“Just a bit more” or “Nibbling”
When you are almost done and the major issues seem to be out of the way, a common tactic is to bring back issues that weren’t previously agreed to and say something like, “Look, given we have made concession A, how about you just throw in B to get this thing done?”… Danger… This tactic is used when one side is on the hook and convinced that a deal is going to be done.  Often thought of as “Sweetening the deal” it is a time of great exposure.

The counter to this is that the other side is likely to be equally committed, so you can flat out refuse to move and they will probably let it go.  If you choose to use this yourself, be careful not to be obvious by setting up a pattern.  It is best used at the end of the ‘Middle game’ so that if you make a decent sized concession, immediately ask the other side for a relatively small concession to ‘soften the blow’.

Voiding a concession (ie Withdrawing a concession)
This is not a tactic to be used in good faith bargaining, but you find that the counterparty is being dogmatic about a subsequent point you can explain in good faith that a previously agreed item must be revised.  A good example is that if you agreed a price and then they demand a higher service level and won’t let go, then you can explain that you can accomodate the service level, but the price needs to go up.

The closer concession
If there is a small concession that you have set aside at the beginning, then often it can greatly help goodwill in revisiting it at the end and making an immediate concession.  This works in the context of, “Look, we said we couldn’t do A, but given you have helped us with B, C & D, let’s just put it on the table and move on.”  This tactic is expecially helpful when the other side needs to take a deal up to the CEO or board for final approval – It finishes the discussion with goodwill all round and they are more inclined to frame the deal positively with the executive.

Some negotiating styles and how to handle them:

Tough – My most difficult negotiation was with a procurement expert at a major telco who used a highly aggressive style that included personal attacks and constant blocks on concession requests.  This style of negotiator must feel that they are ‘winning’.  If you find yourself in this situation there are two things to use in defence:
1) Keep your cool.  This is perhaps the hardest part and it is important to have a non-invested mentor/sounding board that you can talk it through with and get a moderated perspective from.  In my case it was my manager.
2) Come prepared with a bunch of concessions that you can give up that have high value to them and low value to you.  Aggressive negotiators will never concede a point without gaining one (In fact this is standard legal negotiation craft).

Soft exterior, hard core  - This is an unnerving style. Basically a convivial person that is warm in conversation and seemingly the negotiation is flowing when suddenly they change and get very inflexible.  It is startling in that you don’t expect the change and will typically happen when you provoke them with a point they didn’t anticipate or seems excessive to them.  The way to handle their outburst is to question the rationale in an inquiring fashion so you understand the underlying concerns.  With additional information you can get things back on track.  If you attack the point directly you will just provoke further opposition.

Hard exterior, soft core –  These people come out the gates firing and the easiest way to spot them is to use the ‘flinch’ technique mentioned in a previous post.  Look genuinely pained and in a crestfallen voice explain why this concession is going to kill the deal and demonstrate that this affects you personally.  If they then start to back off, then you have found a soft core..If they continue to push, then likely you have a ‘tough’ negotiator and you will need to offer up alternative concessions to get things back on track.

So, that is the end of the short series on negotiation.  If you have any specific scenarios that you would like solutions for, please add a comment and I will do my best to answer them for you.

Higher authority requirement (A non obvious twist on this)
This strategy is used by everyone from regulatory commercial negotiatiors to used car sales people.  The common mistake people make in a professional setting is to say, “I can’t get this approved, I will need to take it to my manager.”  All this does is annoy the buyer and have them ask why your manager isn’t in the room.  Your goal with this technique is to create the perception of pain on your side and a feeling that they need to reciprocate with value to re-balance the deal.

The most effective strategy is to explain that the price/terms/service level is so outside the bounds of normalcy that you will have to have it approved by a group of people or a committee.  This means that they can’t just request a person be brought into the room and it implies a significant amount of internal selling will be required on your part.  With this in mind you can request concessions on the basis that you need to convince a group of people why the deal is in the company’s interest.  eg. “I am happy to take this to the committee, but we have to give them something that compensates for the risk of guaranteeing you 99.9999% uptime.”

