Break Four Bad Listening Habits to Become a More Skilled Negotiator

Completing a winning deal, while maintaining positive relationships, depends largely on your ability to gather as much information as possible about the other side, including their market position, motivations, and goals. This holds true at the personal, departmental, and organizational levels. Better and more complete information can lead to a finely tuned value argument and increased credibility, both of which mean greater leverage that will help you close and achieve positive relationships.

Behind-the-scenes research with your team as you prepare to negotiate is a vital aspect of information gathering; the rest is gleaned from how you engage the other side in conversation. This may seem almost too basic to mention, but we are still surprised to see many seasoned professionals who don’t listen properly and thus fail to gather valuable information from conversations with potential vendors, customers, or partners.

A majority of us have poor listening habits that can be overcome with training and practice. Following are four such listening habits that lessen the effectiveness of otherwise good negotiators:

Pseudo-listening occurs when you only go through the motions of listening. You appear to be present, but your mind is miles away. Consciously correct this error by really focusing on what the speaker is saying. Recognize when distracting thoughts arise (like the urge to look at your iPhone) and train yourself to quickly get your mind back in focus. It’s often a good idea to repeat what the person said to make sure you capture not only the content but also the context. Asking the speaker to repeat what they said can also achieve this, but make sure you are not giving the impression that you weren’t listening in the first place.

Self-centered listening: Do you ever mentally rehearse your answer while the other person is still speaking? This is a form of self-centered listening: concentrating on your own response rather than on the speaker’s words. In that process you are likely to miss something important that would improve any response you are likely to give. Remember that a good listener usually beats a good talker when it comes to making a better impression.

Correct this listening fault by focusing completely on what is being said, allowing time to let the other person complete their thought—then begin to frame your answer. (This is a difficult habit to overcome, but it is crucial to a successful negotiation.)

Listening with a hidden agenda: This habit is closely related to self-centered listening. It occurs when you are so focused on your own agenda/objective, that you fail to fully understand what is on the mind of the person speaking. We’ve all been victims of the agenda-driven salesperson who discounts whatever we say and pushes forward with the sole objective of closing the sale. You feel repelled by such a strategy and so will your prospect when the position is reversed.

Selective listening happens when we listen only to those parts of a message that directly concern us—or what we think directly concerns us. One example of this is letting your mind drift until you hear your name, the name of your company, or something specific to the concerns you brought to the negotiating table. Selective listening often happens when we are multi-tasking; such as when someone is on the phone or a video call while simultaneously browsing on their computer. You will be a far more effective negotiator if you listen to the entire message because you will get the context of all that your counterpart says, rather than just bits and pieces.

To summarize, superior listeners capture subtle information that helps them better understand the other side’s objections, challenges and motivations, i.e., the context for what they are trying to achieve. By overcoming bad listening habits and practicing the skills covered in this article, they earn trust and credibility during the entire negotiation process. Better listening will make you a more effective negotiator. So, recognize and eliminate the four bad habits and watch your results consistently improve.

Negotiate Wisely: Stop the Revenue Leakage Due to Unprincipled Concessions

Over the decades as the K&R team have assisted leading companies achieve business and sales negotiation success, the subject of ”unprincipled concessions” has been a constant. Simply put, unprincipled concessions are those that are not tied to a credible business rationale. Research shows that this simple business negotiation mistake can (and has) cost companies between nine and eighteen percent of their dealmaking revenues.

The below graphic illustrates why unprincipled negotiations are such an important issue. Let’s discuss the problem and what you and your team can do to make this a non-factor in your negotiations.

Negotiation Concessions Infographic

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sales psychology

Discounting, Sales Psychology And Behavioral Economics

Not long ago, I spoke with an IT service provider (our client), who related an impactful discussion with a telco customer’s procurement director. The company offered a $5,300 discount as an incentive to begin the implementation of a customer relationship management (CRM) system for $53,000. Here is a summary of the dialogue:

Vendor: It’s a smart decision for you to move from managing your customer data with spreadsheets to an automated CRM system. To get started sooner, we are prepared to give you a 10% discount.

Buyer: Can you explain that please?

Vendor: Our understanding is that starting phase one ASAP is critical because your people are managing hundreds of customer relationships with a spreadsheet-based system, and your sales per customer need to improve relative to the industry.

Buyer: So, the 10% discount is solely on the $53,000 price tag?

Vendor: Yes.

