The Ultimate 5 Step Negotiation Process

5 step negotiation process

Negotiation is everywhere – not just in sales. We negotiate deals in every aspect of our life, from getting your toddler into their pyjamas to servicing your car. Even in your relationships, you negotiate and compromise for the greater good. This is why it’s crucial salespeople understand that negotiation isn’t a one-off event; it’s an overall strategic process that needs to be ingrained into your approach to selling. Keep reading below to discover how to take control of the 5 step negotiation process and achieve what you want.

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What is a negotiation process?

Negotiation is a method of strategic discussion used to reach an agreement, compromise or settle differences between two or more parties. Critically though, negotiations should not be confused with arguments or disagreements – as both parties will want to achieve the best possible outcome for themselves and each other – often known as “win-win negotiations”. The sales negotiation process is, therefore, a structured approach to negotiation. In other words, selling is the act of achieving the price on your terms and conditions – but negotiating is the act of modifying your position in some way to reach an agreement.

Types of Negotiation

Before we delve into understanding how to take control of the negotiation by learning the 5 step negotiation process, it’s important to be aware of the different types of approaches there are when it comes to negotiating. Read on below to discover the two types of negotiation approaches below:

1. Win-Win Negotiations (Integrative negotiation)

Win-win negotiations are when both parties come to the negotiation table and leave feeling like they have won. They focus on integrative or value-creative bargaining processes and techniques. Rather than the traditional haggling or distributive bargaining process that most people are used to. By utilizing an integrative or value-creative bargaining process, each party learns what the other party wants. Thereby making it easier to work within those confines or restrictions to ensure both parties walk away satisfied and happy. 

What’s more, when a customer walks away happy and feels like they got what they wanted out of the negotiation process, they’re likely to do future business with you. This can increase your repeat or returning business. In fact – many studies have shown it is cheaper to obtain repeat business than it is to gain a new client.

2. Hard bargaining (Distributive negotiation)

Distributive negotiation is when one or both parties take an extreme position, which often creates a win-lose solution. One party wins in this scenario and gets what they were looking for, while one party loses or feels like they did not get what they are looking for. While a win-lose scenario may seem to be beneficial if the deals skew in your favour – other businesses will not want to do business with your company if the deals feel one-sided. That’s why if you use this approach, you might win one negotiation but lose in the long run.

The 5 step negotiation process

Ensure you achieve your desired outcome by understanding how to control the negotiation by learning the 5 step negotiation process below:

1. Prepare

Preparation is key to success in many sales areas, but for negotiation, it’s your first vital step to achieving the outcome you want – and should never be skipped. To prepare for your win-win negotiation, you should research both sides of the conversation so that you can identify your most realistic outcomes. Then, you can prepare a variety of concessions that you’re willing to offer to maintain your working relationship with the other party. At this stage, you should also determine your BATNA (“best alternative to a negotiated agreement”). Lastly, your preparation will include setting the negotiations “ground rules”: where will you meet? At what time? For how long?

2. Exchange information

Next, you exchange information about your initial position with the other negotiating party. We all know the importance of creating an accommodating environment free of aggression and pressure. That’s why we suggest that you allow your prospect to start this stage of the sales negotiation. Not only is it a polite gesture, but it gives you a chance to scope out the scale of their offer – you can use this time to alter your terms if needed.

During this stage, active listening skills are vital for understanding how your counterpart sees the situation so that you can help to reach an agreement that benefits everybody. Many salespeople opt to take notes to help record all points made by the other party if they need to be clarified again later on. Ultimately, it’s crucial for each party to “make their case” and have equal opportunity to share their interests, concerns and hopes uninterrupted.

Key negotiation skills needed to successfully complete this stage of the negotiation process are:

  • Questioning: Help the other party to think deeply about your offering – and ultimately consider if you’re the person to help them solve it! Below are several questions you can ask to understand where they’re coming from – and where they want to go:
  1. What are the most significant challenges you face?
  2. Are you overcoming those challenges now?
  3. How are you trying to overcome those challenges?
  4. Are you satisfied with how my competitors are servicing you?
  5. What other solutions are you looking for?
  • Active listening: Place the focus back on the other party and make them feel valued so that they’re more likely to open up about their issues or concerns.

3. Clarify

During the clarification stage, both parties continue their discussion by justifying their “claims”. If one side is unhappy or disagrees with their terms, they should always calmly discuss how they can reach an agreement that benefits both sides without being confrontational or aggressive. More so, this stage is an opportunity for one party to provide the other with any documentation that helps support its position.

4. Bargain

The bargaining stage is a critical component of the negotiation process because it begins a give-and-take process. Both parties have a chance to suggest different offers to the problem whilst being mindful of their pre-considered concessions. The best negotiators know how their emotions, body language, and verbal communication skills translate into a productive conversation. After all, it would help if you were aiming to reach a win-win negotiation at this stage.

