Musical chairs in negotiation.

Why “Musical Chairs” in Your Sales Organization May Be Eroding Your Negotiation Capital

(This post is adapted from K&R Negotiations’ Six Ways to Shorten the Sales Cycle, a complimentary executive brief.)

Sales organizations often reorganize customer or territory responsibilities at the beginning of a fiscal year.

If your product and sales process is so simple that salespeople (and customer relationships) are as interchangeable as Lego blocks, then frequent reorganizations are unlikely to hamper you. But if you are trying to sell value in complex landscapes to companies with unique business problems, the reshuffling can be terribly disruptive.

In our previous post, we highlighted the fact that sales (buy) cycles are getting longer as customer’s buying habits change.  We also discussed one of the ways companies can shorten those sales cycles by factoring in the customer’s approval process. Unfortunately, with most reshuffles, you unilaterally extend the sales cycle. If you are in a “high value” industry, this could be an unforced error.

You’ll have to wait as the new account owners pick through their predecessor’s notes on your CRM platform, introduce themselves to key accounts, get familiar with the customer’s business — all of which is deadly in an era where the most successful salespeople are de facto consultants who are deeply immersed in and highly valued by their clients’ businesses.

It’s a Matter of Principle: Negotiations Are Continuous

In the most lucrative partnerships or buyer-seller relationships, a deal is not a discrete process. It’s part of a tapestry of interactions, which is why one of our Six Principles™ is “Negotiation is a Continuous Process.”

In other words, if you are skillful in building a good negotiation process, negotiations with your client should never end because you’ll be doing repeat business.

If negotiations are a building block for successful relationships, then they must be seen as a form of interval training, not a single sprint. Since negotiation work can result in a long-term future (or no future), success in that work will create business relationships that make doing business easier and more rewarding for all parties.

Negotiations do not end with the contract signing. In fact, some of the most difficult negotiations may begin after the initial contract is signed. This is particularly true in the technology industry, where many contracts are drawn up before implementation takes place, before any service has been performed, and even before all requirements are known.

These types of contracts guarantee that there will be yet more negotiation.

Some of the most difficult negotiations occur in this execution and revision period. Most contracts have an amendment process, evolving statements of work, change control procedures, engineering change mechanisms, or provisions for out-of-scope requests.

Another key point: The continuous nature of negotiations is that in each negotiation cycle, the parties will call upon what happened before as a model – sometimes of what they want, and sometimes of what they don’t want. But memory and impressions from earlier concluded negotiations will always be factors in the next round. Of course, if any sequence of negotiation is a complete failure, there may not be a next round. We often hear, in sessions around the world, a vendor say, “I’m in the penalty box with my client.” What they really mean is that because of a delivery problem, or a bad negotiation, they are paying the price in their current negotiations. It’s continuous.

We also speak and teach about “negotiation” capital: a “bank” of credibility earned by demonstrating value and managing the negotiation process wisely. This credibility is the foundation of your leverage with the client. Your “fresh new face” means that hard-won capital can reset to zero.

Discussions between customers and suppliers should never end, especially if the relationship is good. An end usually means the relationship is over and only the “survival” terms of the agreement are being implemented.

 While there is a value to reorganizing in order to gain fresh thinking and enthusiasm, we encourage our clients to approach reorganizations with circumspection. In the event that a reshuffling of chairs is critical, the company should encourage and compensate current sellers working on major deals to continue with those deals until an orderly handover is possible or until the deals are closed.

Download your free copy of Six Ways to Shorten the Sales Cycle.

Sales Negotiation

Business Negotiation: Three Questions that Will Shorten Your Sales Cycle

(This post is adapted from K&R Negotiations’ Six Ways to Shorten the Sales Cycle, a complimentary executive brief.)

Perhaps your strategy-level sales conversations have centered on how to shorten sales cycles. Many companies find themselves mired in protracted sales negotiations, driven in part by the expanding involvement of multiple people (and functions) in the decision process.

A recent article (The High Cost of Buying Complexity) cites CEB (now Gartner) research when saying that the customer’s own expectations of the buying process are exceeded by 97%, i.e., taking 97% longer than expected by those requiring the sought goods or services. This seems true whether the ultimate purchase decision is made or if the process results in no decision. In our experience, this is a result of changing priorities or organizations due to passage of time.

Decision to Purchase vs. Decision to Wait

Sellers and sales organizations are often their own worst enemy in this process.

 

Factor in the Decision Process – Make It Easier for Your Customer to buy

One of the most obvious errors we see is the lack of knowledge of the customer’s decision process. This falls on the seller; however, just as often, we see that buying organizations that need the goods or services don’t have a firm grasp on how to navigate their own processes. This is where a knowledgeable seller can help. They need to ask their counterpart at least three questions in the interest of realistic expectations.

 Three Questions Sellers Should Ask Buyers

“WProcess Iconhat is the process you will need to go through to get a decision?”

 

Length of Process“How long does it normally take?”

 

Decision criteria

“What criteria will be used to make the decision?”

 

We recently advised a client that projected a major deal to close in 90 days. The value proposition was compelling – the buyer would save millions of dollars per year in running their core banking system. When we asked about the process, this was the conversation:

Them: “The CIO will need to go to the board to get approval, but that is just a formality.”

Us: “How will the CIO decide whether or not to go to the Board?”

Them: “If we demonstrate we can actually do this and the savings are compelling. The business case on savings has already been discussed and we have a proof of concept running.”

Us: “Good! When is the PoC supposed to be completed?”

Them: “In one week.”

Us: “When is the meeting with the CIO to discuss the outcome of the PoC scheduled?”

