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.

Why Disruptive Deals Are So Difficult (And Why Yours Can Work)

In a 2012 Harvard Business Review article titled “The End of Solution Sales,” authors Brent Adamson, Matthew Dixon, and Nicholas Toman identified a new way of selling being practiced by the cream of today’s sales professionals—usually B2B salespeople attempting to land complex deals.

These prominent authors identified a small percentage engaged in what they call “insight selling.” In contrast to the classic “solution sale,” in which salespeople engage with purchase agents to discover salient needs and align their solution with those needs, this new breed of insight seller identifies needs that potential buyers may not even be aware of yet. They identify opportunities in areas of flux, offer “provocative insights” about the customers and their business models, and become “buying coaches” for their clients. Read more

Chief Procurement Officer Study: Implications for Sales Negotiators

closing big deals

The IBM Institute for Business Value recently released a new thought leadership study (Chief Procurement Officer Study: Improving competitive advantage through procurement excellence) Sellers who regularly deal with chief procurement officers (CPOs) or that CPO’s staff should read it.

The paper’s creators surveyed 1,128 CPOs from organizations with annual revenues in excess of $1 billion to understand how procurement has evolved at top-performing companies. The cost-cutting measures following the 2008 economic crisis increased the influence of many CPOs. In 2013, it is clear that top-performing CPOs have evolved beyond traditional procurement cost-reduction practices. Read more

International Negotiation: More About Preparing to Win

In our previous post on international negotiations, we discussed the critical importance of preparation and gathering facts. You can’t control all the factors, but you can control your knowledge base. The bigger that base is, the higher the chances for success.

As noted before, your charge as an international negotiator is to conduct thorough background work on everything that could impact your potential deal. This includes trying to account for cultural influence on business behaviors, regulations unique to that country, and more. Here we will suggest information sources that will widen your knowledge base and make you a more credible negotiator. In some cases, access to these sources may be limited due to considerations of distance or protocol. Read more

We Have Stuff. Buy it!

In our negotiation sessions, we often get into the discussion of how being so busy saying what you can do it makes you not busy enough saying what your client needs. In an example brought to us for comment, there was a good executive summary (well, not that good, but let’s pretend it was)… on page 18 of a 200-page proposal. If executive summaries show up on page 18, what comes first? Generally speaking, it is stuff about the seller and the seller’s offerings, and not about the client or the client’s needs. An executive would never reach it.

To make it worse, the “seller stuff” is in the wrong form. For example, the seller makes statements which are in concept like these:
• “Our coffee is fair trade.”
• “We roast and deliver daily.”

Instead of statements like these:
• “Your policy is to support reasonable returns for your suppliers. To support that, we offer coffee which we buy under fair trade guidelines.”
• “You told us your clientele is very sensitive to coffee freshness. We roast and deliver daily.”

We just reviewed a client proposal sheet for a multi-multi-million dollar agreement, and every line was about the supplier, not about the client needs.

The shorthand for the first approach is “We have stuff, you should buy it.” For the second, “We understand your needs and our offerings support them.” The first requires the client to make the connection between what you offer and their needs and interests. The second puts the client’s interests first, and then makes the connection for them.

We used coffee in our example, but these errors are all too common in our primary client set, high technology hardware, software, and services providers.

In many cases, the client can make the connection. However, your odds of success will improve if you help them along the way. Don’t say, “We have stuff”. Say, “These are your needs, and our stuff supports them.” You’ll be more successful with your clients. (td)

Got a question? Email a K&R negotiator directly at ask@negotiators.com.

K&R’s Value Selling Poll

If you voted in our recent poll about selling with value, thanks!  Here are some thoughts about what our respondents said.  First, if you know us, you already know that we find that a strong value argument improves your leverage position, and enables you to ask (and get) a higher price for your product or service.  That said, you also know that sometimes you can’t differentiate your value, and as a result you will sell as a commodity – price will be the main selection factor.  What successful sellers do is this: Read more

The Trouble with Value

A recent Computerworld article covered a study done by the Harvard Medical School about the value of computerization in US hospitals.  The article led with the headline: “Computers don’t save hospitals money”.  This is not good news if you’re a seller of Information Technology solutions.

