Negotiate Like a Pro: Gaining and Maintaining Positive Leverage

A few weeks ago, I had the opportunity to join Kison Patel, CEO, and Founder of M&A Science, as his guest on the M&A Science podcast. Kison and I spent over an hour talking about negotiation strategies and tactics in an episode titled, How to Negotiate Like a Pro. I think you will enjoy the discussion and most important, find some valuable nuggets to help improve your and your team’s negotiation effectiveness.

If you work in the business arena, negotiation is usually part of your job description. And this is especially true in sales and procurement. You are negotiating price, terms, delivery, product specifications and many other items, including subtle factors like whether your prospect considers you a business peer or subservient. I’ve been practicing and teaching business negotiations for several decades and still find the subject fascinating.

It’s important to understand the specific types of negotiations you undertake, including problem-solving and adversarial negotiations.  In reality, there are elements of both that permeate almost every negotiation. The problem-solving value-based approach is all about discovering and understanding the other side’s interests. You then negotiate to those interests so you can move your negotiation counterpart closer to your way of thinking. This is where the principle of leverage comes into play.

The Critical Importance of Leverage

A lot of people struggle with the concept of leverage. In the context of negotiations and interpersonal relations, “leverage” is a term that only exists in English. The term actually comes from physics – the ability to move objects of heavier mass with less force. That’s what levers give you. The more levers in a pulley system, the easier it is to move objects of heavier mass with less force.

Similarly, leverage in interpersonal relations is the ability to move people closer to your way of thinking and vice versa. And by applying value-based leverage, or what I call positive-leverage, people move voluntarily. They move voluntarily because you’re doing something for them and it’s in their interest to move. Contrast this with negative leverage, where people may move because they have to, not voluntarily. Taxes and utilities are examples of negative leverage. You cooperate because the consequences of not doing so are unacceptable.

negotiation leverage slopeThe value of positive- and negative-leverage is illustrated on the Leverage Slope™, which is a simple mathematical model that shows unique value on the X-axis and price and terms on the Y-axis. Unique value, combined with less competition, equals greater leverage on the part of the seller. Conversely, lack of unique value and more options creates a commodity scenario (real or perceived) and more leverage for the buyer.

The point is that you need to know where you are on the Leverage Slope and why. This enables you to formulate value arguments that create positive leverage which is generally better received when you are trying to achieve long-term business relationships. But you also have to remember negative leverage – what people will lose when they fail to act with you – since people will act with more urgency in relation to risk. Negative leverage can be very important to the negotiation scenario when used appropriately to create a sense of urgency.

When I enter negotiations on behalf of a client, I want to put all these pieces on the table as we formulate our strategy. This includes a thorough understanding of not only our own leverage but that of the potential clients as well. Obviously, we have something to sell and the prospect has a need to fill, and they may have various options for filling their needs.

Risk Reward Analysis

These dichotomies lead us to the Risk Reward and Action tool.  What are the rewards the prospect receives by taking the action I am asking them to take, which is usually purchasing our solution, and what are the risks if they do not act? For that matter, what risk is the prospect taking when they purchase from me? The answers to these questions provide a good feeling for what leverage you do or don’t have in the negotiation process.

Simply stated, if the risks of action for the other side, or for you, in entering into an agreement (whether it’s a partnership, purchase or sale agreement), are not overcome by the risks mitigated and the rewards gained by taking the action, the deal should not and probably will not happen, especially in the current environment. This is why you need to be deliberate and clear about addressing risks and highlighting rewards, especially for your negotiation counterparts who may be stressed or nervous about some aspects of the potential deal.

And by the way, aren’t we all just a bit stressed about making purchases in our non-business lives, such as a new house, car or really anything of consequence?  The Risk Reward Analysis is played out constantly, whether consciously or subconsciously. As a negotiation pro, understanding the risks and rewards, and being able to articulate them in a way that is reassuring to the prospect, is a key component in maintaining positive leverage throughout the negotiation process.

This is just a sample of what Kison Patel and I covered in the M&A Science podcast. Click here to hear the rest of the story.


