The Power of Negotiating to Win
| Site: | Saylor Academy |
| Course: | PRDV217: Introduction to Sales |
| Book: | The Power of Negotiating to Win |
| Printed by: | Guest user |
| Date: | Sunday, October 6, 2024, 4:23 AM |
Description
Read this chapter, which offers several narratives and illustrations on how to close a sale. What is your best approach? What will work best for you and your prospective client?
Closing Starts at the Beginning
Show me the money!
It is this line from the classic 1996 movie Jerry Maguire that says it all about negotiating and closing the deal. In the movie, Jerry Maguire (Tom Cruise) is a sports agent who has second thoughts about how business is conducted, and when he voices his concerns, he loses his job and all his clients except one. Maguire's passionate plea to his sole client, NFL player Rod Tidwell (Cuba Gooding, Jr.), has become a dramatic metaphor for negotiations and deal-making ever since.
While the movie is fictional, Maguire's character was based on real-life sports agent Leigh Steinberg, whose firm has negotiated and closed more than 100 multimillion-dollar deals for high-profile clients in every professional sport. Steinberg's philosophy on negotiations and closing deals is based on the fact that life is filled with negotiations and deals - from deciding where to eat to buying houses and cars – and each should be handled with "a clear focus and principled philosophy.” There is nothing better than closing a big deal…the right way.
Whether it is a major professional sports deal, business deal, or a significant purchase, it is easy to visualize what the "desired state" is in any kind of deal. You can see the athlete in your team's uniform, imagine two companies merging together as one, or see yourself in the car you want to buy. You negotiate every day. You negotiate with everyone, from your roommate about arranging the furniture to your siblings about who will use the car. You might even negotiate with your professor about when to submit a late assignment.
The step in the selling process that moves the conversation to a sale (or the desired resolution) is the close. Many believe the close occurs at the end of the selling process because the prospect agrees to buy the product or service. But nothing could be farther from the truth. Closing the sale, or getting the order, starts at the beginning of the selling process, long before you even come in contact with the prospect.
Start Strong
"What it takes to win a championship is to have your preparation meet the opportunities, whether out on the racetrack or behind the scenes," according to NASCAR driver Kurt Busch. This is true in sports and in selling. Winning in selling - delivering value to customers and to your company – requires a good solid preparation and hard work. Sure, some sales fall into your lap. Those are the ones that make it feel like the selling is easy. But most sales do not happen that way. In many industries closing the sale may take weeks, months, or even years.
Despite the term "close," which implies the end, closing the sale starts with the first step in the selling process - qualifying. Sometimes salespeople want to fill their sales funnel (or pipeline) with lots of leads, so they do not take the time or ask the right questions when qualifying. While it is true that you want to "go out and get as many nos as you can," you'll get a lot more yeses when you pitch to the right prospects. The selling process is analogous to building a house; if the foundation is poured right, everything else will easily come together. The same is true in selling - prospecting is the foundation of the entire process.
Not only does closing start at the first point in the selling process, but it also is far from the end of the selling process. Closing is like graduation – it is the beginning, not the end. Just like graduation is not the end of your education but rather the beginning or commencement of the rest of your life, the closing in sales is the beginning of the relationship with the customer, not the end of the selling process.
Closing Time
The close might be a definitive part of the selling process. It is not a single statement, question, or event. Rather, the close is an ongoing series of events throughout the selling process, according to Mary Delaney, vice president of sales for CareerBuilder.com. Qualifying is the key; it is virtually impossible to close a sale with the wrong prospect. But the preparation does not stop there. The preapproach, approach, presentation, and overcoming objections all play a role in closing the sale.
According to author Ray Silverstein, the close is made in the first thirty seconds of the sales presentation. He says that is when a customer responds emotionally to you and your product or service story. Silverstein points to research by William Brooks and Thomas Travisano that concludes that people want to buy from people they like and trust. If this sounds familiar, it should be. And understanding the difference between needs, which are rational, and wants, which are emotional, makes a difference in how your prospect perceives you and the message you deliver.
To demonstrate that the close takes place virtually every point in the selling process, Daniel Sheridan from Extensis Group LLC, a sales training consultancy, says it best: "If you are waiting for a proposal to close, it is too late.” He says that the most important meeting is the first one because that is when trust and rapport are established.
The close builds on everything that has already taken place throughout the selling process - rapport, trust, and information sharing. It is also important to know what the close is not. The close is not a high-pressure exchange between seller and buyer. It is not a time when the salesperson resorts to trickery, manipulation, or other unsavory tactics just to get a sale. While sales are the ultimate financial goal of the selling process, relationships, trust, understanding a customer's business, and providing cost-effective solutions are driving factors behind making the sale. The same principles that guide the rest of the selling process also guide the close.
If closing is not a specific event that happens during the selling process, you might be wondering how you effectively get the order. The trial close can take place during any part of the selling process. The trial close lets you get specific feedback from the customer regarding her likelihood of purchasing at any point during the process. While the trial close is most likely to come during the presentation, it could come even earlier depending on the prospect and the product or service being purchased.
A trial close asks for an opinion ("What is most important to you about this product or service?"), whereas a closing question asks for a decision ("Shall we complete the paperwork?"). The trial close lets you learn what the prospect is thinking and will give you insight into when to make the close. Sometimes, the trial close may result in a close, but if it does not, the prospect's response provides valuable insight. The trial close should be done early and often throughout the selling process. Getting the prospect's opinion at various points throughout the process helps you determine your path and how and when you should make your close.
ABC or ABO?
