Are you leaving money on the table?
Having salespeople with clear minds in negotiations has never been more important. In the conflicted world of sales negotiation, the tensions between closing a deal and not losing commission are just two factors which leaves money on the table. Then, there are mixed measures given by Executives about which is more important – revenue or margin. Of course, there are more conflicting messages, but you get the picture. No wonder buyers are emboldened to hold their position of “My price or the highway”. So, having sales people with clear minds in negotiations has never been more important.
The consequences of being conflicted as a sales negotiator is that you start believing that your customers have all the power and you become an “easy mark” for being easily influenced by aggressive anchors like “you have to give us ‘x’ or else”. The challenge is that while we can’t blame you for wanting to get back to what you were hired for, negotiation is not as something to be “got through”. It’s not rocket science and it doesn’t need to be an unpleasant experience. It’s like a game of chess; you have to know the rules of the game. Once you know those rules and play by them you can be calmer and reduce the negativity you feel about negotiating. But, you do have to play the game.
So, if negotiation is like a game of chess – Where’s the Board? I hear you ask.
Here’s how you can build your own trading board before you negotiate and then record the moves you and your opposite number make towards agreement. The Board’s assumptions are:
- Every negotiating issue is quantifiable in terms of money, even where subjective judgement is used.
- All negotiations take place over time and that there are often different deadlines for both parties to reach agreement.
- Both negotiating parties are looking for compromise to a lesser or greater degree
- Both parties are looking for the best deal for their side e.g. buyers want the lowest price and sellers want the highest price possible.
During planning and early negotiation phases you need to build your Trading Board. It’s the area bounded by yours and the other side’s trading limits, e.g. buyer’s lowest price or seller’s best price. Next consider the deadlines by which your and your buyer need agreement. The tighter the deadline for either party will dictate the overall speed at which agreement is reached.
Behind such lines, will be a complex set of behaviors, but at any point the user has a shorthand description for how the negotiation is progressing, and give useful information about what response a move could have on the other party.
For the model to be useful, you have to decide, what your own give and take limits, (Best and Worst) and then predict your opponents give and take limits depending on relative strengths and weaknesses, arguments, etc. This will then help you assess the extent of possible trades and the basis for planning your negotiation.
Where there is no overlap between the two parties e.g. sellers fallback price is greater than the buyer’s fallback price it is likely that either or both are being
unrealistic and there is no basis for negotiation.
The next stage is for the user to consider the deadline or deadlines at which an agreement has to be struck. The tighter the deadline for either party will take the overall speed at which agreement is reached.
Having constructed your Trading Board, it is then helpful to decide at what rate they should trade towards an agreement. It is unlikely that the negotiating moves will be a straight line more like a series of stair steps which will summarize progress and record the moves made during the negotiation period.
It is useful at this point to plan in what increments you will move on an issue. We recommend your think carefully about how to apply the Law of Diminishing Moves. i.e.
- Every move you make is proportionately less than the last move
- Do not move in whole percentage points especially the closer you get to agreement
Examples of Diminishing Moves = 2.5% – 1.75% – 1.37% – 1.187%
This plan can then be confirmed or altered as result of progress during the negotiation such as, if a buyer is giving nothing away in the first period of negotiation their line will be parallel to their Best Price line. At any given point, your can use this negotiation overview to compare your progress with your original planning. This information will also provide useful intelligence about what response will be forthcoming if later a move is made. Finally, post negotiation, you have a shorthand picture of the success or failure of your negotiating strategy that can help improve your negotiating skills.
Other Related Articles
Making the Final Decision: A Buyer’s Perspective
The Effective Negotiator Research
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Getting Your People on the Same Page
Nick Anderson, The Crispian Advantage© Copyright All Rights Reserved, The Crispian Advantage 2021. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Nick Anderson, The Crispian Advantage and Walk the Talk – A Blog for Agile Minds with appropriate and specific direction to the original content.