Negotiation is everywhere, not just in sales. We negotiate deals in every aspect of life, from getting your toddler into their pajamas 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 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.
In these discussions, each party presents its standpoint, 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)
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. Each party learns what the other party wants by utilizing an integrative or value-creative bargaining process. This makes working within those confines or restrictions easier and ensures both parties walk away satisfied and happy.
When customers feel like they got what they wanted in the negotiation process, they will likely 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 occurs 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 the other loses or feels like they did not get what they were looking for.
A win-lose scenario may seem beneficial if the deals skew in your favor, but others will not want to do business with your company if the deals feel one-sided. That’s why using this approach 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:
1. Preparation
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 to identify your most realistic outcomes.
Prepare An Offer They Can’t Refuse
Then, you can prepare a variety of concessions that you’re willing to offer to maintain your working relationship with the other party. You should also determine your BATNA (“best alternative to a negotiated agreement”) at this stage. 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 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. 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 an equal opportunity to share their interests, concerns, and hopes.
Key negotiation skills needed to complete this stage of the negotiation process successfully are:
Questioning
Help the other party think deeply about your offering and if you can 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?
Active listening
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.
3. Clarifying
Both parties continue their discussion during the clarification stage by justifying their “claims.” If one side is unhappy, they should calmly discuss reaching an agreement that benefits both sides. This stage allows one party to provide the other with any documentation that helps support its position.
4. Bargaining
The bargaining stage is critical to the negotiation process because it begins a give-and-take process. Both parties can 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 aimed to reach a win-win negotiation at this stage.
5. Making a Commitment
The final step in the negotiation process is formalizing 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 each party’s expectations 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
When dealing with larger groups of stakeholders, you’ll often 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 a predetermined approach to achieving 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-solve, 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. 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 the talking when meeting for a negotiation. 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 favor, but other businesses will not want to do business with your company if the deals feel one-sided. This situation risks neither party getting what they were looking for, which creates a lose-lose negotiation.
Ultimately leaving both parties frustrated and unhappy is bad for employee morale and repeat business.
Also read:
- 10 Essential Sales Negotiation Skills Every Salesperson Needs to Master
- Adapting Negotiation Skills to Our ‘New Digital Normal’
- How To Deal With Low-Budget Customers
Tips for Successfully Navigating the Negotiation Process
Below are several best practices you should know when entering or approaching a negotiation.
Build Value
The definition of Value is your prospect’s perceived monetary worth. In simple terms, it is 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.
Can you present qualitative or quantitative data 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 can walk away.
However, it would be best if you tried first to slowly disengage from talks by displaying dissatisfaction with the evolving process. 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 minimize 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 your prospective buyer cares about. Once identified, tailor your messaging and approach them accordingly. It often helps if your solution addresses long-term goals in a personalized 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 to help each other or even ideas that help your business meet a specific need.
Close More Deals; Master the Negotiation Process
Profit, relationships, and deals are won or lost during negotiation. When successful negotiators arrive armed with the tools and skills needed to negotiate effectively, desired outcomes are optimized, and loss of profit is avoided. However, profits and closed deals aren’t the only desired outcomes when it comes to negotiations. That’s where our Negotiation Skills Training comes in.
Preserving the relationship is crucial to ensure that long-term business opportunities and negative feelings aren’t harbored.
Sales professionals, procurement departments, and business leaders must learn how to navigate effective negotiations that positively impact both parties and inspire future business.