Messaging Consistency Is Vital For Sales And Negotiation Success

I was recently asked to provide my thoughts on how to better align sales and marketing teams for a Forbes Councils expert panel. Given limited space, I answered as follows:

To align the combined sales and marketing team, the messaging and materials need to be consistent. Also, the marketing staff will benefit from sitting in on sales calls and later-stage negotiations to learn more about real-life buyer objections and motivations and how to address them with more compelling marketing approaches that align with customer and sales force expectations.”

While this is a fine short answer, it deserves a deeper discussion. In our consulting and training practice, we’ve seen major deals disrupted due to inconsistent messaging. I have observed executives backpedal over something their sales rep promised that was unworkable or too costly to deliver. Just as often, I’ve seen this happen in reverse: A sales rep is forced to retreat because of something the CEO or another executive stated.

There are numerous consequences of inconsistency that will affect potential customer relationships, including:

  • Loss of credibility. The prospect who hears conflicting messages will mistrust everything you tell them.
  • Loss of leverage. Given different stories, customers default to the narrative most favorable to them, possibly costing you revenue and profit.
  • Increased tension and conflict. They will pit the conflicting message groups against each other (“Your sales rep promised me ____. Are you now telling me you can’t deliver?”).
  • Loss of negotiation capital. This is about a customer’s willingness to work with you.

The Three Cs of Consistent Messaging

Consistency of messaging requires at least three elements, all of which are dependent on teamwork. I call them the three “Cs.”

The first element is communication. For a team to be coordinated on messaging, there has to be frequent communication, both horizontally and vertically. When an executive promises something to a prospective customer that is beyond your capabilities, it’s often because the executive was never fully educated on the limits of those capabilities.

Communication requires the second element — context — especially as it relates to customer requirements. Messaging improves when everyone on your team has the same understanding of the customer’s environment, pain points and how your solution addresses that pain. Achieving this requires a uniform way of interviewing and capturing input from the prospect as well as communicating that information accurately and thoroughly to teammates. Communicating context clearly is not optional and we should not rely solely on oral accounts from memory. The accuracy and value of information that is not written or recorded drops rapidly.

We have seen sellers solving the “wrong” customer problem because they did not fully understand the context developed by a technical peer working with the customer. In one case, a sales leader for one of our clients kept promising to deliver a multi-channel solution (technical capability to sell across all devices) for a customer within a certain timeframe, while the technical leaders for both companies were fully engaged in solving a security issue that was clearly more important.

The third “C” is coordination. We often refer to this as rules of engagement. A team needs to have an agreement on who will communicate with the customer on what subjects at what times. While not a perfect process, attention to coordination reduces the chance of mistakes and minimizes the likelihood that a C-level executive will jump into a deal midway in the process without a full understanding of what has been said and how they can assist.

Negotiation Capital

Messaging consistency, or lack thereof, affects what we coined as “negotiation capital.” It’s the willingness of the other side to compromise, i.e., work with you. It’s easy to lose negotiation capital with inconsistent messaging, but it takes time to gain it by establishing credibility, fostering goodwill and delivering on what you promised. The good news is that once you establish negotiation capital, it can be utilized as deal “currency” that increases the other side’s willingness to move closer to your way of thinking. And, negotiation capital can be used to offset negotiation obstacles. A simple example is customers who we have heard say something like, “They have overcome these obstacles before, let’s go with them.”

Marketing materials are often viewed by potential customers as generic statements that exaggerate and obfuscate. To ensure this is not the case, it’s important to customize the materials for particular customers. This tailored information earns credibility when accompanied by statements like, “In your environment, this will mean _____.” Having marketing personnel participate in sales and negotiation meetings with important customers and prospects enables them to create relevant materials.

The most extreme form of inconsistent messaging is not exaggeration, but outright misleading statements. Of course, this can lead to numerous negative consequences, including the erosion of negotiation capital. In fact, even a perception of falsity can result in lost opportunities and market impact. A good example is the allegation of misleading demonstrations by electric vehicle developer Nikola Corporation, whose stock fell by more than 50% when the CEO resigned. So far, it seems the company has built enough negotiation capital that its deal with General Motors will remain intact, though that is a tenuous proposition.

