Define Value, Win Credibility and Respect at the Negotiation Table

Posted on December 21, 2011 | Filed Under Negotiation SkillsTactics | Leave a Comment

Define Value, Win Credibility and Respect at the Negotiation Table with a Few Simple Questions

Have you ever heard this from a customer during a discussion? "We’d like an additional 10% discount. If you give this discount to me, we can close the deal." Sellers hear this all the time. More often than not, sellers concede immediately in the interest of getting the fast close. But is this the correct response? Let’s consider the advantages. As a seller, if the deal really closes after you give the quick discount, you can count the revenue and move on to the next deal. And maybe the client likes you for that moment.

But how do you know it will close? Your customer might start thinking, "This was too easy. I should have squeezed them for more." All-too-common scenarios like this are the reason that "Concessions easily given appear of little value" is one of our foundational six principles for successful negotiations is As a result, they may stop the process and look for more. This delays the deal, and probably further erodes your price and terms.

Even if it closes after you give the quick concession, what is the customer thinking? Do they like you for that moment, and then have "buyer’s remorse": "They made that concession so quickly, maybe I should have asked for more." Or, "That was too easy. I guess they were just trying to rip me off with the original proposal."

And what about next time? Will they believe you when you give them a "good" proposal?

Consider this: What would have happened if you answered differently when the customer made their discount request? You might have said:

  • "I understand that you would like a 10% discount, but let me take a moment to explain how our solution really satisfies your business need."

Or

  • "I have to apologize if I have not articulated the value of our solution adequately; can you explain to me why you feel a 10% discount is justified?"

Ultimately, the customer may have an answer – in fact it could go something like, "Well, we feel that your competitor is offering better pricing for substantially the same solution." You should welcome this response because it triggers a meaningful value conversation.

You can then offer a response like:

  • "May I point out some differences in our solution that help your business?"

Or

  • "Well, what differences do you see that make you interested in dealing with us?"

In either case there is a potential that you will focus the customer back on the value-based justification to sustain a higher price and better terms.

But even if you don’t succeed in differentiating the value of your solution, it is much more likely that the questions about your credibility that arise by giving the "instant" discount will not arise. The customer will be satisfied and respectful of your principled approach. And you will have integrity with your next proposal. In a relationship, the expectations of the customer are built over time, as is customer satisfaction and, ultimately, business respect that means a more profitable relationship over time.

Shaping Your Value Argument

Posted on December 7, 2011 | Filed Under Negotiating ValueNegotiation SkillsNegotiation StrategyValue | Leave a Comment

Shaping Your Value Argument: Know Your Internal Audiences on the Client Side and Close the Deal

Relentless and thorough preparation is where negotiators on the vendor side shortchange themselves. It’s a major point of focus during our negotiation training, and one of the most critical aspects of this is considering the various groups of stakeholders across the table that need to understand and buy your value argument. Crafting your value argument – the ultimate answer to the question, "What’s in it for us?" – can fall flat and jeopardize the deal if your argument is presented with only one kind of stakeholder in mind.

The diagram below shows the relationship between roles, motivations (measurement concerns) and relative numbers of people that are typical at many lines of business.

negotiating value

Note that IT, where many sales calls are made, has significantly different motivations from the rest of the business. If a seller only focuses on IT’s motivations, their ability to drive faster closing and higher prices will be severely compromised.

The thought process for you as a negotiator is similar to that for your internal negotiations: Identify goals by individual, using their measurement systems as appropriate. Customers may set up conflict between their team and yours as a negotiating strategy (e.g. limiting contact of your team to their procurement side). Adjust your value arguments to the motivations of the person or people you are meeting with. Recognize that they may also have internal conflict. Do the proposed solutions support the desired relationship?

Typically less is known about the motivations externally than internally, at least at first. P&L (Patience and Listening) are key to determining the set of values that you must deliver to get the agreement. When value arguments are challenged by participants on the other side, make sure you meet the needs of the ultimate decision maker. Planning is every bit as important externally. Many diverse sources of information can help you uncover and consider your potential customers’ motivations.

Remember that the higher you go in a customer organization, the greater the span of control. As a result, getting sponsors at those levels gives you greater leverage in closing agreements. Research shows that senior executives get very involved in the decision process for major purchases. But that involvement is typically early and late in the cycle.

In the middle, delegation proceeds first to implementation staff, then (often) to Procurement for negotiation, then back to implementers before the executives are heavily involved again. (Source: "Selling to Senior Executives" survey, conducted by OnTarget™ with the Kenan-Flagler School of Business.)

To be a "Trusted Advisor," a seller must remain involved with the buyer team throughout the cycle, not just in proximity to when the agreement closes.

Executives perceive a "loyalty gap" when benefits that are discussed early in the "Problem/Vision" part of the cycle are not re-visited after the project concludes. If they don’t get feedback in the result, they assume that it did not meet the targeted benefit.

To be successful you have to be ready to make a valuable argument to each responsible party in turn. Leaving one out will only lead to stalling your agreement when that party is in charge – and lessen the likelihood of closing the deal you want.

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