There is an old adage in selling that says, "Always Be Closing" (ABC). This means that a salesperson should never miss the opportunity to close a sale, no matter where it occurs in the selling process. But in today's collaborative environment, it is better to approach closing more like "Always Be Opening" (ABO). In other words, the best strategy is to always be helping your customer identify and solve his problems, just like you do when opening the selling process.
Focus on asking the right questions and learning about how you can suggest solutions (in some cases, the solution might not even be your product or service). When you deliver value to your prospect, they will seek advice and counsel. "You become much more than a salesperson; you become their marketing expert, a resource, an ally," said Mario Russo, general sales manager at radio station WBEN-FM in Philadelphia. "That is when you are successful in selling.”
Asking for the order is indeed critical for success in selling. But if you close too soon, you might run the risk that the customer thinks that the process is over and mentally moves on to something else. That is why it is a good idea to ask exploratory questions: open-ended, nonthreatening questions that encourage your prospect to discuss her business needs. This helps supplement the information you gathered during the preapproach, enabling you to understand what the customer needs and how to meet those needs.
For example, if you sell accounting software, you might ask the following exploratory questions: "What are the top three activities that consume your people's time daily?" "What is the ideal way you would like your people to spend their time?" "What are the types of activities that you think can be automated?" None of these is a hard-sell question. Rather, each question allows you to listen and gather information to identify how you can help the prospect solve his problem.
While you always have your eye on the prize of closing a sale, the focus is to extend your relationship with your prospect beyond selling to servicing and being a business partner. That is what ABO is all about. When you focus your selling efforts in this way, it makes it easier to sell additional products and services to existing customers because you are constantly learning about ways in which you and your company can add value.
Ask for the Order
When you focus on delivering value to your prospects and customers, you have earned the right to close or ask for the sale. It might seem obvious, but sometimes salespeople get caught up in the selling process and lose track of the fact that it is a buying process for the prospect. Sometimes, simple questions like "Will delivery on Tuesday work for you?" or "Should we start your service the week of the 21st?" help you and the customer focus on moving from the sales presentation to the delivery of the product or service.
The specific closing questions will most likely differ based on the product or service you are selling. For example, in pharmaceutical sales, industry sales expert Jane Williams adds, "Never end a successful close without adding the proper patient dosing.” She says, "It is very important that your physician prescribe your product properly.”
Sometimes salespeople do not feel comfortable asking for the order. Earn the right to ask for the order. Be confident: believe in yourself and your product or service. The trust you establish from the beginning will translate into how you can close the sale. Closing the sale is all about presenting solutions for the biggest problems that your prospect faces. "If you cannot help them with their biggest challenge, they will not have time for you," says Mary Delaney from CareerBuilder. Author Barry Farber includes the element of confidence in the closing equation by saying, "The important factor that contributes to your success at closing (or knowing when to move on) is the leverage you have going in and the confidence you have to back it up.”
Not every contact results in a sale. Typically, 80 percent of prospects say no to a sales offer, and that percentage may be as high as 90 percent during these challenging economic times. This underscores the fact that it usually takes several closes to close the sale. In some cases, it will take at least three tries. In other cases, it can take as many as five or more attempts. It is best to view closing as an ongoing part of the process, not a single event in which a prospect can say no. Confidence and the right mental attitude can make all the difference in taking all the nos on the way to yeses.
When to Close
It is rare that a prospect will say, "I'm ready to close this deal.” That step in the process usually belongs to the salesperson to actively close the sale. The best way to know when to close is to listen and watch. There are verbal and nonverbal cues that prospects provide that help you understand when she is ready for you to close. Here are some of the signals that the prospect is ready to buy:
- When the prospect displays positive body language and interaction. The prospect is engaged and interested, asks questions, reviews literature, and provides insights about his business.
- When the prospect asks questions. It is a good time to close after answering a question. Questions like "How long will delivery take?" or "How would that integrate into our current system?" are good cues that the prospect is close to buying.
- After you handle an objection. This can be the perfect time to close, as you have just provided some insight that will help the customer make her decision.
Tips for Closing with a Committee
It is one thing to close a deal with an individual buyer. It is another thing to close with a buying committee. Here are four steps to close with a committee:
- Have a specific, measurable, actionable, realistic, and time-bound (SMART) objective.
- Know each committee member's name and role in the decision.
- Identify your champion on the committee.
- Leverage your champion to help "sell" the committee for you.
Types of Closes
There is not a single surefire way to close every sale. You should be prepared with several different types of closes and use them appropriately for each situation. Some situations may require a combination of closes.
Direct Request Close
Direct request close means that you simply ask for the order. This is the most straightforward approach to a close. The fact is customers expect salespeople to ask for the order. This is a simple but effective way to close the sale.
| You: | Can I write up the order as we discussed? |
| Prospect: | I think we have covered everything. Yes, let's wrap it up. |
Benefit Summary Close
The benefit summary close is a natural extension of the selling process. It simply summarizes the benefits of everything you have discussed throughout the process. This approach is especially effective when you are able to integrate and present benefits from the prospect's point of view that you have discussed over the course of several meetings. This is an opportunity to focus on how you can help her solve the largest problem that she faces.
| You: | We have discussed that speed is extremely important to you and your company. We can deliver your complete order to your 27 construction sites within 48 hours of your commitment. In addition, you will never be at risk for product performance because we guarantee the product 100 percent. If you ever have a problem, just call us, and we will replace it, no questions asked. Will you be willing to commit to an initial order of 50? |
| Prospect: | Yes, we are looking for a partner who will not only provide the highest quality product but also be able to deliver it on time to all our locations. It sounds like you have your bases covered. If you can deliver what you say, we have a deal. |
Assumptive Close
The assumptive close asks that when the prospect replies, she commits to the sale. In other words, you are assuming that the customer will make the purchase. This close can be effective if you have done your job of developing trust and rapport with your prospect.