People are imperfect and make mistakes. In the vast majority of cases, inconsistent messaging that causes potential credibility issues is unintentional. If your customer brings inconsistency to your attention, you should immediately clear up any misunderstandings and communicate this to your customer and team. Remember that every second you spend arguing or trying to deflect when you make an error, your position and your credibility erodes. Whatever you do, resist the temptation to keep trying to explain away the discrepancies — or as the saying goes: when you find yourself in a hole, stop digging.

Consistent messaging based on the three “Cs” with attention to negotiation capital makes life much simpler for you, your teammates and your customers and prospects.

Note: this article originally appeared in October, 2020 on You can view the original post here.

Attributes of a Successful Sales Negotiator

The thought for this post originated from my recent interview by Paul Watts of Sales Reinvented. Paul asked great questions about how sales reps can improve their negotiations with prospects and customers. This was a very timely topic given the recent changes, in the way sales reps communicate with their prospects and customers. You can listen to the entire podcast here.

Why do so many salespeople and managers struggle with negotiation issues? The primary reason is that negotiation is often viewed as an adversarial process by parties on each side trying to get the upper hand. Most sales professionals want to be liked by their customers. They want to please them. However, to some, negotiations feel like they’re putting that relationship on shaky ground.

To address this issue, sales professionals should view a negotiation as a process to achieve a result versus giving it a negative or adversarial connotation. This shift in mindset alone can change the process for the better and help you become more successful.

I also see many salespeople who don’t know when to walk away. Understandably, they are so focused on being liked or on their quota achievement that they get frustrated when the deal stalls. They often make unreasonable and unprincipled offers and concessions, which detracts from their credibility and diminishes the perception of value their solutions provide. These individuals have to learn that pausing, asking questions or even walking away when necessary actually facilitates respect.

To overcome trepidation to engage in this give and take process, I teach our clients to focus their sales negotiations around what we have termed the leverage cycle. This cycle is about creating value-based leverage that is aimed at delivering a favorable outcome to customers while achieving positive results for yourself. Value-based leverage creates confidence in the seller that they can deliver positive business impact for the buyer. If you don’t have this confidence, why are you engaged with that customer?

Attributes of a Successful Sales Negotiator

Every rep and sales manager has a set of natural traits they need to understand. To gain confidence, you must first recognize those traits, play to your strengths and minimize or improve upon your weaknesses. There are some things that can be learned, and focusing on the following five traits can definitely propel your success:

  1. Genuine Curiosity: Genuine curiosity is absolutely critical. Great sales people are inquisitive.  What is my customer’s business all about?  What do they value and why? Who are their customers and what value does my customer deliver for them?  What do they need out of this relationship? The answers will help you tie your solution to the outcome the client seeks.  That creates the value-based leverage mentioned above and results in confidence.
  2. Confidence without arrogance: A prospect wants to feel that you are confident in your team and solution.  When that confidence is fact-based, your customer will also gain confidence, especially if you maintain a humble approach.  Your customer will be much more receptive if you say “would you like to see….” versus, “let me show you…”
  3. Competence: You need to know your solution, have a reputation that indicates capability to implement it and understand how it applies to your customer’s environment. This goes back to facts in having done it before.  In fact, without competence, your confidence automatically turns into arrogance.
  4. Integrity: Salespeople are often perceived as overpromising and underdelivering. This results in a poor reputation for integrity. If the customer questions your integrity, they will stop listening, which is why this attribute is so important.
  5. Compassion: You need a level of compassion for the people you’re negotiating with, which can often be demonstrated by genuine curiosity.  The old saying “put yourself in their shoes,” applies here. By the way, a great sales person also enables the customer to put themselves in his/her shoes. That bi-lateral ability can be a foundation for lasting relationships.

This set of qualitative characteristics can be more important than domain knowledge. If  your sales professionals embrace and apply these attributes they will be one step closer to success and consistently meet or exceed their targets.

