Sales Negotiation 1

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The festive sale is here, and customers are crazy about it. You are the sales manager of a huge retail textiles chain and have been given a target to meet this year. You show a beautiful navy blue saree to a lady customer, and she says, “What’s your best price for this?” Looks like it’s time to begin negotiations. Are you ready?

Understanding what is a sales negotiation is crucial in this scenario, as it sets the stage for a successful interaction.

In the life of a salesperson, sales negotiation skills are just non-negotiable. Whether you are haggling with a customer over the price of a product or convincing your client to buy a house, it is essential to possess negotiation skills and implement negotiation techniques to close the deal.

The company and the organisational leaders are responsible for ensuring that their sales team is equipped with negotiation skills. Studies show that companies that do not follow a specific sales negotiation training process face an average net income decline of 63.3 per cent.

In this blog, we will look into the essential sales negotiation skills, their importance and key sales negotiation strategies to apply these skills. Let’s first briefly understand what sales negotiations are.

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Meaning Of Sales Negotiation

Sales negotiation is a discussion between two or more parties over purchasing and selling a product or providing a service that aims to create a profitable transaction and customer satisfaction. It involves finding common ground, addressing concerns, and ultimately reaching a deal that satisfies both buyers and sellers.

Effective sales negotiations go beyond simply haggling over prices; they include building relationships, understanding client needs, and creating value for both parties.

With the right strategies, sales professionals can navigate the sales negotiation process skillfully, increasing their chances of closing more deals with optimal outcomes.

Since we are discussing sales negotiation skills, it’s essential to understand two critical terms related to sales – 1) Sales Lead and 2) Lead Conversion. A prospective customer who is interested in the product or service is called a sales lead or the prospect, and the process of negotiating with the sales lead to make it a successful sale is called lead conversion.

This process of converting leads into paying customers is sales negotiation. Let’s look at what role negotiation plays in sales.

Importance Of Negotiation In Sales

Negotiation is the heartbeat of sales, driving the process from initial contact to deal closure. Its significance lies in several key areas:

1. Increase Lead Conversion

Among the many roles of sales negotiations, one crucial role is the direct impact on lead conversion rates. Sales negotiations can be the bridge that transitions your prospects from the consideration stage to becoming actual customers, thus bringing in more deals. Whether the concerns are related to pricing, product features, or competition, effective negotiation allows for a constructive discussion that can lead to resolutions.

Every lead is unique, and their needs may vary. Successful negotiation involves tailoring solutions that align with the specific requirements of each lead and, hence, provide more deals.

2. Build Healthy Relationship

Negotiating isn’t just about closing a single deal; it’s about establishing a foundation for ongoing business relationships and building customer loyalty. Building relationships helps you build trust, and when clients trust you, they are more likely to share their needs and concerns openly.

Even if the prospect or lead does not convert into a customer, building a healthy relationship will ensure that the customer returns and refers to other leads, resulting in more deals.

3. Increase Customer Satisfaction

Sales negotiations often involve overcoming obstacles and addressing customer objections. A skilled negotiator identifies these objections early on and works collaboratively to find solutions that satisfy the customers.

As a sales professional, you need to be open to exploring alternative solutions and adapting their proposals to meet client needs. It’s not just about getting a “yes” from the prospect but ensuring that both parties are satisfied with the terms.

4. Maximise Overall Value

Sales negotiation goes beyond bargaining over prices and quality; it’s about creating mutual value. To maximise value, you need to first understand the client’s needs and priorities. This involves active listening and thorough research before entering negotiations.

A successful sales negotiation results in a win-win scenario. This approach is not just about compromise but about finding creative solutions that address the interests of both sides. Moreover, sales negotiations aim at maximising long-term gains rather than prioritising short-term gains.

5 Essential Skills In Sales Negotiation

Certain skills are indispensable to excel in sales negotiation. In this section, we will dive deeper into what these skills are and some small steps you can take to improve these skills in your daily negotiations.

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Learn sales negotiation techniques and discover how to enhance your proficiency in this critical aspect of the sales process

1. Effective Communication

Communication in negotiation involves effectively expressing ideas to your prospects and showcasing the value of your product or service. Communication also includes active listening, the foundation of understanding your client’s needs and concerns, allowing you to customise your solutions accordingly.