| You: | Shall we set you up on automatic billing? |
| Prospect: | Automatic billing works best for us. |
Alternative-Choice Close
The alternative-choice close gives the prospect a choice between two options rather than between buying and not buying. This close is related to the assumptive close but gives your prospect the option of which product or service they will buy.
| You: | Would you prefer white or blue? |
| Prospect: | White is a more neutral color. |
Compliment or Vanity Close
The compliment (or vanity) close helps you relate the purchase to the person and appeal to his or her sense of identity. You are making a positive connection between the purchase decision and the buyer's judgment. When you use this approach to closing, you are confirming their role as a subject matter expert. You are paying them a compliment.
| You: | One of the reasons I like calling on you is because you and your team understand your business and your customer. You make it easy for your customer to buy from you and offer them the product at a fair price. No games, no coupons, just good, honest value. I think that our product can expand your offering to your customers with a company that shares your values about putting the customer first. I suggest you add this item to your line, and let's gauge the customer response. |
| Prospect: | I'm glad to hear that you feel that way. We do take our commitment to our customers very seriously and we only like to do business with people who feel the same way. I think it would be a good idea to start out with this one product and get some customer feedback. If they like it, we can talk about expanding to more products. |
Combination Close
It is best to have several types of closes ready to deliver. Sometimes, it is a combination of closes that helps you ultimately gain agreement with the prospect. Virtually any of the different closes can be used together.
| You: | The horsepower on this model is the highest in the industry. And the model is so efficient that it will lower your cost per unit in all your factories starting on day one. Can we wrap this up? |
| Prospect: | It looks like this is going to be a good short-term and long-term investment for us. Yes, let's get the paperwork ready. |
Keep It Brief
Whatever close you use, it is best to keep it focused and brief. Salespeople have a habit of talking too much, especially when they are ready to close. According to Michelle Nichols, contributor for BusinessWeek, author, and sales trainer, "Ask yourself what aspect of your offering would customers want so badly that they would miss lunch or cross a very busy street to get it?" That should be the focus of your close.
What Works?
Closing is part of the selling process. A process is a systematic approach, which, by its very nature, can be measured. You will not be able to successfully close every sale. After all, even professional baseball players only hit the ball three times out of every ten pitches to be considered above average. While hitting the ball 100 percent of the time would be considered unrealistic, every professional hitter takes practice to help increase his batting average. His batting coach gives him tips on how to stand, swing, and ultimately increase his percentage of hitting the ball. The same can be done in closing. Record the information about your closings – what works and what does not.
You do not have to wait until the close to be able to track your progress. Sales veteran and author Barry Farber suggests managing accounts and the sales process with a simple visual tool. Post your prospects in the different stages of the sales cycle on a corkboard. While there are several software programs that perform this function, there is nothing more powerful than seeing it play out on the wall in front of you every day.
Closing Complex Sales
A complex sale is a term that usually refers to high-value purchases (usually $100,000 and higher). Products and services such as enterprise systems, health care providers, commercial real estate, manufacturing equipment, logistics services, and other major business-to-business (B2B) purchases are considered complex sales. These types of sales have a long selling cycle because there is much at stake for such a major purchase, and multiple people are involved in the decision-making process. It may take as long as six months to three years to close the sale. The product or service commitment is usually a long-term commitment with a contract as long as three, five, or even ten years or longer.
While the selling skills discussed throughout this book apply to complex sales, there are some differences. According to Jeff Thull, author of Mastering the Complex Sale, there are four phases to a complex sale.
- Discover. As with any other sale, research about the prospect and his needs is critical to success. During the discover phase, you set the stage for the ongoing relationship or engagement. This stage includes your detailed research about the company and its current provider including several meetings and phone calls with the prospect. It is at this stage that the prospect determines whether the engagement has potential.
- Diagnose. In a complex sale, the decision is likely centered on what should be changed, such as the location of a warehouse. It includes a collaborative effort between the salesperson and the customer to determine if the change is feasible and desirable. This stage also includes extensive financial analysis to determine the decision's impact on the company. The salesperson's role is to be a true business partner and help the prospect understand the trade-offs and benefits of making a major change in the operation.
- Design. Complex sales usually involve products and services that are customized for each customer. For example, an ad campaign, software, retail fixtures, or other major purchases are adapted, adjusted, or designed exclusively for that customer. At this stage, the sales rep works closely with key people to design the best solution for the customer's needs.
- Deliver. If the first three phases are implemented correctly, this final stage should logically follow. At this point, the key people at the customer's organization have been involved in the design and financial justification of the product or service, so presenting the formal proposal should lead to acceptance. Then the efforts are focused on delivering the product or service and implementation. For products such as software and other major purchases, there may be training, troubleshooting, and other transition issues handled by the salesperson.
During each phase, it is important to identify all the decision-makers and their positions in the process. As with every stage in the selling process, this is about asking the right questions. "How will your organization go about making this decision?" and "Who else do I need to talk to?" are good questions to ask during the discovery phase so you can get input and feedback from all involved at the beginning of the process.
Once you identify all the people involved in the decision-making process, you'll want to identify the decision-makers. Again, the right questions will help you focus your efforts appropriately. Knowing to whom the expense will be charged helps you identify the ultimate authority. The person who controls the budget is most likely different from the person who will be evaluating the technical aspects of the product or service.