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 You can view the original post here.

craft sales pitch

How To Craft A Pitch That Stands Out

I frequently encounter situations with clients who are trying to expand their business into new territories and verticals. The case with one of our B2B clients was particularly dire. Their growth with existing customers was flat, and their sales force had a low win rate with new prospects. In fact, they bid on 200+ new opportunities the previous year, investing millions in requests for proposal (RFP) responses, without any positive results. So, I asked the question: How do you decide whether to respond to an RFP, and how do you craft a pitch that stands out?

Adapt And Motivate A New Customer To Consider Your Offer

Why would you, as a customer, choose a new vendor with whom you have no experience? There are several factors that would make us, as customers, open to a new vendor relationship. Before pursuing new business or investing in an RFP response, make sure your business and pitch demonstrate that you can do the following for prospective customers:

1. Fill A Void Caused By The Status Quo

Factor one occurs when the customer perceives that the incumbent vendor is not living up to performance expectations in areas such as quality, service, support, delivery and so on. In this case, you need to prove how the benefits of making a change to your company outweigh the costs. Make sure to take the risks of switching suppliers into consideration and address them.

2. Deliver “Transformational Value”

The second driver of buyer action exists when you can make a credible promise to provide compelling new value. To overcome the cost and risk factors mentioned above, your value equation should be “transformational” for the prospect. It should also be accompanied by a credible business case that validates the financial impact of the solution.

3. Fit The Customer’s Environment

Customer environments consist of non-quantifiable factors that impact sales opportunities. These can be as critical to success as your ability to prove upside value. Examples include political changes, shifts in regulatory environments and mandates requiring companies to consider new vendors.

As a new supplier looking to capitalize on this environment, you should be able to prove your value and capability. In fact, this is the common thread that goes through each of the three factors above — the need to prove value and capability. The following scenario illustrates how to make a judgement on whether to compete or walk away.

Scenario: The unemployment system in a particular country was managed by two vendors providing the resources and systems. They had a good record of accomplishment, but the newly appointed agency director didn’t see them as efficient. She needed to cut costs while enabling a significant number of unemployed citizens receiving benefits to obtain new employment faster, which would further reduce the agency’s costs. Because the two current vendors were seen as “entrenched,” our client considered walking away, even though they had invested considerable effort and money in responding to two qualifying RFPs.

Fortunately for our client, their solution would have transformed the country’s delivery of unemployment services by automating much of the manual front-end paperwork and enabling citizens to post resumes to relevant prospects in hours rather than days. The cost reduction was significant but the biggest impact was to the agency’s critical metric — “time on the bench” — which measured the length of unemployment for those who were capable of being employed. They wrote the final RFP response to focus on their unique capabilities to address these metrics. They were able to do so and were ultimately awarded the contract because they were able to meet the conditions above.

4. Provide Services According To The Customer’s Timetable

An additional factor that drives decisions is time. Consider the following scenario:

A financial institution had repeated electronic breaches, including theft of customer assets in certain types of accounts. The current anti-fraud system was not working. When they put this project up for a bid, they decided they will choose a vendor who, first, had the capability and, second, could implement a solution in the shortest amount of time possible.

As part of the process, all prospective vendors described their solution, how they would implement it and the associated investment model. One vendor quantified the “risk over time” based on the institution’s history, indicating the cost to the institution for every month they waited. They supported their analysis with credible industry data and illustrated how they have implemented similar solutions for other financial institutions. The vendor was awarded the contract … despite the fact that alternatives (including the incumbent) might be as much as 30% cheaper!

These two examples illustrate the power of detecting relevant cues from the prospective customer and designing your sales response to show value in alignment with the metrics that are most important to the buyer.

To ensure that you address these conditions in a compelling way, consider the following steps when you’re crafting your proposals. First, make sure to re-state the customer’s current condition that they are trying to address, followed by their desired future state and how they can measure your success. Second, explain how your solution will get them to their future state and when it will do so. Make sure you include some references that validate your capability to do the job, as well as unique features that raise you above the competition. Lastly, always refer to their metrics so they can see that an investment with you will deliver the requisite return.

