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The Three Skills Behind Effective Negotiations

 
 

Profitability in sales is in question. Customers are more empowered by information and more sensitive to risk. Moreover, an increasing number of buyer-side stakeholders means that pricing pressure is compounding. Therefore, more sales professionals need higher-level skills that equip them to navigate the negotiation process. 

Our four decades of work across industries shows that sales professionals can become effective negotiators by focusing on three key phases:

Opening

Sales professionals should make their offer first. Consider research from academics at Northwestern University arguing that, in a high-stakes negotiation, “there is virtually no research that supports the claim that letting the other party open first is advantageous. In fact, it can backfire — and lead to a worse outcome than you imagined.” Why should you make the first offering when negotiating? 

The answer is threefold: 

Anchoring

Put simply, the anchoring bias tells us that people overemphasize the first information they receive. Therefore, the initial offer limits the distance the customer is likely to stray from the initial price. Some term this phenomenon “anchoring and adjusting.” This phrase articulates the idea that people adjust their final answer in relation to an anchor. Moreover, they often over-adjust because they believe this answer should not venture too far from the anchor. 

Pre-suasion

Psychology professor Dr. Robert Cialdini explains, in his book Pre-Suasion: A Revolutionary Way to Influence and Persuade that pre-suasion is “the process of arranging for recipients to be receptive to a message before they encounter it … what we present first changes the way people experience what we present to them next.” When a sales professional makes the first offer, they are engaging in pre-suasion. Sales professionals must prepare their phrasing so that each word primes the customer for what will come next. Pre-suasion cannot be executed “on the fly” — it must be strategized.

Trust

Making the first offer creates trust that is critical to moving negotiations forward. The problem: Research shows that cynicism among buyers runs high. In fact, it runs so high that most buyers walk away from transactions that would benefit them. A study published in Judgment and Decision Making showed that more than half of the buyers walked away from a deal that favored them because of their inherent distrust of being sold to. Additionally, research from the American Psychological Association shows, people base their judgments “not only on what they think about it [the solution] but also how they feel about it.” These feelings, buoyed by trust, are important because “if their feelings towards an activity are favorable, they are moved toward judging the risks as low and the benefits as high,” according to the same research.

 

Control

There is an important distinction to be made between demands and needs. A demand is nonnegotiable. It is an ultimatum. A need, however, is a requirement that can be met in a variety of ways. Sales professionals who can control the negotiation by converting a demand to a need will succeed because they can meet that need in ways that do not require sacrificing valuable factors like payment terms, pricing, or the scope of the sale. 

Converting a demand to a need requires three specific tactics:

Neutral Acknowledgement

Sales professionals must signal that they have heard the customer’s demand. Doing so does not require agreement. The key is to let customers know that their position has been understood. “In a negotiation, that’s called labeling,” explained Chris Voss, the former lead international kidnapping negotiator for the FBI. In his book Never Split the Difference, he explains. “Labeling is a way of validating someone’s emotion by acknowledging it.” By acknowledging the customer’s demand, the sales professional earns the right to go further and ask questions that unearth the underlying needs. 

Effective Listening   

Effective listening is crucial for uncovering needs. Chris said, “Who has control in a conversation, the guy listening or the guy talking? The listener. of course. That’s because the talker is revealing information.” That information has real financial value to sales professionals. By tuning into what the customer is saying, a sales professional can go beyond their words and understand the underlying need. In fact, listening is such a powerful tool that it can even be predictive. 

Shaping Perceptions of Value 

Sales professionals shape perceptions of value when they focus the customer on what they will gain by reaching an agreement and what they will lose by falling short. Creating this influence is important because it makes the customer more receptive to a trade later. Shaping perceptions of value applies to more than just the solution. Sales professionals should also consider ways in which they can reinforce the value of the relationship with the customer as part of their negotiation preparation. 

 

Trading

Trading is one of the negotiator’s most powerful tools. It is powerful because it guards the negotiator against one of the most common traps in a negotiation: making a concession. A concession occurs when someone relinquishes something and receives nothing in return. When a sales professional narrows the scope of the solution to meet a customer’s budgetary needs, they are conceding. 

The solution to this trap to focus on trading. When a sales professional engages in trading, they are giving something and getting something in return. Put simply, trading is not unilateral, it is cooperative. To implement an effective trading strategy, sales professionals must:

Know What to Trade

Knowing what to trade means knowing the value of what is being traded. Prior to a negotiation, a sales professional needs to fully understand the intrinsic and extrinsic value of every aspect of the deal. Without this information, it is not possible to gauge whether what is received in return is of equal or greater value than what was offered. This important step also reveals items that may be of low value to the sales professional but high value to the customer. 

Know When to Trade

Trades should be spaced in increments to make their value more perceptible. If several trades are presented as a “package” they may appear as just one trade. The goal is to maximize the perceived value of each trade. Doing so is not possible unless each trade is treated as one unit. Additionally, breaking up the trades allows the sales professionals to deliver them in order of decreasing value. This strategy signals that the trades are finite and that pressing for more of them will only yield diminishing returns. For example, a sales professional may choose to offer a more customized solution in exchange for an expanded scope of sale. However, as negotiations unfold, these trades should represent smaller, and more nuanced factors. 

Know How to Trade

Sales professionals need to trade with care. That is, they must choose what they are trading judiciously. If sales professionals are not careful, they might resort to a string of trades that leave them with thinning margins. Sales professionals must lead with their trade first because signaling what the customer will get first creates a sense of fairness. This sense of equitable interests has been shown to bring efficiency to selling. 

 

The Three Pillars of a Negotiation Strategy Summarized

Opening

The opening of a negotiation sets the tone for the rest of the exchange. Here, the sales professional should seize the opportunity to:

  • Anchor the value of the sale by making the first offer

  • Leverage pre-suasion by helping customers become receptive to the offer early

  • Build trust early

Control

Control is about converting demands to needs. This is critical to moving a negotiation forward without relinquishing valuable financial terms. Sales professionals can execute a control strategy by:

  • Neutrally acknowledging the demand without agreeing or disagreeing

  • Uncovering the detailed needs that reside below the surface of the demand

  • Shaping perceptions of value by reasserting the benefits of the solution and relationship

Trading

Trading ensures that the sales professional only offers something to the customer with the expectation that they will get something in return. Trading avoids the trap of resorting to concessions late in negotiations when exhaustion sets in and deadlines add pressure. To trade effectively, sales professionals must:

  • Know what to trade by understanding the value of the items on the table

  • Knowing when to trade by ordering the trades in decreasing values

  • Knowing how to trade by using confident and clear language that is unambiguous

Trading is non unilateral, it is cooperative.”

Andrea Grodnitzky | Chief Marketing Officer, Richardson
 

Andrea Grodnitzky

Chief Marketing Officer, Richardson

As Richardson’s Chief Marketing Officer, Andrea is responsible for demand generation and value creation through strategic marketing, brand awareness, digital optimization, product launch initiatives, and market-facing thought leadership to drive sustained, organic growth. With a passion for sales and customer-centric activity, Andrea and her team work to inspire customers across the engagement lifecycle and support them in their journey to market leadership by delivering fresh perspectives to their sales challenges.

Connect with Andrea on LinkedIn.

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