Negotiation is everywhere, not just in sales. We negotiate deals in every aspect of life, from getting your toddler into their pyjamas to servicing your car. Even in your relationships, you negotiate and compromise for the greater good. That’s why salespeople must understand that negotiation isn’t a one-off event. Rather it’s something you need to ingrain into your sales approach. Keep reading below to discover how to take control of the 5 step negotiation process below:
What is Negotiation?
Negotiation is a strategic discussion used to reach an agreement, compromise or settle differences between two or more parties.
However, negotiations shouldn’t be confused with arguments or disagreements. Both parties will want to achieve the best possible outcome for themselves and each other – often known as “win-win negotiations”.
Overall, the sales negotiation process is a structured approach to negotiation. Selling achieves the price on your terms and conditions; negotiating is modifying your position to reach an agreement.
How Negotiations Work: 2 Types of Negotiation Approaches
Negotiations are a process in which two or more parties work together towards achieving a common goal that satisfies everyone involved.
Each party presents their standpoint in these discussions, and the other party accepts the terms or proposes its own.
This cycle continues until both parties reach a mutually acceptable solution, and if they can’t, negotiations halt.
With that said, there are two primary forms of negotiation all salespeople should know about:
1. Win-Win Negotiations (Integrative Negotiation)
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.
When customers feel like they got what they wanted in the negotiation process, they’re likely to do future business with you. This can increase your repeat or returning business. In fact, 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 and gets what they were looking for, while one loses or feels like they did not get what they are looking for.
A win-lose scenario may seem beneficial if the deals skew in your favour, but others 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 Stages of the Negotiation Process
Whether you’re trying to close a business deal or resolve a conflict with a friend, the ability to negotiate effectively can lead to mutually beneficial outcomes.
However, negotiation can be a complex and intimidating process, and many people may need help knowing where to begin. That’s where a structured approach can be helpful.
Understand how to control the negotiation by learning the 5 steps of the negotiation process below:
Preparation is key to success in many sales areas. In negotiations, it’s your first vital step to achieving the outcome you want. To prepare for your win-win negotiation, you should research both sides of the conversation so that you can identify your most realistic outcomes.
Prepare An Offer They Can’t Refuse
Before you begin to negotiate the terms of a deal, you need to be fully prepared with your offer, alternatives and knowledge of when it’s time to walk away. Learn how inside our Negotiation Planner.
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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 negotiation’s “ground rules”: where will you meet? At what time? For how long?
2. Exchanging 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.
While a polite gesture, it also gives you a chance to scope out the scale of their offer. That way, you can use this time to alter your terms if needed.
Active listening skills are vital for understanding how your counterpart sees the situation during this stage. That way, you can help to reach an agreement that benefits everybody. Many salespeople opt to take notes that record all points made by the other party to be clarified later.
Ultimately, it’s crucial for each party to “make their case.” So that they have equal opportunity to share their interests, concerns and hopes.
Key negotiation skills needed to successfully complete this stage of the negotiation process are:
Help the other party to think deeply about your offering and 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:
- What are the most significant challenges you face?
- Are you overcoming those challenges now?
- How are you trying to overcome those challenges?
- Are you satisfied with how my competitors are servicing you?
- What other solutions are you looking for?
Place the focus back on the other party to make them feel valued. That way, they’re more likely to open up about their issues or concerns.
During the clarification stage, both parties continue their discussion by justifying their “claims”. If one side is unhappy, they should calmly discuss how they can reach an agreement that benefits both sides. This stage is an opportunity for one party to provide the other with any documentation that helps support its position.
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. Making a 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. This often requires a follow-up to confirm that the implementation is going well.
The Negotiation Process FAQs
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.
A negotiation strategy is defined as a predetermined approach that helps to achieve the goal or objective of reaching an agreement.
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&As.
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? 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. Meaning that 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 happens is that you leave yourself open and vulnerable to being asked for discounts or 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 happens is 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.
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Tips for Successfully Navigating the Negotiation Process
Below are several best practices you should be aware of when entering or approaching a negotiation.
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 it. 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 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 builds trust quickly. That 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.
Close More Deals; Master the Negotiation Process
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.