Ultimately, if any of the first three factors exist and you have the capability to deliver value for the customer in time (the fourth factor), your decision to compete should be rewarded.

Note: this article originally appeared Dec, 2019 on You can view the original post here.

Mladen Kresic’s Article to Help You Achieve Greater Success in 2020

How to Craft a Pitch that Stands Out, was published at last week. Mladen discussed the circumstances under which you should attempt to sell to a customer who has an established vendor – and when to walk away. Specifically, he outlines four factors that, when addressed properly, can lead to a successful outcome.

Read the article and let’s have a conversation about how to make sure your sales negotiation efforts are rewarded in 2020.

sales negotiation resolutions

Seven Sales Negotiation Resolutions for the New Year

We are at the end of one year and soon, the start of another. A great time to reflect on what we have accomplished, and more important, what we can do to make the next year even better, especially when it comes to revenue and profitability. And if any part of your job involves sales or business negotiations, what better time to reflect upon how a few changes can make a big difference in your business success in the coming year. It’s an area where a small (but strategic) investment can pay big dividends.

Here are seven negotiation resolutions that will serve you and your organization well in the coming year:

  1. Resolve to never make unprincipled concessions. This is perhaps the most important thing we teach our clients. When a seller makes a concession that appears only to get a faster deal, the customer wonders if there’s more to be had. This diminishes the perceived value of your offering, and reduces your credibility. We encourage a strategy that uses only principled concessions (rather than arbitrary ones) made for credible business reasons that are clear to the other side.
  2. Resolve to uncover the key challenges of your prospect early in the process. Don’t be a solution hunting for a problem. If the customer doesn’t know they have a problem, there will be no urgency to solve it.
  3. Resolve to clearly and succinctly articulate the value of your offering in a manner that resonates with the buyer’s needs. This means less emphasis on the canned sales pitch you were taught and more about focus on what you learned about the prospect during pre-call research and subsequent engagements.
  4. Resolve to always quantify the business benefit that your solution provides, using actual customer data. When possible, jointly develop the model for business value with your prospect in a way that directly addresses their key challenges. Gain agreement on the benefits before proceeding with next steps.
  5. Resolve to make it easier for your customers to buy. This starts with knowledge about your customer’s buying process (not your selling process). You then help them navigate this process in a smooth and pleasurable manner. Three great questions to get you started:
    1. What is the process you will need to go through to make a decision?
    2. How long does it normally take?
    3. What criteria will be used to make the decision?
  6. Resolve to stop rushing to speed up the sales process: Whether because of quota/target pressures or because of management expectations, we attempt to speed up the process and ”force” closure. This tendency feels forced to the prospect who soon realizes that you care more about the commission than meeting his or her needs. You lose (hard-to-recover) credibility, deals are lost and sales cycles are lengthened.
  7. Resolve to keep your cool, even in the middle of tense negotiations. As I discussed in a recent article, 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. Realize that 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.

Don’t be like the person who said that the only New Year’s resolution they ever kept was to quit making resolutions! Set, and keep, these seven negotiation resolutions, and you will find yourself with shorter sales cycles, less competitive pressure and higher margins. Most important, your year will be full of more revenue and profits. As always, we are happy to assist you in keeping these resolutions so please reach out to us.

Sell Impact or Don’t Sell at All

Negotiation Example: Seeing K&R’s ViO™ Formula in Action

At our BrightTALK Sales Expert webinar last month, I spoke about Six Ways to Shorten the Sales Cycle – you can listen to the replay hereOne of my key strategies is to make sure that you always sell solutions that impact the customer’s business.  Unfortunately, in the rush to close, sellers often forget that.

It’s not enough that you know/feel that you are going to have a positive impact – your prospect or customer must also accept this premise. The more the prospect believes that your solution lines up with their company’s own business objectives, the more likely you are to get a positive response to your sales efforts. In fact, the goal is to gain so much alignment that the entire process seems more like a successful facilitation towards a mutually-desired conclusion, and less like a hard sales pitch.