Buyer: But this is just an initial deployment. You know the deployment plan is for 250 seats by end of year one, 1,200 in year two and full deployment of 2,500 seats by end of year three. By that time we will have invested over five million with you and others! And you are offering a $5,300 discount. That’s just a rounding error! The discount should be $500,000!

At this point, it was clear that the discount strategy had backfired. There are multiple reasons for this.

The Importance Of Perspective.

The 10% discount ($5,300) may have been attractive in context to the original cost of $53,000. However, the customer viewed the transaction against their total investment for the solution, which from their viewpoint rendered the discount as trivial — less than a fraction of one percent. Instead of being a positive, this was viewed almost as an insult. While predictable, the customer’s reaction was not rational because a savings of $5,300 is the same whether it is a savings applied to $10,000 or $10,000,000.

This reaction is an example of what behavioral economists, such as Dan Ariely, call predictably irrational. We have all experienced examples of this. For example, my cousin recently drove 20 miles to a supermarket because of a 50% off sale. He bought $100 worth of groceries for $50. The next day he bought a $1,500 grill from the local hardware store because it was “only” $75 more than the one at Home Depot, which was 10 miles away and “not worth the trip.”

Lack Of Rationale For The Discount.

The client’s indignation points to the vendor’s loss of credibility for failing to recognize the full context. If the customer has a business reason to make the purchase sooner, then the discount is not needed to motivate a decision. Again, the rationale offered made no sense in this context.

Procurement’s Role.

Procurement’s role is not only to fulfill strategic internal requirements, but to do so at the lowest cost possible. Therefore, it’s not surprising that procurement wanted to expand any discount discussion to the overall investment the customer would make.

Emphasis On Discount Rather Than Value.

The customer was making a significant investment to improve their business. This would have been a much better focus to get the deal done and cement a credible relationship.

Shifting The Perspective To Value

As a result, when debriefing our client, we decided to focus on the value-based leverage of their solution. We spoke with our client and asked three essential questions:

  1. Why is the telco making an investment?
  2. Why would they make the investment with you?
  3. How much are the answers to the first two questions worth to the client?

From these questions, our client realized they should win because their differentiation had a direct impact on the very reason the telco was implementing new CRM systems in the first place: Their sales per customer were currently lower than their competition’s. Our client had differentiation because they had implemented similar systems for them before, and there was proof they could implement the new solution six months sooner than others could. The value of the six months was between $8 and $15 million, at least 2.5 times more than the cost of the entire solution for three years.

We suggested that they call the person who had evaluated their solution in the first place, with whom they had a relationship, as well as the customer’s head of sales, to discuss the importance of implementing six months sooner. If the impact was anywhere close to the vendor’s estimates, no discount would be necessary, and getting the deal done sooner would be a matter of urgency for the customer.

Unfortunately, procurement had already received a discount and wanted it applied across a future rollout of the solution. We suggested that any discount promised for the future should be tied to a commitment from the customer. This would make the discount a “principled concession.” To make it easier, we suggested giving the customer some alternatives that we call multiple acceptable proposals (MAPs) for different levels of commitment. Ultimately this approach was successful because the customer felt they had control by having some choices, while the built-in concessions were principally related to each alternative deal construct.

This scenario presents many lessons, including the following:

  1. Don’t offer discounts as an “incentive” unless it is necessary as a principled concession to solve a problem, (e.g., you are at a price disadvantage and the competition delivers a comparable outcome). This was not true in this case.
  2. Ask the three questions listed above to discover whether you have value-based leverage. The answers will reveal whether any discounts or incentives are required and whether your opportunity is real.
  3. When you provide value to the customer rather than dictating terms, offer them choices that contain some different business outcomes. This will enable them to make a value-based decision by comparing credible alternatives. You will give the customers a feeling of control while staying principled in your discussions.

In the meantime, ask: Why? Why you? How much are you worth to them? And, of course, offer your customers options that are value-based so they can make informed decisions.

Note: this article originally appeared January 2020 on Forbes.com. You can view the original post here.

keep cool tense negotiations

How to Keep Your Cool – Even in Tense Negotiations

I have written quite a bit about how to sharpen you and your team’s professional negotiation skills to close larger deals, faster. However, there are many times professionals lose otherwise quality deals because the seller, the buyer or both, can’t keep their calm when the discussion becomes tense.  We have recently seen a client get so emotional in a discussion that the other side would have walked away had cooler heads not prevailed.

