Train Your Sales Team
A Hands-On Guide for Reps and Managers

Based on an interview with Randall Murphy
Selling Power, March 2004

The Art of Sales Negotiation

Many sales professionals are proficient in every aspect of sales except negotiation. That may be the result of an unwillingness to risk a hard-won relationship by negotiating an agreement that’s favorable for the salesperson’s firm. Sadly, the typical sales negotiation consists of a customer making demands and the salesperson running back to sales management to try to get those demands met.

Ironically, such behavior usually backfires. Deals that don’t make sense for the salesperson’s firm, no matter how much the salesperson feels they are “strategic,” are honored begrudgingly at best. For example, a salesperson who promises “gold” level support even though the customer is only paying for the “silver” level will probably end up with a dissatisfied customer. Even if the salesperson extracts a grudging promise of “gold” level service from the support manager, the customer is unlikely to have the “gold” expectations met.

Another common mistake is making last-minute concessions to close a sale, which can invite additional last-minute demands. Such concessions can delay the sale rather than moving it toward closure. Worse, last-minute concessions destroy the salesperson’s credibility. The customer inevitably wonders why the salesperson didn’t offer the best terms in the first place and may observe that the salesperson would have been perfectly happy to “overcharge” had the customer not forced the price down.

In addition, special agreements and “relationship saving” discounts have an annoying habit of becoming public knowledge, spawning demands for similar deals throughout a customer base. Over time, this can play havoc with the profitability of the salesperson’s firm, resulting in an inability to adequately serve all of its customers. Once again the end result is an unhappy customer.

Beyond Concessions

To avoid these errors, salespeople must rethink the negotiation process. There are three general types of sales negotiations:

1. Competitive. The salesperson and the customer view the negotiation as a win-lose proposition. Both sides hold their cards close to their chests. Concessions by one side are viewed as a victory for the opposite side, and the emphasis is on having your side win at all costs. Such negotiations generally result in agreements that damage customer relationships.

2. Cooperative. The salesperson and the customer are trying to be fair to one another. They may see the need for a long-term relationship and, thus, are willing to compromise. The emphasis is on not losing too much. Such negotiations generally result in agreements that maintain customer relationships.

3. Collaborative. The salesperson and the customer see their goals as aligned and are working together to come up with an arrangement that moves both agendas forward. The emphasis is on finding a way for both sides to win. Such negotiations generally result in mutually beneficial agreements that build strong customer relationships. These three levels, and the type of relationships that they foster, can be viewed as a triangle.

Salespeople who want to negotiate win-win agreements must strive to move the negotiation toward the top of the triangle – even if the customer opens negotiations at the bottom of the triangle. If a negotiation starts out as competitive, the salesperson should try to elevate it to cooperative and then to collaborative. Similarly, if the negotiation starts in the cooperative zone, the salesperson should strive to elevate it into the collaborative zone.

The Power of Negotiation

Negotiation is the application of power – such as knowledge, understanding, or credibility – to meet needs. To align the goals of the salesperson’s firm with the goals of the customer’s firm, the salesperson must accumulate negotiating power. Without negotiating power, a salesperson has little choice but to be at the customer’s beck and call. Unfortunately, many salespeople feel powerless during negotiations. However, actually five varieties of power are available to any salesperson:

1. Insight. This is the power to see beyond the obvious. It is gained by having multiple contacts inside the customer organization that give the salesperson additional understanding to help the customer come up with solutions and achieve goals. Even the CEO at the customer’s firm doesn’t know everything about the firm. As an outsider, the salesperson can bring a fresh perspective on the customer’s needs.

2. Legitimacy. This is the power of knowing the strengths and limitations of your products or services. Legitimacy results from refusing to cave to unreasonable or last-minute customer demands. It means sticking to your firm’s policies and procedures and explaining to the customer why they make sense. Legitimacy comes from being strong and confident about what you can contribute.

3. Understanding needs and solutions. Salespeople are valued when their skill and understanding help the customer to crystallize needs and visualize the right solution. Many customers have a list of detailed requirements that constitutes their best understanding of their needs. Salespeople build power when they can help the customer achieve a clearer understanding of those needs and help the customer focus on the best ways to get those needs met.

4. Differentiation. A salesperson can communicate clearly how his or her products or services are different from the competition’s. Differentiation helps the customer see the salesperson as a unique resource rather than a replaceable functionary.

5. Relationship. Many salespeople mistakenly believe that building rapport is the same thing as building a relationship. While rapport building can be part of relationship building, a true relationship is based upon mutual respect and understanding and a sense of working together to achieve mutual goals. Ideally, a customer should know – through the force of the relationship – that the salesperson is committed to mutual success rather than to merely making a sale.

Building and Sharing Power

The salesperson must begin to accumulate power from the start of the customer relationship. For example, long before a sale enters the negotiation stage, a salesperson should have developed at least three relationships with people inside the customer’s organization. These contacts provide the additional perspective necessary to accumulate the power of insight. If this process is neglected until the actual point of negotiation, the primary customer contact is likely to perceive the attempt to develop additional contacts as a threat.

Similarly, a salesperson should be constantly searching for ways to enhance legitimacy and relationship by genuinely helping the customer to clarify needs, define solutions, and then winnow those solutions down to the one that will work best. As the salesperson adds value to the customer’s decision-making process, power continually accumulates and allows the salesperson to elevate the negotiation from “competitive” to “cooperative” to “collaborative” by constantly moving the discussion toward the achievement of mutual goals.

When the salesperson focuses on the development of power and then is willing to share that power with the customer, a negotiation becomes a relatively simple process. Because both the salesperson and the customer are working together to forge a mutually beneficial agreement, the negotiation becomes a relationship-building experience.