As an example of what not to do: Before engaging with K&R Negotiations – our client delivered a proof of concept (POC) to five different business units of the same company. Time and again, their prospect told them how impressed they were by how well the solution worked, and how much they liked it. Yet, the deal did not happen. Why you ask? Simply that the seller did not gain agreement from the prospect as to the desired business impact.

You can probably relate your own sad tales about how many sales reps (trained by sales managers who should know better) approach the sale as a solution hunting for a problem to be solved. We all get these calls where the sales rep immediately starts spouting the virtues of his or her product or service and how it will solve everything from peace to world hunger. And all this before showing any understanding of our business challenges and how their solution can assist us to fulfill our specific objectives. The message is “Buy from me now”, not “I’m here to serve you”.

We use the acronym ViO™ as a convenient way to show and present the value of business impact.

V = Value

i = Impact

O = Outcomes

Value is created when the measurable Impact of a business Outcome is greater than the cost to deliver that Impact. I talk about ViO in greater detail in a previous article

When you first understand the outcome the client is looking for, and demonstrate that your solution is measurably better (as defined by the client) than other potential solutions in delivering that outcome, the path to the sale is much easier. And always remember that when it comes to ViO, if the customer doesn’t know they have a problem, there is no urgency to solve it – meaning you will not get the sale.

A recent study called The High Cost of Buying Complexity from CEB (now Gartner), showed that the customer’s own expectations of the buying process are exceeded by 97%, i.e., the process takes 97% longer than expected. Interestingly, this is true whether the ultimate purchase decision is made or if the process results in no decision. You need to keep this in mind because one of the options you are selling against is for the client to do nothing. In the end, if the cost and risk of your solution is not substantially less than the business impact, a no-decision will often be the outcome. None of us wants to spend twice as long on a process that ends in no-decision.

Keep this mantra in mind and boost the success of your entire sales organization: before attempting to sell the virtues of your particular product or service, always start with discovering what your prospect is looking for in terms of business impact.  When you then show how your solution delivers that impact (measurable outcomes), the sales process will be smooth and profitable. For information about the other five strategies to shorten the sales cycle, listen to our recent webinar: Six Ways to Shorten the Sales Cycle: Reduce Complexity and Increase Win Rates.

Your Three Rewards from Effective Sales Negotiations

I’m occasionally asked by clients or business colleagues: “What actions can I take that will have the biggest effect on my top line (revenue) or bottom line (profit)?” This is a great question and cannot be oversimplified.  After all, no two companies are alike, and each set of solutions has different competition, sales ecosystems, etc.  However, there are concepts that are true for any organization regardless of circumstance. 

The short answer to the above question is to infuse the entire sales organization with the insights, strategies and techniques of effective sales negotiations. I answer this way because I have experienced and seen hundreds of millions of dollars in deals that have been achieved because individuals from reps, to sales managers, to CSOs and other executive team members, have understood and practiced positive sales and negotiation skills. That is why we have made our company’s mission to “improve our clients’ profitability by providing the tools and training necessary to win wisely in their negotiation activities.”  

As Hank Barnes of Gartner reports in The High Cost of Buying Complexity, both sellers and buyers are frustrated by the amount of time it takes to get to a decision. In fact, buyers report that it takes them 97% longer to buy than anticipated. Worse yet, many sales engagements result in a “no-decision” and leave both parties feeling frustrated and not likely to do future business.

The factors that lead to these poor outcomes include too much complexity in the sales process and the involvement of more and more individuals on all sides. Fortunately, learning about, and practicing, effective negotiation strategies can help you reap three big rewards.

Reward 1: Improved Deal Win Rates

Everyone, from the business development rep (BDR) to the sales rep, sales manager, and CEO, wants to see better close rates. Put simply, an improvement of 10% in this one area, if nothing else changes, can have a profound impact on your team, your customer and the productivity of the entire process. Improving win rates will also enhance your revenue and profit results. But what in your  sales negotiation quiver can help you get there?