Rudyard Kipling talked about this as a virtue in his famous poem If: “If you can keep your head when all about you are losing theirs and blaming it on you.” Great aspiration, but how to accomplish this with rude, inflexible and humorless negotiators?  What if they are even downright nasty? Consider this scene:

The chief negotiator for Dewey, Cheatum and Howe is sarcastic and condescending. In the middle of a tense negotiation, he says: “Gee. Harvey, I’d make this offer if I thought you and your team could understand it.” He is a nasty piece of work. “Arrogant” and “obnoxious” come to mind. Plus, he fails at personal grooming. Add “offensive” to the mix.

Perhaps I’m exaggerting to make the point but what should you do if confronted by such a scenario? The natural inclination is to tell the person off. But being the smart negotiator that you are, you say to your team, “SO WHAT?” Yes, you would rather do business with people who are pleasant. Yes, you would rather do business with people who are not rude and arrogant. Who wouldn’t? But if you’re doing business with someone who is annoying or mean-spirited, stay cool and focus on the merits of the transaction.

Keep Your Focus

I am not advocating for avoiding minor conflict, as heathy disagreement is a necessary part of the negotiation process. Perhaps the individual in question is truly unreasonable or mean-spirited – such people exist. However, any worthy negotiator on the other side—although we like to refer to them as “business partners” or “customers”—will attempt to recognize and understand your strengths and weaknesses early in a negotiation. From that point on, they will try to take advantage of your weaknesses and get around your strengths.

The key point here is to always keep your emotions in check and strictly focus on the merits of the transaction. Ask yourself: “Does this deal make sense for both parties?” If the answer is “yes,” then go about your business and make the best deal for yourself and your company.  Remember, as long as the deal makes business sense for them also, they would look very bad to their peers and superiors if they didn’t get it done. Or, to put this a different way, concentrate on the merits of the deal, not on the behavior of the person on the other side. (Footnote:  Of course, there are limitation when the other side “crosses the line” by going beyond merely rude to clearly offensive, in which case you need to judge how and when to bring it to their and their management’s attention.)

It’s Both What You Say and How You Say It!

Often—in negotiations as in our personal lives—it is not what you say, but how you say it. Our interpretation of words in a specific situation and the way we respond to them depends on our experiences, values, and emotions. Sometimes people use different words to mean the same thing. However, many words carry loaded overtones, connotations that are different from their dictionary meanings.

For example, the words “cheap” and “thrifty” have the same denotation (dictionary meaning): frugal. But wouldn’t you rather be called thrifty than cheap during a negotiation? (Or at any time, for that matter!) Cheap has a negative connotation of “tight-fisted”, while thrifty has the positive connotation of “wisely economical”. Similarly, the words “stubborn” and “resolute” both mean persistent, but stubborn carries a negative connotation of “obstinate” and “pigheaded,” while resolute carries a positive connotation of “purposeful” or “resolved.”

As a negotiator, it’s important to be sensitive to the use of words, otherwise you run the risk of offending someone. More importantly, their behavior toward you may conform to the negative tone you’ve set and you won’t have a clue why! One of the best ways to not lose your cool is to never give the other person a reason to be upset in the first place.

Sometimes, personalities simply don’t mesh for a myriad of reasons.  Following the principles outlined in my book Negotiate Wisely in Business & Technology, you can reconfigure the negotiating team with compatible personalities. This alone can improve your odds of eventual success.

One final thought

When all else fails, it may be worthwhile to find a way to relieve the pressure during a tense negotiation. This can come in two forms: planning events during the negotiation and specfically, within a tough meeting to change the tone. Ways to relieve the pressure include social activities, informal meetings, off-hour activities, and humor. Changing the environment and getting away from the business conference room can be a very effective way to improve a situation that’s gotten testy under the pressure of getting the deal done.

Within a meeting, relieving the pressure may involve taking a break or the use of humor. Assuming you are one of those people who can deliver an amusing (non-offensive) line, this can be a great way to get everyone back to a more positive mindset. I agree with actor Ted Danson’s comment, “Humor can bring people under the tent. And a good joke can deflect some of the intensity surrounding a serious subject.”

I wish you great success in keeping your cool and succeeding in all your negotiation environments.

Properly Manage Internal Expectations

Almost every sales organization and every seller operates under some pressure associated with quantifying and then making their sales numbers. The instincts that cause this are positive – the desire to succeed by meeting or exceeding quota, or perhaps to be seen as a top performer within the sales organization.

There are three related manifestations of this pressure that negatively impact the seller’s ability to deal with complex buy cycles.

