Sales Negotiation Strategic Model Tactic: Analyze the Situation

Analyzing the account situation is something most salespeople do well, since they have general access to their best customers and frequently visit their premises and facilities. However, they are usually analyzing the account for opportunities to build relationships, find new applications, identify needs, learn the customer's business, and solve problems. When anticipating or starting a negotiation, some of these need change, and others require a different focus. At least four interacting indicators should be examined before deciding if negotiation is the best strategy to employ and/or what's the best approach to take in implementing it.

Ramp up the Power (On Both Sides!)
One indicator that should be carefully scrutinized is the power-who has it? While most salespeople think the customer always has the power (and plenty of it), that's a fallacy. While the power can be heavy on the customer's end, it can also be weighted toward the seller. For example, suppose you're dealing with a good account, whose priorities have changed suddenly, and it requires expedited delivery of significant orders from your company. Who has the power? In this situation, if the delivery can be expedited, the seller has the power. However, you can't abuse the situation and ask for more (in return) than expediting the delivery is worth.

The main idea in examining the power before entering a specific situation is to make sure the power is reasonably balanced on both sides. While the customer has the power to provide business, sign orders, make demands, and so on, there are many power issues in your favor, and the prudent customer will not risk losing them. After all, you provide quality products and services, have learned the customer's business, provide value-added services, have developed relationships, and probably have an edge over the competition. One of your power pluses, it is hoped, is your superior ability in executing a sales negotiating strategy. Don't ever sell your power short!

This power assessment serves as a reality check:
1) If you have an excess of power, be careful and don't abuse it during the negotiation. You may win the battle but shoot yourself in the foot on a long-term basis by not orchestrating a win-win solution or by allowing stress to neutralize relationships.

2) If the customer has an excess of power, this situation may be the one you should decline or tactfully avoid entering into.

Power is a state of mind, and by assessing the power balance each time you'll probably find that you have more power than you thought!

What's the Interest behind Each Position?
Another element that needs to be carefully assessed or analyzed is the customer's position and interest. In simple terms, a position is what the customer wants (or will ask for). You will often know some of his or her positions before the negotiation. Positions are difficult to change unless you can pinpoint the interest behind the position; in other words, it's necessary to probe into what's causing the customer to take the position. A customer who seeks a 10 percent discount on a large order is taking a position. If you take this at face value, you can negotiate only this position. However, when you probe the interest (behind the position) you may uncover a number of interests that can be more successfully negotiated, and you can find better ways to handle it. In terms of this hypothetical customer's 10 percent discount position, the interest could be a budget cut, need for better terms, and a concern about getting more value from purchases, an ego demand on the customer's part, a desire to look good by saving money, and so on. It should be obvious that the latter "interests" are easier to negotiate than a concrete demand for a 10 percent discount. Finding the interests opens up many additional opportunities for creative solutions and trades.

Once you know the position, how do you find the interest? You simply use your tactical selling skills. By probing for the reasons behind the position, you may uncover some clues to the request; this is one way to effectively capitalize on relationships before you find yourself in a negotiating session. If you can't uncover the interest before negotiation, you can certainly ask during negotiating. However, you lose the advantage of knowing in advance (and being able to plan your strategy). Better to plan and to ask your questions while in the analysis step.

Check Out the Competition
Another indicator that needs to be assessed in this first step is the competition. Competition may not be a factor, and in most sales negotiations it should not be. The general rule for negotiation is that "if the customer negotiates, he has made a mental decision to purchase and is merely seeking a better deal." That's pretty sound, but it's very precarious if he's negotiating with your competition simultaneously or using them for leverage. In either case, your analysis should be applied to the situation if a competitor lurks in the wings; if so, do a quick feature/benefit analysis to compare your strengths and weaknesses with the competitions. You can thus arm yourself with appropriate offers to offset the competitive issues, if they surface.

Go or No-Go Decision?
The final indicator for you to ponder: Is this a productive opportunity to negotiate with the customer? This is the bottom line for you, and the platform for your strategy. In brief, you need to weigh the risks and determine if you should proceed (perhaps initiate the negotiation yourself) or dodge it, assuming the customer is pressing you for a negotiating solution. One method for deciding is to use a simple decision matrix that helps you objectively weigh the factors, as in Exhibit 5.2.

In short, the object of the decision matrix is to rank your power and that of the customer's as high (H), medium (M), or low (L) for this possible negotiation. Beware if either you or the customers are at opposite poles (high or low).

If you can't identify at least one (and probably two) positions that the customer will take, you are not ready to negotiate. The solution is to do more tactful probing so you can arm yourself. You may or may not be able to surface the interest in this step, but that's OK. This gap (empty space under "Interests") will reinforce the need to locate the interests) later in your planning and actual negotiating.

Finally, you quickly assess if competition is a factor (high, medium, low, or not applicable). If it is high or medium, then it would be a good idea to examine both strengths and weaknesses of the competition's offering as compared to the strengths and weaknesses of yours.

If all conditions are met, it's academic who initiates the negotiation. Go for it! But first go to the next step to make sure you have a trading situation and have completed a balanced action plan.

Source: Sales Negotiation Skills That Sell by Robert E. Kellar