For example, while the chief information officer may make the budget decision, the systems implementation manager may be evaluating the technical aspects of the software. Finally, you want to identify the "power broker," who will ultimately decide. This is usually the person, a subject-matter expert, who is the right hand of the person who controls the budget. In other words, you want to identify with whom you will be negotiating and ultimately closing the sale.
Key Takeaways
- Closing is not an event but an ongoing part of the selling process that starts with prospecting and qualifying.
- Closing is all about helping the customer solve the single largest challenge he faces.
- Salespeople should always ask for the sale and make it easy for the customer to go from the conversation or sales presentation to the sale.
- The prospect provides verbal and nonverbal cues that make it easier to know when to close.
- There are several different types of closes. Each can effectively be used alone or in combination with other closes.
- Complex sales have a longer selling cycle, involve many people in the decision-making, and require a modified selling process.
This text was adapted by Saylor Academy under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 License without attribution as requested by the work's original creator or licensor.
Collaborate to Negotiate
Now that you have learned about the role of closing in the selling process and techniques to close the sale, it is time to dig deeper into the negotiating process. Depending on the product, service, or prospect, some sales might be straightforward, like, for example, buying a computer (I will take the MacBook Pro with the 15-inch screen).
The price is posted, and there is no room for negotiation. However, in many situations, especially in business-to-business (B2B) selling, the pricing, length of the contract, terms, options, delivery dates, services, and other aspects of the sale can all be negotiated. Negotiation, like selling, is a process. Following the process helps improve your chances of getting what you want.
The Art of Negotiation
Simply put, negotiating is the act of discussing an issue between two or more parties with competing interests with the aim of agreeing. While that might sound like an impossible task, it is not as difficult as you might think. Even people with different positions or points of view share a common interest, which becomes the basis for finding common ground. It is these common interests – security, economic health, personal recognition, and control – that motivate people. If you take the time to understand your prospect's interests in a negotiation, you can successfully collaborate and find a solution that supports the interests of all parties.
It is negotiating that provides profit for organizations. The collaboration between parties is what provides companies the opportunity to exchange goods and services for money.
It might be helpful to think about a negotiation like an iceberg. Although you can see the tip of the iceberg, it can be deceiving because it does not tell the entire story. The same is true when you are negotiating; your prospect may say something that appears to be obvious but wants to achieve other things that are hidden below the surface.
Using the negotiation process to learn more about your prospect's motivations and interests, you can understand what is below the tip of the iceberg. It is usually part of the iceberg you cannot see that is more substantial and has more impact than the visible portion. When you come prepared, listen, and probe during the negotiation process, you can learn much about what lies below the tip of the iceberg and use this information to collaborate and eventually reach common ground on the issues.
For example, assume you are selling advertising space for a men's magazine to the hottest new beer company. Your contact at the beer company wants to get the word out about this new brand but has a very small budget, so he does not want to pay the full published rate for the ads. You do not want to sell at less than the published rate because that will lower the value of your ad space. The tip of the iceberg shows that this is a price negotiation.
However, if you ask the right questions and listen more, you will learn that his ultimate objective is to get people to taste the beer because that is the best way to get new customers. If he can get a major sampling opportunity, he can use it to go to other media partners to get other sampling campaigns.
Now you have gotten below the surface of the iceberg and understand his motivations. With this additional information that was not readily visible on the surface, you can offer him an advertising package that includes ads in the magazine in addition to sampling opportunities at three upcoming national events that the magazine sponsors. Now the negotiation is focused on all parties winning by getting something they want, rather than simply negotiating on price. Getting below the surface provides valuable information and insights for negotiating.
Definition of Negotiating
Negotiation occurs only before you agree to anything: If you ask for something before a contract is signed, it is called "negotiating." If you ask for something after a contract is signed, it is called "begging." It is better to be a good negotiator than an expert beggar.
Negotiate to Win-Win-Win
A successful negotiation can be measured by its ability to deliver a mutually beneficial solution to all parties. Some people believe that negotiation is an act that yields a "win" for one side and therefore a "lose" for the other side. The win-lose approach usually ends up in a lose-lose deal that does not work for anyone. This philosophy of negotiating is selfish and short term. In addition, this approach implies that negotiation includes some kind of confrontation or manipulation to "trick" one side into doing something that it does not want to do. This is an unethical approach to negotiating which does not have a place in the business world.
In selling, negotiating and closing go hand-in-hand. Just as closing is not a one-time event, negotiating is a process that has both short-term and long-term impacts. The best negotiations are collaborative in nature and focus on delivering mutual satisfaction. According to Leigh Steinberg, lawyer, and sports agent, "The goal is not to destroy the other side. The goal is to find the most profitable way to complete a deal that works for both sides." Effective negotiating is based on respect and is seeded with open communication.
Collaborative negotiating depends on three elements:
1. Building trust. Establishing and building trust is key to relationship building. Negotiating is the ultimate extension of a relationship because you and your customer agree to concede on some points to make the relationship go even further. If your prospect signs a contract with your company for products or services, you are now even more dependent on each other to make the relationship work. It is a true win-win-win relationship. But if your prospect does not trust you, or you do not trust her, it will be difficult to enter into a negotiation that will work for both of you and both of your companies. Building trust is the precursor to all business transactions, especially negotiating and closing.
The best way to build trust during the negotiation process is to gain trust before the formal negotiation. And then, during the formal negotiation, focus on the ends rather than the means. In other words, instead of focusing on going head to head on each issue to be negotiated, concentrate on keeping the end goal in mind. Take the time to listen and understand exactly what motivates your prospect so you can deliver what is important to her. "Negotiation is needs based," according to the online Selling Power Sales Management Newsletter. Understanding what is important to you and to your prospect drives your negotiation.