When engaged in a negotiation, give your undivided attention to the buyer. Avoid multitasking or thinking about your response while the buyer is speaking. Further, seek clarification on points that may not be clear. This will show your attentiveness and help you understand the needs of the buyer more effectively.

2. Emotional Intelligence

Emotional intelligence in sales negotiation is the ability to understand and manage the emotions of both the seller and buyer. Recognising and managing emotions is vital for building rapport and navigating challenging moments during sales negotiations.

To manage emotional intelligence, reflect on your emotions and how they may impact your communication. Pay attention to the prospect’s emotional cues, both verbal and non-verbal. For example, if your prospect is fidgeting and looking distracted, they are not interested in the product you are selling. In this situation, first understand their needs before offering any other product.

3. Problem-Solving

Problem-solving in negotiation is about navigating obstacles and finding solutions that satisfy buyers and sellers. In sales, it is common for customers to raise objections to the product quality or price or something else. Quick thinking and creative problem-solving are essential for overcoming these objections and moving the negotiation forward.

Through your experience and interaction with similar prospects, attempt to anticipate potential objections and prepare responses in advance. Work together with the buyer to find solutions that meet their needs while aligning with your objectives.

4. Adaptability

Sales is an extremely dynamic sector. There can be changes in the personalities of the prospects, the market trends, and the product prices. Being adaptable allows you to adjust your approach and sales negotiation strategies according to the situation at that specific time and also helps you to know when to walk away.

To work on your adaptability, conduct thorough research on the client, industry trends, and potential challenges before the negotiation. Be open to adjusting your approach based on the client’s responses. If a strategy isn’t working, be willing to pivot and explore alternative paths to reach an agreement. Learn from each interaction; reflect on what worked well and what could be improved.

5. Persuasion

Even if the purpose of sales negotiation is twofold, a successful transaction and customer satisfaction, the underlying concept is to convert a lead into a paying customer. Persuasion is the art of influencing others to see value in your proposal and take the desired course of action.

To persuade the buyer, frame your offer in a way that attracts them towards your product or service. Focus on the value generated by your offer rather than the cost the party has to bear. Phrases such as “gain” and “achieve” can have a persuasive impact on the customer’s perception.

Now, an important question that lies here is, ‘If you hone all these five skills, will you become an expert negotiator?’ The answer is no, it’s not that simple. Nurturing these skills will make you a really good and effective negotiator, but to become an expert, you need to be efficient at using certain sales negotiation strategies. Let’s look at these strategies.

4 Key Strategies For Sales Negotiation

Negotiation strategies are certain plans of action that can be implemented in different sales negotiations to achieve the desired outcome.

This article will discuss four key sales negotiation strategies you can incorporate to get more successful deals.

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1. Maintaining Right Pricing

The first sales negotiation strategy is ‘maintaining the right pricing’ for your product or service. The topics of ‘Price’ and ‘affordability’ are often the central topics in a negotiation. However, it is essential not to jump to the conclusion that budget concerns are the primary focus for your buyer.

It is a natural human tendency to bargain and save money, and a good negotiator does not give in to this tactic. The first step is to set the price of the product or service according to the cost of providing that product or service and the value it will add to the customer.

If you determine that providing a sales discount is the appropriate approach, it’s advisable to avoid proposing a range for the discount, e.g., 10 – 15% off. Buyers are less likely to choose a fixed discount of 10% when a range of 10-15% is on the negotiation table.

Additionally, refrain from immediately meeting your prospect halfway on the price. This premature compromise reduces your bargaining capacity since now, if you reduce the price at all, the negotiation will be in favour of the prospect. If the price is non-negotiable for you, be prepared to walk away than sell it for a lesser price and reduce the value of the product or service.

There are certain pros and cons of using this strategy:

Pros: Keeping strict pricing and fixed discounts increases trust in your product or service and allows you to close a deal at a reasonable price.

Cons: It’s crucial to remember that although offering a discount may expedite the sale, it could potentially lead the prospect to undervalue your product.

