Seven Basic Rules for Negotiating in Sales

By Kees Scheffel

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Negotiating is very often a part of the sales process. At the same time, many sales people try to avoid negotiating for various reasons. That is too bad, because a well performed negotiation can add value to the deal.
Before getting into more detail about the do's and don'ts in the negotiation process, allow me to stipulate a few things:
B2B versus B2C
There are quite some differences when it comes to negotiations between the B2B and B2C market. In the B2C market we often talk about one-time sales and negotiations boil down to the price very fast. This post is written with the B2B market in mind.
Bargaining or haggling
Although bargaining is a form of negotiating, in the B2B market it is often the result of poor salesmanship. Apparently the sales rep has not been able to convince the customer of the value and now has to lower the price to get the deal.
No matter how you put it, lowering your price just because the customer asks you to makes you unreliable and not trustworthy. What I see happening a lot is something like this:
Sales rep: The total cost is $100.00.
Customer: That is way too much! Your competitor is a lot cheaper.
Sales rep: I can give you a 10% discount.
Customer: A 20% discount sounds much better.
Sales rep: I can go to 15%. That is the best I can do.
After that there can be a closed deal, more haggling, a customer that wants to think it over or a lost deal.
The essence here is what the customer thinks about this sales rep. What would have happened if he had said 'yes' initially. He would have paid at least 15% too much. Just asking for a discount saved him at least $15.00. In other words, the sales rep tried to rip off the customer in the first place! Most purchasers in the B2B market will label the sales rep/organization as unreliable and it is not a great start for a long lasting relationship.
Some Basic Rules in Negotiations

1. Determine your boundaries One of the most important aspects of a negotiation is the preparation. Negotiating is often an emotional process and we tend to get carried away. It is a lot like attending an auction: we want a certain item so bad that we keep on bidding and we end up paying way too much because our emotions took over. Determine how far you are willing to go. What will be your starting point, what is the minimum you have to have. What conditions have to be met and what can you possibly give away. Once you have set your boundaries, make sure that you stick to them during the actual negotiations!
2. Commitment Maybe the most common mistake is starting negotiations without commitment. Negotiating should be the final stage. In fact, the two parties should have agreed on doing business together. There are just some details to be smoothed out. Suppose you want to buy a house. You look at a number of houses and in the end you have narrowed it down to the one you want. Then you start negotiations about the price and other conditions. Once you agree on that, the deal is done. You don't say to the seller: "OK, we agree on all terms and conditions, now let me think about it". As a sales rep, you have to make absolutely sure that the terms and conditions you are negotiating about are the only obstacles left. In other words, as soon as you agreed on those, the deal is closed. Don't end up with a customer that wants to think about it a bit more. In most cases like that you just have been used by the customer to put pressure on one of your competitors.
3. Only negotiate with decision makers It has no use to negotiate with people that cannot make the decision. Every 'deal' you work out with somebody that has to ask permission afterwards to his superior is bound to fail. That superior most likely wants to prove that he is 'superior' and will send your negotiation partner back with extra demands. The same goes for you as well. If you don't have decision making authority, you should not enter a negotiation. You will make a bad impression if you have to ask your 'boss' permission for every move you make and you will lose momentum and credibility.
4. Always ask something in return A very important rule and what sets true negotiating apart from bargaining, is that you always ask something in return when you give something up. The reason for this is significant in many ways:
   • It proves that your price and conditions were right to start with. As we saw before, just giving something away because it was asked for, makes clear that your initial price and conditions were too high/demanding.
   • It influences the customer's aspiration level. Your response to a request for a discount or better conditions gives the customer some insight in how far he can go. As soon as he notices that you are willing to move, but at a cost, he will be more cautious.
   • It gives you the opportunity to end up with a better deal. You can ask for additional volume, products, services, hours, whatever.
   • It shows that you are not a push-over. It is important for customers to know that their sales rep is a strong person. After all, once there is a relationship, the customer expects the sales rep to defend his interests and solve his problems in the future. Being a firm negotiator builds tremendous rapport.
   Even if the customer wants something that is well within the limits of the boundaries you have set in your preparation, you still should ask something in return. It doesn't necessarily have to be of an equal value but it has to make some sense at least.
5. Be firm on the matter but gentle with the person Business negotiations are about the business, nothing more, nothing less. A skilled negotiator can be very firm about what he wants while maintaining a good and friendly relationship with his customer. It is very important to stay focused on the matter and to stay away from personal emotions. After all, once the deal is done, you want a strong relationship with your customer for various reason like follow-ups, referrals, repeat sales, etc.
6. Maintain your price OK, that's in many cases easier said then done. But the essence is that you are better off giving extra product/service for free or less while maintaining the base price then by giving a discount. A discounted price will haunt you for all the years to come. Once given away it is hard, if not impossible, to take it back in following deals.
7. You've come to a deal? Stick to it! Once you have negotiated a deal, you have to follow up on it. Even if the deal turns out to be not that great, too bad. You become totally unreliable if you try to weasel yourself out of a bad deal. See it as the price for a valuable lesson learned.

There are many more aspects to negotiations. All kinds of strategies can be thought out, depending on the industry, the importance of the deal, the Decision Making Unit(s) involved, etc. The way you communicate has a huge impact as well. But these ground rules are basic in every negotiation, no matter the subject, no matter the amount of money involved.
Happy negotiating!
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Succinct Inc. is an Ontario based organization specialized in tailor-made training programs for sales and management. Succinct also provides Online Assessments that can be a tremendous help for all HR practitioners while hiring new employees or making the right choices in an employee's development. We have customers all over the world and working with all these different cultures has enriched our programs tremendously.
For more information: Succint Inc
For a more personal view on things, please visit my blog at Excellence in Communication
Kees Scheffel.