Leave the lawyers until the end.
Prior to negotiating terms you should sit with your lawyers to understand the boundaries of your authority and sticking points, but they should not be engaged until the principles have been agreed.  Lawyers are required to be confrontational in order to protect the organization from undue risk, which is exceptionally valuable in the end, but can break a deal if engaged too early in the process.  I should add that one of my most valuable resources in the past was a commercially savvy lawyer who understood how to get deals done whilst preserving value – If you can find one of these gems, hang on with both hands (You know who you are John M).

Never split the difference by default
A rookie negotiation mistake is to split the difference because it just seems fair; but that depends on where you started negotiating from (Remember the opening technique of starting with an outrageous offer?).  The exception to this is to split the difference if it gets you closer to where you want to end up, but then you must revert to the ‘higher authority’ technique to get it back up – “Gee, I tried it on, but management wouldn’t wear it, which is a shame because we are so close.”  Then you push the deal up to where you need it.

This dovetails into the ‘Nibbling’ strategy that I will discuss in the next post, but sufficeth to say that when the counterparty thinks that the deal is done you are at your most powerful.

Traits of the best negotiators
Here is a list of behaviors that you should adopt in addition to the tactics:

1) Always explain circumstances before disagreeing or refusing a request.  If you do this in a logical, commonsense fashion you often find the other side nodding their head before you state your position.  I used this technique to explain to customers that by its nature, cloud computing imputes the same service ‘up-time’ for all customers and therefore we couldn’t offer differentiated service levels per customer – It just makes no sense… Which avoided extended discussions with procurement about novel service level agreements.

2)  Restate and test your understanding of the counterparty’s position.  It is important to do this because on playing it back you may find you have misunderstood their intent, or as I have found, in playing it back to them they hear how unreasonable a request is.

3) Ask a lot of questions in order to:
- Understand the counterparty’s true motivations.
- To avoid head to head disagreements
- To reduce the thinking time of the counterparty
- To control the flow of the discussion

The next post will include the closing tactics and discuss a few styles to look out for and how to deal with them.

The outrageous first offer:  This is a tactic often used to set new expectations.  Your goal is to learn from their response and to raise the top end from which they are thinking that they are negotiating. In fact, this is used by savvy employees during salary negotiation – eg.  If you expect to get $150k, then you would lay out an expectation of $200k.  This tactic is also very helpful for getting a feel for where the other side is at.  The offer should be believable, but right on the extreme edge of plausibility.

If you create lots of room for negotiation, it lets the buyer feel like they are getting some wins.

Your response:  You should act with an extreme emotion, to bring things back to an even keel.  Each situation is different, but examples are shock, disappointment, sadness, anger or outrage.  Something I do is to literally flinch – This is a very powerful technique.  You need to do this to show that this offer is not a new benchmark to work from and that it is in fact ridiculous to have tabled.

Time pressure:  Used to avoid excessive analysis of options, or to avoid conpetitors having time to react.  There are a number of ways to make this happen: A required signatory on your side is going overseas, a promotional price has an impending deadline etc.

Your response:  If it is used on you, use the ‘higher authority’ tactic you will find in the next post to slow things down again.  The danger to you of time pressure is that you aren’t able to analyse risks or assess variables.

Maintain momentum:  As you work your way through the discussion points don’t get caught up on one.  It is best practice to set aside sticking points for later discussion if you are miles away from agreement on a particular point.  The way to do so is say, “Look, I am sure we can work this one out, but I will need to assess this in the overall context of the agreement, so let’s set this aside until we have agreed the other points.”.  This then allows you time to think about how best to tackle it and creates a pattern of agreement between both parties.  If you continually deadlock during the discussion emotions can get in the way of progress.

Your response: This is a best practice, so if moving on is proposed by the other party, you should do so.

Silence:  Use this as a way of getting concessions out of less experienced people.  It should be used to gain clarity or concessions – For example, if they state a demand, just sit and say nothing.  Most of the time people will crack and go on to explain why they made the demand or water it down, providing you with a gap to dive through.  Secondly, when you make a demand, be careful to say nothing afterwards and wait out their response.

Your response:  This is a game of ‘stare-down’.  Use your discretion, but for the most part, he/she that speaks first, loses.

Flattery: Ensure that the discussion starts off on a positive note and that the other side understands that you value the relationship.

Next week’s post will list some mid-game tactics you can use to ensure that you have the upper hand in the next phase of the discussion.