Them: “The week after that.”

Us: “How often does the Board meet? When is the next meeting?”

Them: “Once monthly, however, due to a national holiday, the next monthly meeting will not take place. So, in about 6 weeks.”

Us: “And once the Board approves, will procurement issue a PO?”

Them: “No, they will issue an RFP.”

Us: “And how long will that process take?”

Them: “It has never taken more than 2 months from the RFP request.”

This team was taking an incredible risk and would likely be frustrated, along with the CIO. So, we discussed what could be done to compress this process in a collaborative way with the CIO’s organization. These included steps like:

Collaborating with the CIO’s Organization

CIO Collaboration Steps

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.

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. 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.

Asking the right questions and managing the negotiation process with key roles in mind will lessen the likelihood that your deal languishes on the buyer’s side of the table.

Download your free copy of Six Ways to Shorten the Sales Cycle.

Negotiation Examples: How Avoiding Unprincipled Concessions Kept the Customer’s Respect (And Won More Revenue)

 

When competition starts putting the pressure on you, it’s natural to look at price-cutting as the primary way to keep the business. But in the long run, this is a mistaken impulse, unless accompanied by a sound business rationale such as a reduction in scope, change in terms or outcome from the deal. One of our engagements with a client that served a European industrial (the customer) with technology solutions definitely illustrated the value of avoiding such “unprincipled concessions!”

Unprincipled concessions are “giveaways” not tied to a credible business rationale. Our research shows that this simple business negotiation mistake costs companies between 9 and 18% of gross revenue and significant profit. (See our infographic on the topic for a more detailed discussion of this vital principle and how it can be applied.) Read more

Negotiation Examples: The Power of Agenda Management

The “time factor” — how you manage it against other considerations and use the high-level (or macro) agenda to help create agreement has a huge impact on your success!

This was certainly the case during an engagement with one of our technology clients, whose customer was in the European auto segment. All of our client’s revenue with this automaker was in jeopardy when the automaker announced that a purchasing freeze would be in effect at the beginning of the coming year, due to deteriorating economic conditions and new IT management. Since it was October, these developments required immediate action and a clear agenda that would culminate in closure before end of year. Read more

To Win the Deal, Add Personal Value to Your Negotiation Strategy

Effective, persuasive communication is fundamental to building winning deals. When you are understood and believed, you greatly increase your chances of gaining leverage and having your value argument accepted by the other side.

However, we make a mistake if our communication doesn’t recognize two kinds of value:

 

  • Company value to the other side
  • Personal value to the representative of the other side

You generate company value by making the deal beneficial to the customer’s organization. Read more

Unprincipled Concessions Cost You Money at the Negotiating Table

Spot Them, Avoid Them and Close Faster

Unprincipled concessions are concessions not tied to a credible business rationale. Years of research show us that this simple business negotiation mistake costs companies between 9 and 18% of their gross operating revenue.

Principled Concessions Infographic

Read more

Negotiation Success Range (NSR)™: Understanding Walkaway Positions so Neither Side Walks Away

Winning Negotiations Strategy

One of our tools for helping clients prepare a winning negotiations strategy is the Negotiation Success Range (NSR)™, which identifies the conditions under which both parties will be satisfied. And if those conditions satisfy both sides, but our side likes them more than theirs? That’s OK: A winning deal is never perfectly even. In business, especially when forging long-term relationships, the NSR is critical because the deal should work for both sides, and both sides need to feel like they have won.

This is easier said than done. As an example, during negotiation planning the seller’s price and the buyer’s cost are often crucial factors in the deal. In fact, price is often a deal maker or a deal breaker. (The impact of price considerations on your deal can be ameliorated with value articulation.)

While the NSR example we’ll discuss relates to price, the tool works with any negotiation term that has a range. Read more

The Value of Role Playing in Negotiation

We have had the privilege of assisting major companies all over the world with our Win Wisely™ approach to negotiation. The principles we teach are far from theoretical: they were forged from practical experience gained in all kinds of negotiations involving all types of participants. This includes everything from basic buy-sell transactions to complex, high-stakes negotiations in business and technology conducted by lawyers, salespeople and executives. Each of them needed a methodical approach to forging better deals.

We routinely hear from our clients. They describe how the teams we have trained are able to put their learning to immediate effect. Read more

Misusing Leverage: The High Cost of a Short-Term Negotiation “Win”

Do repeat business assumptions count in your business plan? If so, the way you conduct your negotiations takes on much greater importance.

Some view negotiation as a series of devious games and ego contests conducted to gain advantage by keeping the other side continuously off balance, intimidated or flustered. We find this approach to negotiation quite short-sighted if your “win” leaves the other side angry, resentful and questioning your credibility. Who wants to do more business with someone who makes them feel as if they have been bullied or tricked? The logical response will be to aggressively seek an alternative the next time around, whether you are a buyer, seller or “business partner.” That doesn’t sound like much of a win to us. Read more

Negotiation Blocking Techniques

In one sense, negotiations are a strategic exchange of ideas and information. But the value of what information we give (and when) can have a very real bearing on our success.

As you seek leverage in the deal, you are trying to find key information from the other side. If you’re negotiating with seasoned professionals, you can expect them to do the same with you. Sometimes difficult questions arise that, when answered, could erode your position. For example, if you have few or no real alternatives to doing an important deal, revealing that fact to the other side can cost you dearly. That’s why experienced negotiators have a handful of practiced blocking techniques they use when they feel a certain question must be deflected. As always, consider your purpose, audience and personal style as you decide how, and when, to use any of these strategies. Read more