Power Player: Lessons in Selling from Successful Salespeople
Honesty: The Best Negotiating Tool
Marty Rodriguez, one of the top real estate brokers worldwide for Century 21, has a simple formula for successful negotiations. She feels strongly that the real estate business is not just about closing the deal – it is about providing honest information to help customers make the right decision.
She tells prospects everything from the fact that there is structural damage on a property to whether she thinks a deal is out of their price range. "When you treat people that way, they are not only happy to give you a commission – they become raving fans," according to Rodriguez.
2. Gaining commitment. Part of the process of closing is gaining commitment on every specific element of the sale. To do that effectively, strive to gain commitment long before you begin the formal negotiation. That means using every touch point you have at the company to help you. While you might think it is impossible to enlist others in your prospect's company to help you sell, consider the creativity of Art Fry, the creator of 3M Post-it notes.
Fry stumbled upon the semi-sticky adhesive years before the product was introduced after creating the first version of the product as a way to mark hymns in his hymnal at church, he started giving his new invention to secretaries and coworkers at 3M. Soon secretaries were taking the pilgrimage between buildings on the 3M corporate campus just to get more of the sticky note pads. It was the demand from the people who used the product that ultimately generated interest in marketing the product to consumers. Fry successfully gained commitment from others in the company as a way to "sell" his new invention as a marketable product.
3. Managing opposition. It is true that although a negotiation is a collaborative effort, it is inherently a situation that addresses opposing views. The best way to manage this is to be prepared and know what is important to you and your prospect.
Power Selling: Lessons in Selling from Successful Companies
Searching for Common Ground
Microsoft wanted to be more dominant in the Internet search business and saw the acquisition of Yahoo! and the development of a new search engine named Bing as the way to gain market share quickly. Although Microsoft made a bid to buy Yahoo! in early 2008, it was not until July 2009 that a deal was closed.
The original $45 billion takeover bid was shunned by Yahoo! much to the dismay and dissatisfaction of the shareholders because senior management wanted the company to remain a separate company.
Then, newly appointed Yahoo! CEO Carol Bartz saw an opportunity for common ground and negotiated a deal that was a win for everyone. Under the ten-year agreement, Microsoft's Bing will be used to power Yahoo! searches. Yahoo! will receive 88 percent of the revenue from all searches done on Yahoo! Web sites. Customers and advertisers now have a viable alternative to Google.
Negotiating a solution that lets everyone win, including the customer, takes creativity and time.
The Three Elements of Negotiation
Every negotiation, whether it is in business, politics, or your personal life, includes three critical elements. Understanding the role of these elements can help make you a better negotiator.
- Information. When you do your homework, research, and ask questions about what is important to your prospect, you may be able to avoid negotiating on price all together. If you have information, and share information at the appropriate time, you can make a negotiation a huge win for everyone.
- Power. According to Herb Cohen, known as the world's best negotiator, power is based on perception. If you perceive you have the power to influence your situation, you do (conversely, if you do not believe you have the power, you do not).
- Time. Time is the great negotiator. Ninety percent of all negotiating occurs during the last 10 percent of the set time frame. Deadlines force decisions to be made and negotiations to come to fruition. Use time to your advantage by never revealing your deadline. Do not negotiate when you are in a hurry; chances are you will not get the result you want.
Everything Is Negotiable
Many salespeople are afraid of negotiating. They are worried that they will not be up to the challenge to persuade someone to do what they want or to pay their price. Confidence and preparation go a long way to achieving a satisfactory result on both sides. Negotiating and closing are ways of gaining agreement.
The old saying goes, "Everything is negotiable," and it is true. Your prospect believes the same thing, so be prepared to negotiate about virtually every aspect of the sale. For less complex sales, the close might come as a result of a simple question at the end of the presentation. However, for more complex sales, various elements of the sale must be agreed upon to close the sale. Elements such as price, length of contract, service, terms, and options are common points to be negotiated as part of the close.
One for All
Negotiations in B2B selling usually require multiple parties to be involved from both companies. You may find yourself negotiating one-on-one with a prospect or being a member of a negotiating team that works with a prospect team to negotiate a deal. Either way, the same principles of negotiating apply.
Many salespeople are concerned about negotiating prices. They think that lowering the price will make the sale. Price is rarely the motivating factor behind any purchase. That is not to say that price is not important, but customers buy value, not price. If price were always the determining factor in purchases, premium brand such as Porsche, Apple, and Neiman Marcus would not exist.
If you have ever shopped at Nordstrom, Banana Republic, or Abercrombie & Fitch, you decided that those retailers offered more value than Old Navy, eBay, or Walmart for the item you bought. Price is a part of the value equation but not all of it. According to author Kelley Robertson, "Everything you say and do from the first contact with a prospect affects the value of your product or service in their mind." That means establishing value with your presentation, demonstration, testimonials, follow-up, and everything that comes before the actual negotiation. How is your product or service different? What advantage does it offer? What is the most important problem it will solve for your prospect?
Holding Firm
Forty percent of customers ask for a price concession not because they want it to close the sale but because "they had to ask." Fifty percent of salespeople give price concessions on the first request. The best salespeople negotiate on value, not price, and use creative negotiating to find common ground.
If your prospect wants to negotiate on price, use your creative problem solving skills to get to the end that will work for all parties. Use concessions, something that you are willing to compromise, to create value during the negotiation. For example, use length of the contract, payment terms, service, delivery date, training, or other elements to demonstrate to your prospect that you are willing to work with him and give him something that has value to him.
| You: | I am not able to meet that price, but I can offer you three months of training worth $3,000 at no charge. |
| Prospect: | How many employees would be included in the training? |
The following is another example:
| You: | That pricing is only available if you carry the entire product line. If you add all ten of the products into all your stores, I can meet that pricing. |
| Prospect: | We can take a look at that. |
The bottom line is that it is best not to concede without getting a concession. In these examples, the salesperson always used another part of the deal to give something and get something in return. This win-win-win approach helps reach common ground and close the sale faster.
