Negotiation Examples: Knowing How the Other Team Approves a Deal
Knowing how people are measured for bonuses, rankings, commissions or promotions helps you determine the personal motivations that can be just as important as company position when it comes to closing the deal.
Simply making someone’s job easier can be a major motivation. Here’s a software negotiation story from the K&R files:
It was the middle of the fourth quarter and the software sales team of Company X was trying to sell a $650K software monitoring solution to a major financial institution, Company Y. The customer IT executive had been convinced a few months earlier that the solution would help them tackle certain technical issues in serving their international accounts. The Company X sales team was getting pretty frustrated with a sale that should have been easy. They couldn’t get Company Y’s procurement team to move with urgency.
We at K&R were called in to help. We asked what the last involvement of the IT executive had been. The answer was that the sales team had last seen him a month ago. He was very busy, even overwhelmed.
We asked how he gets his approval for expenditures. The reply was, “He has to go to the CFO for anything between $500K and $5 million.”
“Well, Does he have a business case to show the CFO?”
“Not as far as we know,” Company X’s executive told me.
“Can we build one for him?” we asked.
“We could, but we’re not sure of all the Company Y data.”
“Why don’t we try with our best data and then give Company Y our assumptions?”
A few days later, with the assistance of an astute financial person at Company X, we built a sample business case for the IT executive. A meeting was scheduled with him for a week later.
At the meeting, the Company X sales rep showed him the business case, which contained three alternative views: an aggressive, a middle and a conservative effect of implementing Company X’s technology. The conservative case showed a 240% ROI over two years!
The IT executive corrected some of our assumptions and asked for a copy of the business case. “This saves me a lot of work,” he said.
Two weeks later, the IT executive had the CFO’s approval. The deal was done in the week before New Year’s. What the sales team missed was that this was not a Company Y procurement team problem. Procurement was sitting on the deal because the IT executive wasn’t ready to do anything until he had a business case (which he was too busy to do). In many situations like this, sales teams in the position Company X was in will start to cut the price to try to close the sale. It didn’t work – price was not the problem.