Negotiating During a Business Downturn

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Negotiating During a Business Downturn

Written by Bill McCormick

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Poker and the Art of Negotiating

There is a golden rule in poker that applies to negotiating as well: A strong opponent will try to act weak, while a weak opponent will try to act strong. Knowing this single basic tenet will give you and your people a significant edge over those who are not aware of it.

Negotiation skills have always been crucial for sales professionals, but have become increasingly more essential in today’s economy and turbulent business environment. The prevailing bottom-line climate forces a constant pressure to reduce costs. Salespeople are pushed more and more by customers who squeeze suppliers for deeper concessions. Sales professionals and sales managers claim, now more than ever, that this prevailing competitive culture makes negotiation skills savvy a top priority.

Negotiating with key accounts and prospects often culminates in a signed contract, and tends to be a longer and more formal negotiation process. Since contract negotiations are inherently more complex, particularly in the current business climate, it is common for average sales professionals to make several mistakes during a contract negotiation. Listed below are four critical success factors for negotiation and some corresponding mistakes made by average sales professionals. Those who avoid these common mistakes will win and retain more business.

Four Critical Success Factors for Sales Negotiators

1. Contract negotiations are more complex and preparation is imperative. Many sales negotiations are fairly straightforward and only have one or two critical issues, but contract negotiation almost always involves multiple issues. As such, you must analyze the customer’s multiple issues and consider questions such as:

Which of their issues are most crucial (their “must haves”)?
Why is this issue important to them?
What are some alternative ways that we could address that issue?

The answers to these and similar questions will help you to brainstorm some alternatives and improve your ability to give and get concessions. The most common mistake that sales managers cite about their salespeople is that “…they concede too much, too soon”.

2. Always assess the alternatives for both sides. The acronym BATNA (“Best Alternative To a Negotiated Agreement”) was first popularized in the book Getting To Yes by Fisher and Ury, and is especially relevant during difficult negotiations. Before you start each negotiation, you need to answer these two questions:

First, if we don’t reach an agreement with this customer, what other alternatives do we have?
Second, if the other side doesn’t reach a deal with us, what other alternatives do they have?

The answers to these two questions determine who has the power in a negotiation, and affect your overall strategy and approach. Average sellers make the mistake of underestimating their power. In today’s business climate, a customer may increasingly threaten to go to a competitor. You can’t ignore these threats, but you also shouldn’t be intimidated. The BATNA assessment is an effective way to gauge how seriously to take these threats, and to decide in advance what other alternatives you have.

3. Be prepared for customers to use more adversarial negotiation tactics in today’s business climate. There are many adversarial tactics such as “change the negotiator”, “last & final offer”, and “good guy/bad guy”. For example, the good guy/bad guy tactic can occur in a team negotiation when one person acts tough and unreasonable and their partner acts more conciliatory. Remember, if the other side is using this on you, neither side is really the good guy. You can react by walking out, protesting, ignoring the bad guy, or using your own bad guy. Humor can sometimes work ("Hey, I know what you're doing...I saw it on TV.").

Average salespeople don’t react well to adversarial tactics, and make mistakes such as conceding too much or becoming flustered. By contrast, the best sales professionals can identify and respond effectively to adversarial tactics.

4. Team negotiations are more likely to be relevant when negotiating with key accounts. Team negotiation presents some additional opportunities and challenges. A well prepared and functioning negotiation team will always do a better job of negotiation than a single individual. However, it requires greater skill and effort to form and negotiate effectively as a team. Important questions include:

Who should be on your team?
Who will lead the team, during both the planning and execution stages?
Overall, how can you take advantage of each person’s strengths?

A group of people thrown together is not a team. Average sellers fail to utilize and build successful negotiating teams, whereas the best sales people have learned that negotiating is definitely a team sport.

Achieving a successful win/win outcome in today’s economy requires the use of effective negotiation planning strategies. Thorough preparation is the key to walking away with a better agreement, particularly during an economic downturn. Dealing with the additional obstacles of adversarial tactics and team negotiation is difficult, but when handled well can help retain and win customers.

If you enjoyed this article, click here for more resources on negotiation skills.

Bill McCormick
		About the author:
		Bill McCormick is the founder and president of Sales Training And Results, Inc. (STAR), (www.salestrainingandresults.com) a firm specializing in customized sales training and consulting. STAR has worked nationally with thousands of employees and managers in a wide range of industries, in both the service and manufacturing sectors. Bill is the author of STAR’s monthly newsletters, sales articles and blog, all of which cover many practical sales skills tips and tools for anyone who comes in contact with the customer, from the customer service representative to the key account manager. .