2. Highlight Potential Loss

Loss aversion theory is an essential concept in sales negotiation skills. It suggests that losses have a more significant psychological impact than equivalent gains or profits. Consider presenting the sales proposition to your prospect as a means to prevent the loss of revenue, reputation, or a competitive edge rather than emphasising the opportunity to save money, enhance their reputation, or gain a competitive advantage.

For example, let’s say you sell pens and other stationery for kids; tell your prospects that ‘this pen is now in trend and all popular and smart kids have already purchased it from me, and if you don’t have it, you will be the only one left without this pen’.

There are certain pros and cons of using this strategy:

Pros: Your sales presentation is more likely to lead to a deal when you highlight the negative outcomes of not accepting the deal or signing the contract.

Cons: One foundational pillar of negotiation is transparency. In this strategy, you are taking advantage of the prospect’s ignorance about the concept of loss aversion, which may appear manipulative.

3. Mirror Your Prospect

Chris Voss, a  former FBI hostage negotiator, has suggested an effective strategy to enhance your negotiation skills and improve communication is to become efficient at mirroring.

Mirroring means matching the other party’s body language, tone of voice, and other non-verbal cues without being too obvious. Subtly imitating the prospect’s speech patterns or physical gestures has been proven to foster rapport and empathy in the sales process, facilitating the identification of common ground between negotiating parties.

For example, if your prospect speaks slowly and uses animated hand gestures, make sure you keep the pitch of your voice low as well and try to use hand gestures effectively to build rapport with them. If the prospect shows a willingness to walk away from the deal, do not push and know when to walk away as well.

There are certain pros and cons of using this strategy:

Pros: Mirroring prompts both the buyer and seller to arrive at similar conclusions achieving a mutually beneficial outcome.

Cons: Mirroring requires some practice to do it efficiently. Without practice, it may come across as forced and feel artificial.

4. Utilise Impartial Standards

In negotiation, you might have to use references, proofs and evidence to persuade the prospect to believe your statements. It is advised not to use biased standards like your previous sale or an invalid contract.

Similar to an unbiased referee, using independent and impartial standards in your sales negotiation, such as past signed contracts, industry benchmarks, and reputable third-party references, can help bridge significant gaps between the buyer and seller.

For example, instead of saying that ‘our services are better than theirs and it is clearly mentioned in our brochure’, tell your prospect, ‘This is a comparison chart of the features of our service and those of our competitors, and these are all the customer feedback’.

There are certain pros and cons of using this strategy:

Pros: Using impartial standards to present your offer and its benefits reflects a fair trade and increases the chances of a successful deal.

Cons: If this strategy contradicts the customer’s research or knowledge, it may not be beneficial.

Tips To Improve Sales Negotiation

We have understood what sales negotiation is, several skills involved in sales negotiation and the strategies that need to be employed to get more deals.

Here, we will explore some tips and actionable steps you can take to become an effective sales negotiator. Let’s dive in!

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1. Be Thoroughly Prepared

Preparation stands as a crucial ingredient for a successful negotiation. The more information you gather about the core issues, the interests and priorities of the buyer, and potential challenges, the better equipped you are to navigate the negotiation landscape.

Let’s say you show a few houses to your lead but still cannot close the deal because none of the houses are acceptable to them. Understanding their needs, what they are looking for, their budget, etc., will be beneficial in this situation.

Understanding the ZOPA (Zone of Possible Agreement) can be one of the best ways to prepare thoroughly. It helps negotiators identify potential areas of agreement between the buyer and seller. To identify the ZOPA, focus on the highest price or most favourable terms the buyer is willing to accept based on their budget constraints, market conditions, and the perceived value of the product or service. The next step is to identify the lowest price or least favourable terms that you, as the seller, are willing to accept, considering your costs, market value, and priorities.

For example, if a buyer is willing to buy a car for a price between ₹15,00,000 and ₹18,00,000, and a seller is willing to charge between ₹16,00,000 and ₹20,00,000, the ZOPA is between ₹16,00,000 and ₹18,00,000. In this case, there is potential for a mutually beneficial agreement within that price range.