When you set out the terms that you are seeking to secure, you will undoubtedly be challenged by a ‘standard’ that the other party is anchoring to.  A ‘standard’ is a comparative benchmark that is used to justify a point.  For example, when I buy a loaf of bread, I expect it to be the same price each week – If it weren’t, I would use the prior price as a ‘standard’ for negotiation with the seller.

Last post I discussed consideration for the counterparty’s standards, but you need to think through and write down what your standards for all important points will be.  Some examples are given below and it will be obvious that they may be used by either side.  This part of your preparation is critical, because if you can’t defend your position with a standard (benchmark), then you leave yourself open to any and all attacks.

• Industry average (price/service levels/payment terms etc)
  • Price- If you vary the price above the norm or expectations, then you can use the following justifications
    • The product delivers higher value to the client than other offerings (It can’t just be that it has more functionality, but rather that what it delivers results in a greater benefit to them).
    • The contract is more complex/higher risk than average
    • There are terms or features in the contract that expose your organisation more than average and this needs to be compensated for.
    • There is a premium service level that has been requested (eg Prioritized delivery).
  • Service levels- If they are seeking higher warranties or greater responsiveness then:
    • If you can deliver this, then explain that you can do so, but that the price will rise commensurately.
    • If you can’t deliver this, then explain that the price doesn’t cater for such high service levels, or why your service/product deviates from industry norms (For example, if you are selling equipment to rural locations, then you can’t guarantee a 4 hour on-site service response time).
  • Payment terms - These can be varied by both sides using the following negotiating points.
    • Price/Contract length - Shift price/length up, then the payment terms will vary consistently.
    • Debt rating – If the client has no payment history with you, then you may be able to negotiate shorter terms.
• Previous contract terms – Clients always seek to improve terms over time (esp. procurement)
  • Stick to your terms: You should rarely accept any variation in terms other than price.  New staff with the counterparty may seek to get a win by introducing new warranties or service levels, but this should be avoided.
  • Price increase:  You can justify a price increase if your service/product is delivering increasing value to the client, or the cost of delivery has gone up on average across the industry.  Never try to negotiate your price up on the basis that your internal costs have increased, because that simply demonstrates inefficiency.
  • Price decrease:  Clients often say that input costs have decreased since the previous contract, which may only be countered by proving additional value that is reflected in your internal costs increasing.
• Internal policies for terms – Both parties can say, “Our policy is ‘X’, therefore we must stand firm on this.”
  • When they say it:  No ‘policy’ is set in stone unless it is part of a legislative or industry regulatory requirement, therefore your response should be to state why your standard is more valid ask who is empowered to make exceptions.  In doing so you are exposing that you know that changes can be made and my experience is that counterparty will eventually handle it on their side by seeking approval and moving on.  ’Company policy’ is one of the weakest defences.
  • For your side: A savvy negotiator will follow the advice above, therefore a goo d response is, “Look, I can take it to [CxO], but I know what the response will be.  I can tell you that he/she has never varied on this, not even for our largest customers, including [insert large company name] (Of course this must be true).  An alternative is to just name a single large customer where this is true, so that the counterparty can go to their boss and say, “Look, it is good enough for [Large company] so it should be good enough for us.
• Legislative requirements – This can work for and against you.
  • If it is their defense, then the only option you have is to challenge the applicability of the legislation to your situation.  Sometimes counterparties are too lazy/hasty in assessing relevance.

• Company constitutional  commitments – This is the same as legislative requirements.  For larger organizations this is generally immovable.

This list is not exhaustive and I would love you hear your standards and responses.

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1) Who is going to be in the room?

- What are the measured on?  eg.  Procurement are measured on % savings from a baseline – Usually the first offer you put on the table  or an industry benchmark.  A commercial person is likely measured on the ROI of the project and therefore is interested in a combination of risk/return.

- What are the personal motivations of each person?  Some are less obvious – I have been in several deals where an individual wanted to be associated with a high complexity and large-scale project so that they could have this in their CV.  This works against lower cost, simple service providers who think that they will win because it is the best answer for the prospect company.

- How have the participants done deals in the past?  Are they risk taking innovators or conservative pragmatists?   These and several other factors you will have learned in sales training all dictate the negotiation points that will cause concern for them.

2) What will their standards/benchmarks be?