First tip: Be prepared1. You can expect to hear about this, certainly if you are selling in the health industry, but generally if you are selling the value of Information Technology to people who either have trouble believing in the value of IT, or for whom it is disadvantageous to admit it (for example, buyers in procurement roles).  The article will be used in attempts to undermine your value arguments, and thereby reduce your prices. Read more

Negotiation Anosognosia

Wikipedia says, “Anosognosia is a condition in which a person who suffers disability seems unaware of or denies the existence of his or her disability. This may include unawareness of quite dramatic impairments, such as blindness or paralysis.”

The description could be applied to a negotiator who fails to recognize what everyone else can see – their product or service has value to the buyer.  In a recent account planning and negotiation review, a sales team came to us and basically said, “Our proposal for the customer provides $500,000,000 (yes, $500 million) worth of our product for $100,000.  They haven’t signed yet.  What should we do?”

This team was Anosognosiastic (if such a word exists).  They failed to see what many others could, including the K&R reviewers.  At a 99.8% discount the only thing left to do was wait.  What they were unaware of or denied was that this situation was brought about by a complete failure to attribute any value to their product for the customer.  If it had any value to the buyer, the deal would have been closed long ago – probably for more than the $100,000 price.

Don’t fail to see the simplest of your persuasive arguments, which is that what you provide has value.  If you fail to see this, you may be suffering from Negotiation Anosognosia.  (td)

Principled Concessions™ – The short version

In our workshops, we teach the concept of a “Principled Concession™”.  Many people hear this and confuse it with the related but different concept of trading concessions in a negotiation.  They think of common examples like these:

  • “If you buy 2, I can discount the second one by 50%.”
  • “If we reduce the scope by providing service 12×7 instead of 24×7, we can lower the price by 20%.”
  • “We can finance your total $100M payment for this project, at a cost to you of $1M.”

These “offers” follow the least-acceptable form of changing your position.  It is a more acceptable form than this one:

  • “I’ve sharpened my pencil, and I can offer you an additional 12% off the price.”

It is easy to see that the first three are preferable to the last one.  The 12% price reduction in the last example implicitly contains a message that your profit margin is high enough to offer a discount.  The buyer is now challenged to take that information, and try to find out how much margin, through extended negotiating.  Instead of the goal which the offer is usually intended to achieve (faster closing), it actually creates buyer uncertainty, loss of confidence, and delay.

Let’s reframe the first three in the form of Principled Concessions™:

  • “If you buy 2, I can discount the second one by 50% – and you’ll be able to use both at the same time when needed to perform (whatever desired outcome you bought them for).”
  • “If we reduce the scope by providing service 12×7 instead of 24×7, we can lower the price by 20%.  However, your mission-critical revenue-collection application will take longer to restore during the unsupported hours, and your revenue could be impacted by $25,000 for each hour of delay.”
  • “We can finance your total $100M payment for this project, at a cost to you of $1M.  This will allow the project benefit stream (in $) to pay for the continuing costs, and you will avoid significant out-of-pocket costs, thereby freeing up that money for other investments.”

In each of these cases, we are describing the exchange in terms of outcomes to each side.  For the seller, this is money.  The buyer gets simultaneous use (for whatever purpose), risks losing revenue, or will free up funding for other projects.  In each case, the outcome description provides a business basis for the concession, and allows the buyer to make the decision on the basis of business value.  In the real world, the outcome descriptions would be even more robust, but these examples convey the intent.

So here is the formal definition of a Principled Concession™: A concession given with a specific connection to business value.  The alternative form is this: A concession expressed as an exchange of outcomes.   (td)

Forensic Forecasting – More business in 2009

We have added an article on Forensic Forecasting to the K&R Web Site.  The article begins:

“Forensic” is an adjective meaning “appropriate for use in legal or public discussions”.  In today’s popular culture it often refers to the use of technical analysis for criminal cases.  We’re not taking your sales forecast to court, but we can tell you how to improve its accuracy – and your results.  When year-end measurements are coming, improving your results can have an even bigger impact.

You can read and download the complete article here: Forensic Forecasting

Best Wishes for every success in closing more business in 2009.