“What is it about the sales environment that seems to put us at a disadvantage in our negotiations? Our sales folks almost always feel they have weak leverage, constantly ask for more authority, and end up giving discounts we don’t want. How can we reverse this and get our prices and revenue up, while still closing more deals?”
These questions, posed by a mid-sized company owner to me recently, raise issues for every company with a sales force. Keep in mind that the negotiation process is virtually synonymous with the sales process and does not simply start when a customer requests a discount. Instead, each starts with the first contact with a potential customer.
So what are these challenges and how can they be overcome?
1. Many sales folks are not disciplined process people
Picture the classic sales person – friendly, outgoing, instinctively good at rapport-building, articulate, persuasive, relationship-oriented to the point of avoiding conflicts that might harm it, and, of course, can rattle off the features of what they’re selling.
These are important. Yet notice the traits not typically associated with sales professionals – great questioners and listeners, naturally curious, process-oriented, and comfortable with conflict.
Here’s the challenge. Sales professionals – to become top sales negotiators – must augment their natural “classic” skills with these other skills. How? Learn and implement negotiation best practices through a systematic, disciplined strategic planning approach.
Developing strategic plans and putting them into practice will help ensure they bolster their natural strengths with proven strategies that include:
– writing down their goals,
– exploring their counterparts’ needs and interests through active listening and questioning,
– deciding on their first concession before making it,
– setting the agenda for their calls, and the list goes on.
We largely know what works in negotiations based on research in the last 30 or so years. The challenge, especially for sales professionals, is to systematically and strategically implement them and not just instinctively try to get the deal done.
2. Misaligned incentive structures
Many sales people derive the biggest portion of their compensation from commissions that kick in when they close a sale. This makes sense. It’s critical to incentivize them and align their interests with their company’s interests.
But here’s the challenge. With any significant commission, sales folks are motivated to get a deal at almost any cost. Since they usually get zero commission if they walk away – even if it makes strategic sense for the company as the deal might create bad precedent – the sales person will push super hard and provide any discount within their authority to close the deal.
The solution? Reorient their incentives. Consider more incentives for deals with smaller discounts and/or higher margins and perhaps some financial protection when a sales person appropriately recommends the company reject a deal. Especially incentivize the creation of strategic plans.
And two, actively manage the authority provided to your sales folks with the knowledge that they will likely give most of it away unless you reorient their compensation. (For a discussion on their likelihood of using their authority, see my column, “When to limit the power to concede.”)
3. Sales folks often misbelieve they have weak leverage
Sales folks often feel they have weak leverage as they are constantly asked to concede and provide discounts.
And sometimes it’s true. But not always. In fact, many sales professionals have strong leverage – and don’t need to concede much – if their competitors don’t match up well with them, if they have strong sales pipelines/many interested customers, and/or if they have limited products or services and can’t easily provide more.
Bottom line – sales folks need to accurately evaluate their leverage and act accordingly.
Sales professionals have particular challenges in negotiations. All can be overcome.
Published October 6, 2013 The Arizona Republic