2. Identify Decision Maker

In many negotiations, be it business transactions or simple personal decisions, multiple individuals may be involved in the negotiation process, but only one of them has the actual decision-making power.

For example, if you apply for a job, your interview may be conducted with your team head, your team head’s manager and the HR, but the power to decide the salary will only be with the HR. Similarly, if a mother and son shop for clothes, even if the son makes the choices, the decision maker is the mother.

The decision-maker is the individual with the authority to commit the resources necessary for striking the deal. During negotiations, there are several things to observe to identify the decision maker and the key influencers. To begin with, talk to the other party and try to understand their roles and, in the case of an organisation, their titles as well. Figure out the tenure they have been in the organisation for and what kind of duties are bestowed upon them.

Talk to parties in their past deals and find out the type of negotiator they are – do they sign paperwork or read it and pass it on to someone else? Lastly, if your organisation has an online presence, check what pages of your website the decision maker visits and how they interact with your content.

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Understanding who holds this authority helps you tailor your negotiation strategy to address the concerns and priorities that matter most to the ultimate decision-maker.

3. Practise Active Listening

It is essential to practise active listening to have an effective negotiation. By listening intently and carefully, you can understand the underlying concerns and identify the deal’s ZOPA and BATNA (Best Alternative to a Negotiated Agreement) of the other party. Focus on what the other party is saying, and consciously try to understand their perspective. Avoid interrupting and give the speaker your full attention. This will help you customise your responses to address the needs of both parties.

You can further practise reflective listening to improve your listening skills. In reflective listening, you paraphrase and summarise the other party’s statements to demonstrate your commitment to understanding their viewpoint. If the other party says, ‘This is not at all in my budget,’ you listen to this carefully and repeat, ‘Okay, I understand this is a bit over budget for you, let me offer you …’.

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4. Strategize With Team

Negotiation can be intricate, especially in complex situations. Taking the time to strategise is a crucial step that involves careful planning and collaboration with your sales team. In many negotiations, particularly those involving significant deals or multifaceted issues, it’s advantageous to involve your sales team.

Each member may bring a unique perspective and expertise to the table. Further, during the strategic pauses, seek advice from team members who may have specialised knowledge or experience relevant to the negotiation.

Collaborating with your team allows you to pool insights, explore different angles, and collectively strategise on potential compromises or concessions that can be offered to meet customer expectations. It helps you to identify your BATNA (Best Alternative to a Negotiated Agreement). BATNA is the best alternative proposal you can offer the other party if your first negotiation does not result in a satisfactory agreement.

For example, if your main offer is to sell a car for ₹18,00,000/- and the prospect does not want to pay more than ₹16,00,000/-, your BATNA can be to charge ₹18,00,000/- and offer one free service, repair and paint job within three years of purchase.

By strategising, you equip yourself and your sales team with the ability to adapt to unforeseen changes, unexpected challenges, or new information that may arise during the course of the negotiation.

Conclusion: Sales Negotiation Skills

You engage in sales every day and multiple times a day. However, if you do not work on your sales negotiation skills, you may put all your efforts in but still fail at closing deals.

Making lead conversion is the most crucial part of sales, and knowing how to negotiate, what strategies to adopt, and what areas to work on can help you take your sales to the next level.

Suppose you are a sales professional and you are looking to upgrade your sales negotiation skills. In that case, you may begin by reading Chris Voss’ book on negotiation, ‘Never Split the Difference: Negotiating as if Your Life Depended on It’. You can leverage networking tools like LinkedIn to reach out to experienced professionals and seek mentorship from them.

Suppose you are an experienced sales personnel looking to become a sales manager or are already a manager willing to take your skills to the next level. In that case, you can invest in a negotiation training program that covers negotiation in depth.

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By Ashish Agarwal

Ashish is a content writer at Kapable. A dynamic lawyer, experienced educator and content writer, he blends his legal expertise with a flair for storytelling. He has a passion for writing compelling articles and strives to simplify complex concepts, making them accessible to diverse audiences. He is dedicated to writing on contemporary topics and topics related to soft skills development. His articles showcase a deep understanding of the topic and reflect his commitment to fostering intellectual curiosity.

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