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In many companies and across multiple industries, representatives face enormous pressure to quickly provide their price and present their offer even before having a real conversation with their potential customer. Unfortunately for them, many tend to actually provide these prices, which represents a significant error in their sales process. Thereafter, they often find themselves stuck in a conversation that focuses only on the price and they immediately enter into a negotiation process with their prospect.
Thus, the question is: Is negotiation a step in the sales process? My answer to this question is mitigated. However, as a general rule, if a consultative sales approach is followed and in particular, the baseline selling methodology, a representative should never have to negotiate during the sales process.
In this type of approach, negotiating is not part of an effective sales process. However, if a negotiation is to take place, the time at which it takes place is a determining factor for the profitability of the sale.
Where does the problem of negotiating in sales come from?
If you are in an industry where there is a pervasive price culture, you may have yourself contributed to instilling bad habits among your customers by giving them discounts on demand or by making concessions without demanding anything in return. As a result, it is a movement that has become very common in these industries and can only be countered by a company that is a leader in its market.
If your company is in a leading position, you have the opportunity to choose the customers you want to keep based on their profitability. Thereafter, you will have to manage clients who are potentially, or very close to, being profitable by negotiating with them.
This is the challenge faced by many salespeople, as the majority of them do not have the skills to negotiate adequately with their customers. Here are the two elements that each representative should know before engaging in a negotiation process:
- To which sales process you are referring (e.g. baseline selling)
- Never make an offer or negotiate before third base.
When is the best time to negotiate with potential customers?
Many representatives are used to start their sales process by sending their rates by email or by starting the conversation with their customer by presenting their offer and the new prices. Many industries do this, but when you want to sell your products or services at full value, this approach leads to a dead end.
The baseline selling methodology gives us an illustration of the only acceptable time for negotiation: between 3rd base and home plate. Why?
In order to negotiate, it is necessary to have essential information that representatives cannot guess or assume. Therefore, you must go through 1st, 2nd and 3rd base before starting this phase.
Between 1st and 2nd, you should:
- Understand your client’s needs and problems;
- Identify the essential reasons to buy (the impact/consequences of the problem);
- Quantify the cost of the problem;
- Identify the urgency for action.
Once the work is done between the first and second goals, also remember that it is now important to complete the steps in the sales process to achieve the third goal. The path from second to third goal is more of a qualification step, as you are looking to see if the potential customer meets the key criteria for you to spend time making an offer or bid.
In short, here is what you need to understand between 2nd and 3rd base:
- Know if the client has the funds or the willingness to raise funds;
- Know the decision-makers;
- Know the timelines for decision making;
- Know the decision-making processes;
- Know the decision criteria;
- Know your position in the face of competition;
It is when all these steps are completed that you find yourself at the third base and head for home plate and it is at that very moment that you use everything you have learned beforehand to present your offer. That is why you can never negotiate before the third goal, since it would be completely illogical to start a negotiation process before you even know the information that allows you to build your offer and to have presented it to your client.
What you need to know about negotiation
First of all, it is important to clarify that negotiation is not limited to price. It is possible to remain firm on price while negotiating on other elements such as conditions, service levels and more. In reality, it happens on several occasions that we do not concede on the price but rather on these other elements. We must absolutely remember that as soon as there is a concession, there must also absolutely be counterparts.
Here are some examples of counterparties:
- The customer offers you quality referencing;
- The customer uses more services from your company;
- The client opens you doors to a larger territory.
If you are a manager and your salespeople keep coming back to you saying that they must offer a concession to a customer at the risk of losing him, and that there is no counterpart, you must question the ability of your representatives to sell value and apply a consultative approach.
Do not underestimate the proximity to your customer
One challenge you may possibly face through your negotiation process is the business relationship, or proximity, you have with your client. If you are very close to your client, you share a business relationship that has been established for several years, you are used to meeting him in a very friendly context, and you have never confronted him or her before, the level of difficulty in negotiating increases a notch.
Therefore, it is quite possible that at the time of negotiation, your client may misunderstand your intentions and be dissatisfied. It is therefore important for you to know how to manage such a situation properly.
For sales managers, it is important to equip your team of representatives with the necessary skills to be able to negotiate effectively. To limit the frequency of negotiation situations, adopt a consultative sales approach that allows representatives to be strong at each step of the sales process before potential negotiation. This is the best approach to keep your team from leaving money on the table!
If you are a sales representative, remember that it is crucial for you not to skip any steps in your sales process and to refer to a specific method that will help you advance your sales opportunities in a healthy and efficient way. Don’t be afraid of negotiation, because if you have properly followed your consultative sales process and you succeed in creating value, the customer should be fully open to offering you counterparties if the negotiations were to take place.