You should have a fair idea about the points that they will want to discuss, so think through what their benchmark anchors will be and how you can counter these with your own.  Doing this correctly will take the weight out of their  arguments and confound spurious debating points.

3) Write it all down in a summary and markup any draft contract that they may have made.

4) Do a practice run (role play)

This is the item that separates the amateurs from true professionals.  We all know that doing run throughs of our sales presentations is mandatory for nailing it in the day – So too for trial negotiations.  Get one of your sales colleagues (or better still your sales manager) to play the part of the other side and have them go after every point like a  pitbull.  Also, it is important that you don’t tell them what you have assumed their side will bite off on.  Let them play the part of the customer and decide what they want to debate for themselves – This is a really valuable exercise because often they will bring a new perspective to what will go wrong.

Finally, revise your meeting preparation notes based on what you learned during the role play and you will be ready.  The next post will describe the various tactics and practices that may be employed during a negotiation [I have been told that these work very well during annual territory and package negotiations as well ].

Know your desired outcomes and limits:

1) What is your Best Alternative to a Negotiatied Agreement (BATNA)?

In order to maintain some leverage in a negotiation you must have a plausible alternative to doing a sub-optimal deal.  In sales, this alternative usually becomes weaker the longer you stay at the table.  An example BATNA is – ‘Stop negotiating this deal and spend time pursuing other deals with better terms.’  If the other side thinks you can just walk away, they will try much harder to get the deal done.

2) Decide where do you want the relationship to end up?

Often you can afford to walk away from a new prospect despite some residual negativity, but this will not be the case if you are negotiating with an existing customer.  Keep this in mind before going in with a tough bottom line.

3) Prepare all the points and have a firm ‘walk-away’ position.

Before you enter the negotiation you should list all the likely points for negotiation and know the ones you can move on and those you can’t.  I will discuss strategies for delivering these in a later post, but ahead of time you need to know your range for each.

Arrive with benchmarks or ‘standards’ for each negotiating point.

Inexperienced negotiators will present a demand without having a supporting standard or benchmark that justifies their position.  This leaves you open for having your position undermined and losing control of the discussion.  For example, if you wish to argue for 30 day payment terms against their desire for 90 days, then your ‘standard’ might be that this is common across the industry and is required of you by your suppliers.  You cannot just say, “This is our company policy.”, because everyone knows this is a weak justification.

In the next post I will discuss the final preparation elements to ensure that you understand how they are likely to react.

This is the first post in a series on B2B negotiation that will give you the techniques you need to avoid the gut wrenching feeling of winning a deal, but still feeling like you lost because of the terms you ended up with.  We will begin by avoiding the all too common situation of being led through a series of value destroying negotiations because the customer took control and you were inadvertently dancing to their tunes.

Agree a close plan:  The first thing to do is to mutually agree a path to conclusion with the evaluation lead.  Be certain that this person can give you an authoritative view of how to get the deal done and then meet to confirm and document the steps to closure.

In order to create this plan you need to have a list of who is authorised to:
- Negotiate the operational/technical details
- Agree commercial terms (Usually a combination of business and procurement)
- Craft legal terms
- Physically sign the agreement

You goal is to ensure that all the necessary people (and none of the unnecessary people) are in the room at the correct time.

After you have been shortlisted, your negotiation should go in the following order:

1) A high level term sheet agreed with the business/technical/operational/procurement leads.
2) Legal draft of the term sheet to be completed and negotiated by legal counsel for each side

Expert tip: Many enterprise salespeople make the mistake of going from proposal to formal legal documentation.  This creates great inefficiencies and delivers a bad outcome for both parties.  NEVER allow legal staff to participate in the creation of the term sheet. Until terms are agreed, having lawyers in the room wastes time – Their very important risk mitigation and compliance function is best applied when the terms are concluded.

The goal of the term sheet is to accurately describe the intent of what a legally binding contract will contain.  It is non-binding and therefore allows you to focus on moving quickly and not focusing on the ‘heretofores’ and ‘notwithstandings’.

The next post will discuss what you need to prepare before going into your terms sheet negotiation.

Compare and contrast:

vs

The first version has two obvious flaws:

1) This person can’t be bothered personalizing the invitation so it is essentially saying, “Matt, give me your direct line just in case I ever need you for anything.”
2) They haven’t reminded me how I know them – I have been in sales for nearly 20 years and met thousands of people, so chances are I have no idea how me met.