5. Commitment

The final step in the negotiation process is formalising the agreement reached in the previous stage. In major negotiations, this often requires ironing out the specifics with a formal contract. But before this happens, both parties should thank each other for attending the discussion – regardless of the outcome. This is because negotiations are all about creating and maintaining long-term relationships, so you should always put your best foot forward to secure that deal!

Then outline the expectations of each party to ensure that the compromise will be effective – which often requires a follow-up to confirm that the implementation is going well.

Negotiation Process FAQs

Who are the key stakeholders during a negotiation process?

Often, when dealing with larger groups of stakeholders, you’ll encounter stakeholder representatives. These individuals speak on behalf of their company because it will usually take too long to get so many people to agree to a solution.

What are negotiation strategies?

A negotiation strategy is defined as a predetermined approach that helps to achieve the goal or objective of reaching an agreement.

How do I improve my negotiation skills?

We equip participants with an executive education in the negotiation skills needed to understand what’s most important to counterparts, prepare and present powerful offers, overcome difficult conversations, and deal with difficult people to avoid losing deals.

Learn effective negotiation strategies through a combination of solid content with highly interactive and industry-specific activities to practice negotiating. Including individual participation, group discussions, role-play activities, case studies, and Q&A’s.

Participants leave our training with developed skills in negotiation: knowing precisely how to prepare for a negotiation, create viable alternatives, problem-solving and confidently negotiate “win-win” agreements.

Mistakes to avoid during the negotiation process

We’ve discussed how to take control of the negotiation process, but what are some common pitfalls that salespeople tend to make? Find out below what to avoid when preparing for your next sales negotiation:

Losing control of your emotions

When under stress and pressure, you can become so emotionally involved
that you revert to instinct rather than logic. This means that you react rather than respond and you either try to dominate the process or ultimately give in to the other party’s needs.

A weak pre-negotiation position

Again, this all comes back to preparation, but having a weak pre-negotiation position is a cardinal sin. If you haven’t identified the other party’s needs, desires and plans, you can’t accurately position your offering. What ends up happening is that you leave yourself open and vulnerable to being asked for discounts and agreeing to terms you don’t feel comfortable providing.

Talking too much

Don’t talk yourself out of a win-win negotiation by talking too much – too many salespeople think they need to do all of the talking when meeting for a negotiation. What usually happens is that they dominate the conversation, leaving little time for the other party to share anything about themselves or what they’re looking to achieve from the deal.

Aiming for a win-lose negotiation

Don’t assume that “the pie is fixed”, as stated before; a win-lose solution may seem beneficial if the deals skew in your favour, but other businesses will not want to do business with your company if the deals feel one-sided. This situation runs the risk of neither party getting what they were looking for, which creates a lose-lose negotiation. Ultimately leaving both parties frustrated and unhappy, which is bad for employee morale and repeat business. 

Best practices for taking control of the negotiation process

Below are several best practices you should be aware of when entering or approaching a negotiation.

Build value

The definition of Value is perceived monetary worth by your prospect – In simple terms, exactly how much someone is willing to pay for a product or service. However, It is also how much someone considers something essential or beneficial; or has a high opinion of. Use your negotiation skills to justify your price with evidence. Do you have qualitative or quantitative data you could present to your prospect to show why it’s worth what you’re asking? How about testimonials, case studies, and reviews? These are excellent ‘proof devices’ that demonstrate how valuable your offering is.

Know when to walk away

You might find instances during sales negotiations where the other party makes demands that your business just can’t facilitate; whether that involves radical amendments or colossal price reductions, it’s important to know that you have the option to walk away. However, it would be best if you tried first to slowly disengage from talks by displaying your dissatisfaction with how the process is evolving. If the prospect isn’t picking up on your signals, gracefully bow out of sales negotiations to save you both from wasting time and effort.

Leverage the power of emotion

Although it’s standard advice to minimise emotion in negotiations – they’re often primary motivators of the other parties decision-making. This is why you must leverage the power of emotions during the negotiation process, so consider what does your prospective buyer care about? Once identified, tailor your messaging and approach to them accordingly. It often helps if your solution addresses long-term goals in a personalised way.

Use active listening skills

By expressing genuine interest in the person in front of you, you’re making them feel valued, which will build trust quickly, and naturally creates a real personal connection. As the conversation progresses, you may find that you have common goals, ways in which you could help each other, or even ideas that help your business with a specific need.

Master the negotiation process with negotiation skills training

Profit, relationships and deals are won or lost during the negotiation process. When successful negotiators arrive armed with the tools and skills needed to negotiate effectively, desired outcomes are optimised, and loss of profit is avoided. The thing is, when it comes to negotiations, profits and closed deals aren’t the only desired outcome. That’s where our Negotiation Skills Training comes in. 

Preserving the relationship is also crucial to ensure that long-term business opportunities and negative feelings aren’t harboured.

Sales professionals, procurement departments, and business leaders must learn how to navigate effective negotiations that positively impact both parties and inspire future business.

negotiation process, negotiation skills training
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