Steps of the Negotiation Process
While negotiation has some elements of being an art, you can follow three steps to help ensure success with each negotiation.
Three Steps of the Negotiation Process
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Steps |
Activities |
|---|---|
| 1. Pren-egotiation |
|
| 2. Negotiation |
|
| 3. Post-negotiation |
|
Step 1: Prenegotiation
Start off in the right frame of mind. Be confident, knowing you are one of the finalists for your prospect's business. If you are confident that you have the best product and represent the best value for the price, you already have the beginning of a good negotiation. On the other hand, if you are not confident or do not believe in the value of your product, chances are you will not negotiate well.
Once you believe you are presenting the best option with the best value to your prospect, dig below the surface in research and conversation to learn what is really important to your prospect. Ask a lot of questions; negotiators report that they often have to ask five levels of "why" to get to the "root cause" or true motivator of the person with whom they are negotiating.
Identify your prenegotiation goal or the minimum you will accept during the negotiation. This is critical to your success as a negotiator so that you do not give away more than you want to make the deal. Prenegotiation goals should be realistic based on what you want to get out of the negotiation and what your prospect wants or needs to get out of the negotiation. This is where you can explore creative solutions that may address different aspects of the sale. (Are you willing to provide additional services rather than a price concession? Will shorter payment terms help your prospect be able to sign on the dotted line?)
It is a good idea to realize that your prenegotiation goals should not be the same offer you put on the table. Always allow some negotiating room as the first offer is rarely, if ever, accepted. Your prospect wants to feel as if she was able to get you to move from your original position. When you identify your prenegotiation goals, you know where you may end up, and also give yourself some room to negotiate.
Step 2: Negotiation
This is where it all comes together – your preparation, prenegotiation goals, strategy, and understanding of your prospect's needs. Although you have done your homework and set your prenegotiation goals, hold firm on your initial offer. This allows you to learn more about what your prospect thinks is important and why. If you give in too early in the process, your prospect will feel like the negotiation was too easy and may have an expectation of getting even more concessions than you are willing to give. The general rule of negotiating is not to accept the first offer. That means you must reiterate the value you deliver and hold firm to your initial offer.
As the negotiation progresses, consider offering a concession to move toward common ground. But for every concession you give, get one in return. For example, "I'll be able to look at pricing like this if we were able to be your exclusive distributor in the Northeast." This is an example of using other "currencies" to make the negotiation work. In this case, the currency of exclusivity is used in exchange for a price concession.
Specificity is key in negotiating and closing because once an issue is negotiated, it will be difficult to revisit it. Define each negotiated point in specific terms, such as the number of days until delivery, specific payment terms, options that are spelled out, and any other information that will clearly define your agreement. In most cases, all these elements are included in the contract that is signed due to the negotiation. It is always best to clarify each point during the negotiation and put it on paper to avoid misconceptions, bad memories, or surprises down the road. If there is no contract, it is a good idea to follow up the negotiation with a written summary of the agreed upon points.
If you encounter an issue during the negotiation that causes a deadlock, or a stop in the discussion, set the issue aside and revisit it after other elements have been negotiated. You may find a way to include the thorny issue in a concession for a different negotiating point. It is not worth getting held up on points during the negotiation; simply set them aside and revisit them later. When you leave the most difficult issues until the end, other issues have already been resolved, and both parties are motivated to find a resolution.
Negotiator and author Herb Cohen say, "Negotiation is just a game. You care about the outcome, but not that much." You have to avoid getting emotionally involved in the negotiation because the more emotionally attached to the outcome you become, the more you push to get what you want. Getting emotionally involved in a negotiation makes it extremely difficult to walk away from it. That is why many professional people, such as actors and actresses, professional athletes, writers, and others have agents negotiate their contracts.
It is a good idea to remember that it is not personal, it is business. Not all negotiations end in a deal. Based on your prenegotiation goals, you may need to walk away from a deal if it is not mutually beneficial. Keep in mind that your ability to negotiate is directly linked to your ability to walk away from the deal. If you do not have any other options, you have given up any power you might have. It is a good idea to always keep your options open.
Step 3: Postnegotiation
At this point, every deal element has been negotiated, agreed to, and documented on paper. It is a good idea to take some time to celebrate a successful negotiation, including all appropriate people at dinner, cocktails, or another get-together. This is a good way to recognize everyone's contribution to making the negotiation a success and to look forward to enjoying the benefits of the partnership. There is one thing that is true about every negotiation – it will undoubtedly lead to other negotiations in the future.
Key Takeaways
- Many times closing includes negotiating, the act of discussing an issue between two or more parties with competing interests with the aim of agreeing.
- A successful negotiation focuses on open, honest communication and yields a win-win resolution.
- Negotiations require building trust, gaining commitment, and managing opposition.
- Every negotiation includes three elements – information, power, and time.
- Negotiating starts long before the formal exchange; it begins with your first communication with the prospect and includes every contact you have had with her. Those communications establish the value of your product or service.
- While price is a common negotiating point, it is rarely the deal breaker that most salespeople perceive it is.
- Every negotiation includes three parts – prenegotiation, negotiation, and postnegotiation.
- Avoid getting emotionally involved in a negotiation as it makes it easier to walk away, if need be.