The second version is my suggestion for best practice:

1) Tells me how I know the person
2) Shows me they have taken the time to personalize – I feel like I owe them a response now.
3) They have indicated an interest in me personally, rather then just asking for a connection that appears self serving.

Try the second approach if you are seeking to connect with someone.

Secondly, if you do get a generic request from someone that you know but haven’t spoken to for a  while, don’t just accept – Immediately send them a Linkedin message asking about them and what they are up to. You may find great value in properly connecting.

A connection is not part of a useful network unless there is social capital involved. Ignoring this rule makes Linkedin just a database and you may as well have a spreadsheet.

Professionals engaged in enterprise selling are constantly looking to attain access to the executive suite so that they may sell “high and wide”.  The challenge for many is to determine how they can be relevant to a cross-section of interests and this post provides the answer in a way that can assure you the role of trusted advisor, thereby embedding you into the fabric of your customer.

Whether you sell technology, business services or financial instruments, knowledge of your customer’s customer will allow you to find opportunity and threats for your customer that you can use to build the strongest of relationships.  This is a large topic, but I can simplify the process for you as follows:

1) Map the landscape of your customer’s market
- Read the industry journals or analysts research on factors relating to the market your customer serves
- Ask your customer who their most important customers are and what they are thinking about in terms of serving them better

2) Brainstorm the biggest opportunities for your customer to serve their customers
- Do a quick Porter 5 forces analysis for your customer with respect to their market (Just a thumbnail sketch is fine)
- Sit with your team and think through where the highest value opportunities are for your customer to serve theirs

3) Match your capabilities to the best opportunities represented and find a fit
There are always simple themes that you can attach to – Disintermediation, regulation, consolidation, cost reduction etc… Figure out what the future scenarios might look like and how you can partner with your customer in addressing the change.

4) Discuss your thoughts with customer executives as an advisor
Having identified opportunities or threats, you can now write a considered note to any number of executives at your customer and explain the high level detail of your thinking and the opportunity you think it represents.  Set the meeting, with the simple agenda of validating the opportunity and seeking sponsorship to explore it further.  The content should be something along the lines of, “I have observed XXX with respect to your market… I believe it represents Y to you… I would like to meet to discuss how we might address this” .  Making sure not to discuss your solutions or offerings at all in the note.

Use this as an opportunity to get out of your usual silo within the customer!

Example 1) A finance provider attacking the technology wholesale market

Situation: A consolidation of wholesalers means that resellers have credit accounts with fewer distributors, resulting in tighter cashflow due to the inability to spread their account limits.

Opportunity:  A finance provider can work with one distributor to offer better credit terms to attract a greater share of reseller business.   The provider would initiate this discussion with the CEO and then would work with the CFO and head of sales to develop the plan.

Example 2) A software provider seeking to gain greater share within the mortgage processing market

Situation:  The mortgage broking market is increasingly competitive and the biggest customer demand is turnaround time in mortgage processing.  The software provider should work with the broker to use a low-cost business process automation solution that can sit behind a marketing message of speed of approval.   This discussion may start with the head of marketing and then work across to technology… A way to outflank the competition through broader executive access.

Case Study – N.Z. Telco technology outsourcing

 In 1999 a U.S. multinational technology firm called Electronic Data systems (EDS) was seeking to win a 10 year, $2bn outsourcing deal with Telecom New Zealand.  They were competing with IBM and the battle was fierce.  There were many factors for their ultimate win, but core to it was the brilliance of the lead Sales Executive, Michael B.  Michael worked very hard to understand Telecom’s strategy, which included finding ways to sell high margin content/services over their existing infrastructure (copper wires) that was increasingly becoming commoditized due to new regulations requiring wholesale/retail splits.

This insight led him to work with Microsoft to include a three-way partnership into a new entity called, ‘E-Solutions’, which would deliver Microsoft applications as one of the earliest software as a service offerings.  This innovative approach to solving a strategic challenge saw the account exec win the largest ever outsourcing deal in New Zealand I.T. history.  In this example one party focused on solving the current cost challenges, whereas the other was looking to the future and adding considerably more value through market insights.

So, if you want a way to outflank the competition and to develop long-term, enduring customer relationships, start researching your customer’s market and find ways to help them play to where the puck will be…