  • We may raise expectations of success with internal management on deals where some of the fundamentals are missing or will take more time to develop. Such expectations can be made through forecasting in the CRM system or by what sales reps promise to their managers. Regardless of how this occurs, not taking reality into account affects the seller’s credibility and results.
  • We rush, trying to speed up the process. If the deal is not moving at the pace we desire (or which is imposed from above), this leads to mistakes and a loss of credibility internally or externally. In either event, that loss of credibility will further prolong the sales cycle or result in a lost opportunity.
  • We make unprincipled concessions in an attempt to get the prospect to act faster. As I explain in an earlier article, unprincipled concessions are “giveaways” not tied to a credible business rationale. Our research shows that this simple negotiation mistake costs businesses between 9 and 18% of gross revenue and significant profit. This is a much too high a price to pay in any sales scenario, especially when it doesn’t contribute to revenue.

To overcome the negative impact of these manifestations, I suggest you deal with each in a conscious way, in order to eliminate or reduce the mistakes and frustration caused by internal pressure. Very few individuals operate more effectively while under pressure. Prospects can sense it, and managers can sense it, and neither responds well to the type of selling environment caused by pressure.

One of the often unspoken issues is that the buying cycle can be vastly different from the sales cycle. Sales management can choose to dictate a certain sales cycle; say four months. However, while this sounds ok, the buyer may have a far different perspective on the timing of the deal. This is a good example of the quote, often attributed to John Lennon, “Life is what happens to you while you are busy making other plans.”

A few years ago, a friend was under some pressure to get a strategic contract done for his company. His executive called for status updates daily (sometime more often). He had a contract draft ready for the customer that at least one person other than him would normally review (two sets of eyes before something important goes to a customer is a good policy).

However, he felt he could not afford the couple of hours that the review would take. The contract had a critical typo in it that caused an internal escalation within the customer. While the deal was done, it took a week longer as a result. As mentioned above, the motivation for going against standard operating procedure was sound: the desire to make the sale happen on schedule.  However, in hindsight, the cost of the extra week was not worth the potential few hours saved.

Setting honest expectations and describing key dependencies and timing is always good practice, though it may not be what the boss wants to hear. This does not mean making excuses – rather it means being factual and explaining what needs to happen and what you are doing to facilitate an optimal outcome. This may be a bit painful in the short-term, where pressure to meet this quarter’s number is strongest – but it will definitely pay off over time, in terms of streamlined, less-painful and more profitable sales.

Negotiation Mistakes: Own Them, Move on and Prosper

Have you found yourself exasperated by a colleague or partner who won’t own his or her mistakes? The minute an error is discovered, they offer excuses and deflections instead of responsibility and solutions. This is not only a time-waster because you have to take extra steps getting to the heart of the problem, but your whole team loses credibility and the value of your business relationship is undermined.

At K&R, we use the term Negotiation Capital™ to illustrate the goodwill that is created through credibility, good relationships and successful delivery. Negotiation Capital is like “currency.” It translates into the other side’s willingness to move closer to your way of thinking. If you lose credibility or have to backtrack due to mistakes, then you use Negotiation Capital as if you were “burning” currency. The other side’s willingness to deal with you and to compromise is reduced. Read more

Do You Want to Be Successful? A Better Negotiator? Break These Three Bad Listening Habits

Forging a winning deal depends largely on your ability to gather as much information as possible about the other side’s market position, motivations and goals. This holds equally true at the organizational, departmental and personal levels. Better information means a more finely tuned value argument and increased credibility, both of which mean more positive leverage that will help you close.

Behind-the-scenes research with your team as you prepare to negotiate is a vital aspect of information gathering; the rest is gleaned from how you engage the other side in conversation. This may seem almost too basic to mention, but we are still surprised to see how many seasoned professionals fail to listen and thus don’t gather valuable information from conversations with potential partners, vendors or customers. Read more

Negotiation Mistakes: Misguided Integrity

negotiation integrityNegotiating with integrity is central to the Win Wisely™ approach; after all, if we are in search of positive leverage to artfully move the other side closer to our way of thinking, we must have integrity. Integrity gives us the foundation to make value arguments that are believable. When we are perceived as people who constantly play games with the truth and are slippery during discussion of the challenges, our leverage predictably erodes.

However, there are situations in which being too forthright needlessly damages your position and erodes your leverage as surely as being untruthful would. Imagine that you are negotiating with a manufacturer whose specialty component is critical to your upcoming product. The week before, you dismissed an alternative provider after lengthy negotiations, leaving this manufacturer in the “sole provider” position. Read more