Selling Yourself: Negotiating to Win for Your Job Offer
So you have completed all your interviews, and it is the moment of truth … you are on the verge of receiving an internship or job offer. Congratulations!
As difficult as it has been to get to this point, you are not quite there yet. This is the stage of the job-searching process that tests your mettle to get what you want. Just like negotiating and closing (outlined in the previous sections of this chapter), the quality of the job offer starts long before you receive the offer.
Know What You are Worth
Before you even begin thinking about looking for an internship or job, your first step should be to determine your value based on the marketplace. As with every step of the selling process, doing your homework is key. If you do not do your research to find out competitive compensation packages for the position and city in which you are seeking an internship or job, you might be disappointed with the job offers you receive.
There are several Web sites – Salary.com, JobStar.com, and SalaryExpert.com are just a few – that include compensation ranges for hundreds of different positions in areas across the country. You should gather compensation information before you go on any interviews.
It is a good idea to use these tools as a guide as there are many assumptions that are made when these numbers are prepared. However, this information can be extremely helpful to understand the range of compensation being paid for a specific role in a specific city. You will be able to negotiate more effectively if you walk into every job interview knowing how much you are worth.
Establish Your Value Early
As in the selling process, establishing your value begins with first contacting your prospective employer. You often have the opportunity to meet at least one or two people at the company, usually someone in human resources and your hiring manager. In some cases, you may meet with several different people with whom you will be working. Sometimes, you may also talk with or meet with a recruiter. At any rate, you can establish your value with as many people as you meet.
Everything you say and do impacts how people perceive you and your value. Are your résumé and cover letter professional? Did you do your research before you contacted the employer? How did you make contact? When you went in for an interview, did you dress appropriately and professionally? Were you prepared for the interview? Did you bring samples of your work to demonstrate your skills? Did you follow up with a thank-you e-mail and handwritten thank-you note within twenty-four hours? All these elements help establish your value long before an offer is extended. When it comes to making an impression on a prospective employer, everything matters.
Just as in the selling process, if you do your homework and establish your value early in the process, you will be more likely to get the offer you want.
Compensation versus Salary
One thing to know before you walk into any interview: compensation differs from salary.
Compensation is the total money and benefits paid for a particular position. Compensation can include salary, insurance, vacation or sick leave, stock options, signing bonus, car allowance, 401(k), child care or elder care assistance, and any other payment received in exchange for your services to the company.
Salary, a fixed amount paid regularly in exchange for services provided, is only one compensation element. When you are considering a job offer, it is best to keep in mind that salary is not the only element of compensation. This will allow you to be creative in your negotiating as there are several elements other than salary that can be included in your total compensation package.
Starting Out at a Start-Up
Working for a start-up company can be exciting and lucrative - with the right compensation agreement. The high-risk environment of a start-up might provide exactly the right place for you to start your career. But enter the business with your eyes wide open. "There is no shortage of start-ups to work for, but most are going to fail," says Greg Carney of Carney-Neuhaus. This article provides insight about how to structure compensation with a start-up company.
Timing Is Everything
Although you may want to discuss compensation on your first interview, it is a good idea to postpone discussing the topic as long as possible. Just as in the selling process, you want to focus on establishing your value and learning about what is important to your prospective employer before you begin discussing compensation. A word of caution: you should be prepared to give your desired salary range in an interview, as many employers want to understand your salary expectations as soon as possible. If you can avoid the topic, do so until you receive a job offer. Here is an example of how you can deflect the conversation.
| Interviewer: | What are your salary expectations? |
| You: | I am sure your total compensation package is competitive for the position. What is most important to me is the opportunity to learn and be a part of an organization like yours. |
If you are forced to give a salary range, be sure you can live with the lowest number you give. Once you say a number, it will be extremely difficult to negotiate above that salary.
Receiving the Offer
Most job offers are extended over the phone, although some may be extended in a letter and others may be presented in person. Since companies usually interview multiple candidates for each position, chances are you will not receive a job offer during an interview. However, you should be prepared to respond to a job offer if one is presented during an interview.
When you receive an offer, it will likely come over the phone. When you get a phone call about an offer, write down every element (it is okay to ask the person to hold while you get a pencil and paper). Thank the person who made the offer and tell her how pleased you are to receive the offer. Even if you think you want to accept the offer, do not accept it right away.
| You: | I am very excited about this offer. Thank you so much for extending it to me. It is a huge decision, and I would like a few days to consider it. Can I get back to you on Thursday? What time is good for you to talk? |
| Employer: | I am glad to hear that you are happy about the offer. We are all very excited about the prospect of you joining our team. I am happy to answer any questions about the company or the offer. Do not hesitate to give me a call. Let me give you my cell phone number so you can call me anytime. Then let's chat on Thursday at 10:00 a.m. |
| You: | I just want to repeat the elements of the offer so that I have it correct. The base salary is $45,000, with the opportunity to earn a bonus of five percent based on meeting performance objectives. There is a car allowance of $3,000 a month. I will be eligible for medical insurance after thirty days of employment, and I will receive one week of vacation after working for twelve months. Is that right? |
It is worth noting the time element of this negotiation. You should take as much time as you need to evaluate the offer, but you should be reasonable and state the time frame you need. Recall from earlier in this chapter that time is one of the elements always present in a negotiation. Sometimes a prospective employer or recruiter will try to create a deadline to force you to decide by a specific date. Use the time to your advantage and negotiate for more time so that you do not feel as if you are under pressure to make this important decision.