One tool we use throughout the sales negotiation cycle is the Risk/Reward/Action analysis.  If the risks of action for the customer, i.e., of making a decision in our favor, are not overcome by the risks mitigated and the rewards gained of taking the action, it is highly likely that the deal will not close … unless we take steps to address those “risks of action.” For example, certain new implementations of technology solutions take too long and will jeopardize the customer’s return unless you can demonstrate that you have previously delivered the solution in a timely manner under similar circumstances. By looking at a risk/reward matrix early in the cycle, you can develop a strategy to mitigate risks or make a decision to focus on a different opportunity that has a higher chance of success. This will definitely improve your win rate!

Reward 2: Shortened Sales Cycles

Many sales people offer buyers deep and limited-time discounts, or other incentives to close deals by certain end-of-quarter or end-of-year deadlines. However, as discussed in my book, Negotiate Wisely in Business & Technology, the dynamic of shifting leverage is critical, especially in sales negotiations.  At end of your fiscal quarter or year, buyers almost always have the leverage because they know sales people are desperate to close deals and make quota.

As a result, the incentives sales people give are intended to help compel or motivate the customer to act. Then, by definition, any such incentive must expire by the deadline. Otherwise, the leverage doesn’t shift away from the buyer as the buyer is not being given additional reason to act. As we heard from a recent customer of one of our clients, “I’ll get the incentive anyway.”  If the incentive does not come off the table, there is no reason to offer it in the first place!

In fact, if you extend the incentives such as a reduced price beyond the deadlines you set, you will prolong the closing process, and impact both your credibility and your margins! Put yourself in the shoes of the customer: “If I am the buyer, I will not act until the benefit of my acting outweighs the benefit I perceive of continuing to wait for future incentives or better solutions.” This leads us back to building a compelling value proposition for your solution and relying on value-based leverage to compel the customer to make the decision now rather than waiting.   If you feel that additional incentives are necessary to close now, make sure they come off the table when “now” ends.

Changing the end-of-period incentive habit is a hard, but important, lesson to learn. That is why we prefer to utilize a principled negotiation strategy: one that uses only principled concessions (rather than arbitrary ones) that are made for credible business reasons that can be explained to the customer.  When the customer sees that you will only make principled concessions, they will feel more comfortable that they received a good deal when you decline their next negotiation request. This creates an environment in which the customer is less likely to ask for things that have no sound business rationale and in which both sides will know that the process has a rational end – and one that happens faster. This and five other strategies are explained in our executive brief, Six Actions to Shorten the Sales Cycle.

Reward 3: Better (and More Profitable) Relationships

Given how much of our life is spent negotiating, we should enjoy the process. This includes you and your prospect or customer. Fortunately, you can enjoy the process more if you know what you are doing, the goals you and the customer are after and why.  This enables you to have a principled negotiation approach that will  result in good relationships.  Good business relationships that result from successful negotiations lead to additional deals and greater revenues and profits.

We’ve all had the experience of dealing with a sales rep who insisted on pitching us in a way that has nothing to do with our needs. Don’t be this type of rep. If you properly focus on the Mandatories (what the customer really cares about) you will minimize conflict and reduce acrimony.

Even a customer who knows you have quota pressure, and has leverage because they have choices, will respect your effort to explain why and how your solution impacts their business.  After all, even if they like you, they care more about their business than yours! 

This is even truer when you have the leverage because they have no choice but to do business with you, either because they already standardized on your solution or because you are the only game in town.  If you win only because they feel they have no adequate alternatives, they may do business now, but will switch to another partner or supplier as soon as the opportunity presents itself.

However, if you win because they feel like they are getting value bacause your solution has a positive impact on their business, they will voluntarily continue to do business with you.  That is why you need to continuously affirm your value after contract signing (we call this Afirming Client Value or “ACV”).  ACV builds positive leverage for continuing your client realtionships!

What can be better than a sales negotiation process that results in higher win rates, shorter sales cycles and better relationships? This is the trifecta of good sales negotiations. Let us know how we can help.


