STEP #5: NEGOTIATE IN GOOD FAITH

  • Before you actually negotiate, make one last reality check.
  • Because you’ve invested time in the opportunity, and may have made quota commitments to your manager, you may feel as if you absolutely MUST close the deal.  If so, you’re not ready to negotiate.  Instead, you should go back to Step 2 and start rebuilding your negotiating power.
  • As you negotiate, do not allow the prospect to feel as if he can simply dictate terms.  That’s a recipe for a win-lose outcome, with YOU on the losing end if the deal.  From the start of the negotiation, let your counterpart know that every concession will be meaningful and that holding out will reap not big rewards.
  • During the negotiation, you should take every opportunity to strengthen your “negotiating power” using the tactics discussed in Step #2. Whenever you take a position, be sure you can buttress it with appropriate rationales. Be specific about your facts and don’t let the negotiation process become emotional.  Remain detached and objective.
  • Always remember that the purpose of the negotiating process is to reach a contract.  The negotiation isn’t over until the contract is signed.  That being said, there’s a point in every negotiation where the deal is pretty much what it’s going to be. If you’ve found that you’ve gotten pretty much what you wanted, don’t sweat the stuff that you didn’t get.  Instead, push the negotiation into the contract phase.

STEP #6: IGNORE LAST MINUTE DEMANDS

Last minute demands sometimes “magically” appear after a negotiation has been completed.  They’re usually positioned as “deal breakers” but most of the time they’re something else altogether — a simple test to ensure that the negotiated deal is the best possible agreement.

Unfortunately, many sales pros simply give in to such demands, because it seems as if the prospect –  the person with the money — holds all the power.  However, if you followed the steps in this post, you’ve got some counterbalancing power, remember?

Here’s the truth: giving in to any last minute demand is a huge mistake, because this is what’s going to happen:

  • Your prospect makes a last-minute demand.
  • You don’t want to lose the sale, so you run back to your management to see whether you can get that demand met.
  • After a lot of extra work, you gets internal agreement, and then you run back to the prospect with the “good news,” expecting to close the deal.
  • Surprise! Your prospect now has another, even bigger demand.
  • You run back, and after even more hard work, get agreement.
  • You go back to the prospect, hoping to close the deal.
  • Surprise! Another demand!

This process continues until your prospect makes a demand that the management can’t stomach, in which case one of two things happens. Either the deal falls through, making your hard work into a complete waste of time and money, or the deal gets signed but is a headache for your firm, usually because it’s unprofitable.

What’s worse, “special agreements” and “relationship saving” discounts have an annoying habit of becoming public knowledge, spawning demands for similar deals. Over time, that can damage the profitability, and even the viability, of an entire company.

And that’s not all. Regardless of the final outcome, you’ll find that, by giving in to a last minute demand,you’ve completely lost the prospect’s respect.  Rather than the CEO’s equal, you’ve revealed yourself as a mere “doofer” who always has something that he needs to “do for” the prospect.

Giving in to last minute demands undermines your credibility and will probably result in further demands.  If you give in to this last-minute stuff, you’re simultaneously telling the customer that you can’t be trusted, and that you’re a push-over.

So, the correct response is to hold firm, once you’ve to your position.  In most cases, the customer will be relieved at this confirmation of your legitimacy and will take the demands off the table.

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