Evaluating the Offer
Congratulations on your offer! Although it is a difficult economy, do not feel pressured to take the first offer you get. Take the first offer you get for a job you want. This is a special moment; it is the time when the power shifts from the prospective employer to you (remember that power is one of the elements that is always present in a negotiation). Your prospective employer has now indicated that you are their choice for the position. You can take the offer, counteroffer (your response to the job offer), or walk away. Whatever your choice, you have the power. As soon as you make your choice, the power shifts back to your prospective employer. That is why it is a good idea to take your time and completely evaluate your offer before you respond.
Now that you have all the elements of the offer, you can begin to evaluate it. Just as in a negotiation in selling, identify what is important to you. Consider making a list that includes both elements of compensation as well as other elements such as culture, opportunity, environment, commuting distance, and so on. Figure 12.6, "Compensation Elements to Consider in a Job Offer," and Figure 12.7, "Other Elements to Consider When Evaluating a Job Offer," can provide some ideas to help you create your list.
Figure 12.6 Compensation Elements to Consider in a Job Offer
Figure 12.7 Other Elements to Consider When Evaluating a Job Offer
Only you can determine if a job offer is right for you.
Negotiating the Offer
After you have had the time to evaluate the job offer, it is time to identify any gaps that there might be between what you think is important and the offer. If you think the offer is perfect as is, then accept it as is. Remember that many employers expect candidates to negotiate by presenting a counteroffer, a candidate's response to a job offer. Since the economy is challenging, candidates do not have as much bargaining power as when the economy is healthy. However, this is when you have the most negotiating power with your prospective employer, so it is a good idea to take advantage of the opportunity.
This is when you should identify your prenegotiation goals. Remember that your prenegotiation goals are the minimum that you will accept. Your counteroffer will be above your prenegotiation goals to allow room for negotiation. You will not be able to negotiate every element of the offer. Choose one or two key areas and focus your negotiation on those. Keep in mind the things that are important to you and to your prospective employer so that you can easily find common ground.
For example, if speed and availability are important to your prospective employer, you may want to use that fact to negotiate a more flexible work arrangement. While it may be difficult to negotiate a higher base salary in this economy, you may be able to negotiate on another area such as getting additional vacation time.
When you have identified the areas you wish to negotiate along with your counteroffer for each, contact the recruiter or prospective employer to begin the negotiation. As with any negotiation, approach it with a confident, collaborative attitude. It is important to note that you should not accept the offer until you negotiate it. Once you accept the offer, you have lost your power to negotiate.
| You: | I wanted to follow up and thank you again for the offer to join the company. I am excited about it. Based on the interviews, I believe I can bring value to your company. I wanted to talk about one area of the offer. |
| Employer: | Great. What questions can I answer for you? |
| You: | The base salary is lower than I expected. [Important note here: say this point and wait for a response. Many people feel obligated to talk more, but less is more in a negotiation.] |
| Employer: | We have made the base salary as high as we could. There is really nothing we can do to make it any higher. |
| You: | One of the things that could make the offer more attractive is additional vacation time. |
| Employer: | We might be able to take a look at that. Let me touch base with Casey. I ca not make you any promises, but I can talk to him and let you know. |
| You: | That would be great. I really appreciate it. |
Just as in a selling negotiation, you have to be ready to accept the offer as is or be ready to walk away. That is a lot harder to do when you are negotiating on behalf of yourself since you are emotionally involved with the decision.
You have the Power: Tips for Your Job Search
Negotiate before You Accept
Use your power when you receive a job offer. Thank the employer for the offer, evaluate it, and negotiate the offer before you accept it. Once you accept the offer, you have lost any power to negotiate.
The Offer Letter
Once you agree on the final elements of the offer, you should ask for an offer letter, a formal letter from the company (on company letterhead) that outlines the terms of the offer. All companies should provide an offer letter as a matter of course for an internship (paid or unpaid) or a job offer. If you received the original offer in the form of a letter, you already have the offer letter; however, you should request an updated letter to reflect the final offer on which you agreed. If you find any discrepancies in your offer letter, contact the person at the company as soon as possible to have a new offer letter issued.
A offer letter simply reiterates the terms of employment that you have negotiated and may be conditional based on requirements such as a background check or drug test or may make reference to company documents such as the benefits summary or employee handbook. While some information in offer letters may vary depending on the company, some key information should be included in the offer letter:
- Title
- Salary
- Bonus
- All other elements of compensation (e.g., stock options, benefits)
- Start date
- Any conditions of employment
Some companies request that you sign a copy of the offer letter and return it to the company. If this is the case, sign the letter and make a copy for your files before returning it to the company. The offer letter is your documentation of the compensation the company has agreed to give you. See sample offer letters in Figure 12.8 "Sample Offer Letter" and Figure 12.9 "Sample Offer Letter."
Figure 12.8 Sample Offer Letter
Figure 12.9 Sample Offer Letter
Key Takeaways
- Before you begin your job search, do your research and know what you are worth in the marketplace.
- Salary is only one element of total compensation. Use all elements of compensation to creatively negotiate to get what you want.
- Avoid discussing compensation as long as possible; do not bring it up unless the interviewer brings it up. Your goal on every interview is to establish your value so that your offer reflects your worth.
- Before you begin negotiating a job offer, be sure you understand all the elements of the offer.
- Carefully evaluate an internship or job offer based on what is important to you, including the offer and other aspects of the job and company.
- Identify one or two elements of a job offer that you want to negotiate. Determine your prenegotiation goals for each and approach your prospective employer to discuss each element. Focus on what is important to the company as you negotiate each point.
- The final offer that you accept should be documented in an offer letter. Whether you are being offered an internship (paid or unpaid) or a full-time job, the company should provide an offer letter within a few days of your acceptance of the offer.