I plead guilty to enjoying a cold beer or two, and I’ve watched with amazement as the decade-long bull market in the craft beer industry shows no signs of abating.
Many managers think their sales teams need help building their negotiation skills but can’t articulate why. Most salespeople possess some level of intuitive negotiating skills, but many lack the discipline necessary to simultaneously sell and negotiate. The result can be less value for the company and bonus dollars for them.
So how do you know if your sales process or compensation plans are working or could be improved? Accordence consultants assess nine factors to see where we can assist in making improvements to your sales teams’ selling and negotiation approaches. If you cannot respond about your team to at least six or seven of the factors with “we do this very well,” then there are likely additional gross margin dollars to be captured through better selling and negotiating. In today’s market, those dollars are very important; it’s just a matter of a little better blocking and tackling. We’ll present five of those factors in Part I of this two-part article. Part II will be posted on Dec. 22.
5 Factors for Assessing Negotiation Weak Spots:
1. The sales teams responsible for driving 70% of your gross profit cannot articulate how you fit into their customers’ long-term strategies and are not seen as an important part of their execution.
When preparing for selling and negotiating with a customer, I always want to know not only who are the interested parties but more importantly, who are the parties I need to get interested in us. Most customers are more likely to use your products and services if they understand how it supports their strategies. That means getting beyond the purchasing buyer to those charged with developing and executing strategy within the customer’s organization. Once your customer understands that you are helping them achieve their strategic goals, price becomes less of a relative factor (although it will always be important). Many times it will not be your product or service, but rather what it will accomplish for them that creates value.
For instance, Accordence consultants were working with a company that sold operating room equipment. We had the doctors and technicians on board but we were blocked by the director of operations. She was a staunch supporter of our competitor, which offered a less expensive solution, although it was not the best for the hospital. So how did we get them to see this and maintain our relationship with the director of operations? We decided to hold a meeting between their senior executives and ours to discuss each other’s visions of the operating room of the future. We found they wanted more flexibility to perform procedures in multiple areas not just in one operating room. Therefore, in the future, equipment had to be mobile and easily transported up and down hospital halls. (The competitor’s equipment was not easily moved and too tall to get down hospital halls.). Once the administration saw us as helping them implement their strategy, price and our competitor became less of an issue. The focus became solving the customer’s problem of the future not of the present. We won that deal.
2. Customers rarely try to renegotiate their contract before its expiration or fail to live up to its terms.
This is an indicator that you either did not understand everyone’s interests or did not have all of the relevant parties at the table when concluding the negotiation. As a lawyer I used to say that all the work began after the contract was signed. This was because rarely had the parties vetted out what they really needed from each other ahead of time. Usually they found out too late and the conflict began; non-compliance with the contract and a poor customer relationship. World class sales forces spend time, almost four times that of their less-effective counterparts, listening and not talking, then crafting agreements that match what each other needs. The extra time spent up front results in fewer agreements not being complied with or needing amendment.
3. There is little pricing and terms integrity in your market place.
This is an indication that a sales force may not have objective standards on how to make offers, counteroffers, or concessions. In addition, it shows that we are not using objective criteria to distinguish pricing of one sale to another. We were working with a company selling laboratory testing equipment and consumables on a deal in the Northeast, which was proceeding as well as we could have expected. On one of our last visits to finalize some timing details we were surprised when the potential customer showed us a sale that had been consummated on the West Coast on almost the exact products and terms and conditions for 17% less than we had in our proposal. Eventually they went with our competitor even though the product was not as superior as ours. They lost trust in us.
4. Negotiation strategies do not exist for 70% of your business and are not integrated into your sales training and marketing programs.
Without these strategies and their integration, your sales team may not have thenegotiation tools and approach to capture and hold on to value in their selling andnegotiating processes. There are many companies which are great at training sales on itsproducts and services, and sometimes there is even good training on the sales process.But we see things fall down when the sales team is trying to negotiate and sell at the sametime. Marketing tools are usually very good at describing features and benefits, but not ataddressing deal timing or concession strategies, which are left to the sales team. So salesthen gets “creative” and doesn’t stick to the pricing, terms and configurations prescribedin the marketing materials. We may have hired Sales to be creative, but they may havebeen given little to no leeway in creating good offers, concession strategies and counteroffers.In addition, sales development usually focuses on teaching the marketing approach and features and benefits, yet not enough time spent understanding negotiabletrade-offs or what they could even negotiate. Instead they are taught to overcomeresistance, a necessary skill but not sufficient alone.
5. Salespeople do not have clear guidelines and authority to culminate agreements
without management assistance, including walking away.
In all of our years of teaching negotiation and negotiating we find this to be the one area that hurts companies the most. Usually I hear from the sales team that they cannot walk away from a sale. So I ask, “Does that mean you will take any deal?” Of course the answer is “No, not any deal.” But what happens if they counter or show a competitor’s deal that seems to be better than yours? That is when the sales manager comes in. Usually the negotiation then becomes all about price rather than value, a very inefficient resolution and more loss of revenue.
What we find is usually the sales team wants to negotiate and walk away from bad deals. But the team lacks the guidelines and walk away points. They should learn to control the tempo of the negotiation and walk away when the sale makes no economic sense or destroys pricing integrity in the market. Without these guidelines and authority, all sales make sense until someone says no. The most efficient and effective person to negotiate is usually the salesperson.
The authors are executives at Accordence, a negotiations and interactions training consultancy that helps organizations maximize negotiation as a competitive advantage. You can find Part II of this article HERE.