How to avoid the 10 fatal flaws made during negotiations
By Christine McMahon, for SBT
Question: I am sales manager and have been with my new company for three months. I am wondering if there are specific mistakes sales people make when negotiating?
Answer: Having participated in hundreds of negotiations both as a participant and observer, there are 10 fatal flaws sales professionals make that negatively impact their results. These mistakes results in both lost commission dollars and lost profits.
Here are the 10 most fatal flaws:
1) Poor planning – A lack of understanding the issues at hand, the needs and wants of both parties, and a strategic plan for bridging the two positions is critical prior to entering into the negotiation. Failure to do so creates heightened emotional anxiety. Sales professionals who fail to plan are forced to think and be creative on their feet, creating a recipe for disaster.
2) Inadequate information gathering – Knowledge is power when negotiating. It not unusual for strategic information that could enhance the sales person’s position to be left behind in unopened files. For example, understanding how your company has negotiated with this customer in the past, what commitments have been made and by whom, or how your company has negotiated similar situations with other customers provides valuable information when developing a negotiating strategy. Effective information gathering also helps to identify the information needed from the customer to develop a mutually beneficial strategy.
3) Not viewing the negotiation from the customer’s viewpoint – Some sales professionals never view the negotiation from the customer’s standpoint. As a result, they are stunned or emotionally shutdown when the customer responds in an unexpected way. Before entering into a negotiation, the sales person must justify the value and merit of his/her strategy from the customer’s standpoint.
Before entering into the negotiation, it should be common practice to consider the negotiation from the customer’s point of view. What are their wants and needs? What might be their walk-away point? What other options might they pursue in case this negotiation fails? What might be their reaction to your solution/offer? These insights help to identify common ground and develop an effective approach in presenting your solution.
4) Failure to negotiate internally first – Sales professionals must ensure their negotiating strategy is acceptable to all impacted company personnel. A salesperson who over-commits company resources without advance approval, creates a highly volatile situation. When expectations are not fulfilled, all parties feel compromised.
5) Having an inflexible mind-set – Entering into a negotiation with only one option and with little to no room to make concessions initiates defensiveness resulting in an adversarial situation. Customers do not want to be told that there is only one way, your way. When negotiating, it’s acceptable and in some cases it’s even expected for you to ask for more than you think you are going to get. However, not providing the customer with an opportunity for small victories proves fatal in the long run.
For example, if the customer is in a position where they absolutely must use your product or service at this time, you can bet, they will be looking for alternatives. As soon as they have something else in place, they will terminate your relationship.
6) Making concessions without knowing all demands – Some concession demands can be important to the other party, fulfilling a specific need, while others are superfluous, fulfilling a want or desire. Inexperienced sales people fail to qualify the total scope of the other party’s demands before offering a concession. Rather, they respond to each demand as a standalone request. They think resolving this one demand will close the deal – only to be shocked when another request comes forth after they have made a substantial concession. This is a fatal flaw that undermines company revenues and earned commission dollars.
When a concession demand is presented, the most effective response is: "In addition to X, what else is important to you?"
7) Making a concession without asking for something in return – Salespeople who make a concession without asking for something in return are not negotiating. In fact, they are not even selling — they are giving in. For example, if a price concession is given in response to a customer demand, if it is given away without getting something in return, you are risking that the customer will assume: you are overpriced to begin with (otherwise how could you have just given it away), or you trying to take advantage of them (you inflated your prices and now trust has been broken), or maybe, you are not worth what the investment. None of these assumptions is relationship building.
Always ask for something in return for every concession you consider making. To accomplish this, simply ask, "If the possibility to provide X exists, would you be able to provide Y?" The responsibility for taking action now rests with the other party. You establish value for what you might give away. And you know just how important the request really is to the customer. If they back down, you know they were fishing for the bottom line.
8) Not taking a recess – When faced with an impasse or a situation where the sales person is unsure about how to proceed, the best option is to take a recess. It’s always within the sales person’s control to request a short break or even adjourn for a few days. Taking time to think or gather more information is critical to a mutually successful resolution. A simple statement saying, "I am not prepared to discuss that at this time. I’d like to take a short break and resume later this week when I have better information. Would Friday at 2 p.m. work for you?"
When a salesperson feels pressured and makes a concession to an unreasonable request, the result is always fatal.
9) Letting the ego influence emotions and communications – Salespeople who let their passion for "winning" influence their emotions, ultimately compromise the quality of their communications. This is a fatal because everyone wants to feel they have won something. When communications are directed from the place of Ego, listening aptitude is diminished making the other party feel expensed. The result is a defensive posture that eliminates any desire for finding common ground or coming to a mutual agreeable solution.
10) Lack of follow-through – Once the contract is signed, salespeople who step out of the picture until implementation has complete make a fatal error. Post-negotiation is a prime time for securing new business. Unforeseen factors can change the original scope of the project creating new streams of revenue. For example, I have a client who was in contact with his customer twice a week during the implementation phase. During the third week, his customer was complaining about a component that was not working. With some help from engineering, the salesperson was able to deliver the component on a timely basis for the customer and made a good margin. An absentee sales person would have missed this opportunity.
Salespeople who stay involved with the customer during the implementation phase not only identify new opportunities, but can resolve issues quickly, and can be renegotiate new terms when project creep occurs.
A negotiation is a process, not an event. Securing the best possible negotiation outcome requires quality information to be gathered early in the selling process. Understanding what is most important to the customer and why before the stakes get high, creates an optimum situation for creating a mutually agreeable solution.
It’s been written that 50% of fatal flaws happen prior to the negotiation. Another 35% happen during the negotiation; the balance 15% happen after the contract has been signed. To prevent fatal flaws, be sure sales team members understand negotiation strategies and tactics and have experience putting them into action. Then create a checklist to ensure expectations about what is and is not acceptable are clearly understood. This will help to eliminate fatal flaws that cost you valuable revenues and profits.
Christine McMahon is the owner of Christine McMahon & Associates, a training and coaching firm in Milwaukee. She can be reached at 414-290-3344. Small Business Times readers who would like a negotiating situation addressed in this column can send a fax to 414-290-3330, or e-mail her at: ccm@christinemcmahon.com. Her column appears in every other issue of SBT.
Oct. 31, 2003 Small Business Times, Milwaukee