K&R Negotiation Associates: Our Philosophy

About K&R’s Business Negotiation Philosophy

While some negotiations can be adversarial, negotiations as a defined business activity should be viewed as a positive process. The word itself often creates a lump in the throat if you are automatically inclined to picture tense standoffs, intimidation, manipulation, or a zero-sum game in which one side wins and the other side loses. But the primary facts are:

  • Negotiations are simply interactions between or among parties to bring about agreement. This in itself should be positive rather than adversarial.
  • Negotiations permeate almost everything you do in business and in life. Why spend so much of your life in fear of what should be a positive process?

Those of you who have had the pleasure of negotiating with your spouse or children can certainly attest to the inevitability of negotiation in all facets of life.  It’s also likely that your current position in business is a product of negotiation,as are more mundane items such as times when meetings start or end. 

For those of you in B2B industries, negotiations often seem open-ended: they don’t begin when we first discuss price or end when an agreement is struck. They begin before you get involved, when conventional wisdom within an industry or prior interactions have already set expectations. And they continue during delivery, often being influenced by new factors,technologies and competition. 

Seeing Negotiations as a Cooperative Process

Much has been made over the years about problem solving versus adversarial negotiations or distributive (single issue) versus integrative (multiple issue) negotiations. Behaviorally, we believe it is rarely necessary to be adversarial in the process.  In fact, even if people have short-term interests, cooperative negotiations tend to lead to better results. (One of our practices is the application of “value-based leverage,” which uses proven situational analysis and communication principles to help the other side move more to your way of thinking without the need for subterfuge, games or intimidation.)

This does not mean that there are no adversarial elements to business negotiations. You should expect healthy and passionate debates about issues and items where negotiating parties have opposing interests.  If that is the case, a cooperative approach to prioritization and problem resolution will yield better results. To address this, we created a negotiation tool called the MID™ that helps you map the priorities and goals of all involved to identify points of resistance, neutralizing what might first appear as “deal breakers.” Through this process of prioritization and goal orientation, we often find mutually acceptable solutions.

However, we must never forget our own interests in that process. The same is true for distributive versus integrative negotiations.  While we favor the cooperative approaches of integrative negotiations, we must understand the true interests of parties to determine how they are likely to behave and whether they are interested in long-term relationships versus short-term financial gains.If we do not distinguish between a profitable vendor looking to enter into a five-year agreement versus one who is on the verge of bankruptcy and needs current cash flows, shame on us!  (By the way, you can do business with both, but the terms should be radically different.)

Bottom line, we believe:

  • Whenever possible, we should utilize interest-based negotiations, truly understanding the other side (and our own) to form successful agreements, long-term relationships and efficiencies.
  • Prioritizing issues and activities should be based on those interests.
  • It is important to understand situations when either the other side or our own short-term needs may make interest-based negotiations challenging and when it is necessary to “distribute the pie” using potentially adversarial elements.
  • Ensuring all agreements are implementable/deliverable to match expectation and facilitate long term relationships (this includes focusing on performance and enforcement that is relevant to the business outcomes sought in any agreement).
  • Great governance and validation of negotiated deals fosters future relationships and mutual success. 

K&R’s Six Principles

While the best practices of B2B negotiations are numerous and situational, our decades spent negotiating deals and relationships gave birth to the Six Principles many years ago.  These six pillars should support any business negotiator’s practice.

Our front-line experience, taught us that issues related to the principles apply and need to be addressed in nearly every negotiation process:

These Six Principles reflect the essence of our philosophy in strategic and actionable terms. Whether we’re negotiating a compensation package with a new employer, trying to close a large purchase with a client, or even negotiating as a potential client, the critical process of negotiation touches all of our lives.

Our universal and underlying principles of negotiation serve as a guide for creating winning conditions, regardless of what is being negotiated for, or with whom. If you would like to learn more, this whitepaper outlines K&R’s Six Principles in more detail and why they are important for creating positive outcomes —so all parties can leave the table with their major objectives met and their expectations satisfied based on the value they have received.