Luckily, over the years, I have developed strategies to pre-empt, or avoid the need for negotiation. These strategies also significantly enhance my chances of winning a sale in competitive situations too. Of course, I will negotiate if needed – but I can honestly say I haven’t had to negotiate my fees in well over a year now.

My advice below is primarily geared towards those selling professional services – consulting, legal, accounting or technical. But many of the lessons can be applied to product sales too.

Why is Negotiation Necessary?
Negotiation – particularly over price happens because of one (or more) of seven key reasons:

• Value: the client doesn’t believe that the value you and/or your product are offering justifies the price you are charging.
• Credibility: the value you claim may be worth the price – but the client doesn’t believe you will really deliver it and so discounts the value.
• Competition: the client believes they can get the same or higher value elsewhere for a cheaper price.
• Budget: the value may justify the price – but the client simply can’t afford it.
• Habit: in many industries – retail for example – buyers expect to negotiate, and expect to get discounts. It’s part of the way they do business and breaking that expectation can be difficult.
• Role: for example, many procurement departments are measured on the discounts they achieve with suppliers – that’s their job.
• Psychology: many customers struggle to pay what they feel is an excessive price – particularly when paying for someone’s time. What seems to make sense rationally from a value pricing perspective can sometimes feel emotionally to the customer like you are “gouging” them.

Let’s look at each of these in turn to see what can be done to pre-empt and make negotiation unneccesary.

Value
A significant amount of the selling process needs to be devoted to uncovering the true value of what you are selling. Often, customers won’t realise this up front. They will perceive an “itch” that they start talking to you about – but won’t realise how serious their problem is, or the true impact it is having. As a result, if you prematurely propose solutions you run the significant risk of the cost of the solution seeming to outweigh its benefits. Instead you must ensure that you and the customer fully explore all the impacts of the issue at hand – the side-effects and costs to others in his organisation, the impact on customers and suppliers, on employee morale etc. Be conservative – but ensure that all angles are covered.

In my business we help clients grow their sales – so it’s usually fairly easy to estimate and quantify the potential impact of our work. I typically look to deliver annualised sales increases of between 5 to 10 times the 1-time cost of my services. This means that – as long as the client buys-in to the estimate – there is rarely any concern over whether the benfit is worth the cost.

Setting this perception of value is critical to avoiding painful negotiation. And if you do find your customer negotiating it is often worth checking back to make sure that you have fully established the true value of what you are offering. If they are negotiating hard, then often you haven’t.

Credibility
Sometimes customer may buy-in to the potential value of your offer – but be concerned as to whether you can fully deliver that value. As a result, they discount the value and negotiate accordingly.

Obviously, establishing your (or your products) credibility is a huge part of selling. And for professional services, a major component of this is to not only establish that you can technically do the work required – but that you will “gel” with the client’s team and be able to deliver in practice.
Working with the client’s team “live” during the sales process and demonstrating (rather than just claiming) your capability and compatibility is key here. Turn presentations into workshops, meetings into real dialogues and pitches into joint problem-solving sessions. Really show the client what it will be like to work with you. Treat the sales process as a sample of your work and it will pay huge dividends in avoiding later negotiations.

Competition
Of course, even if you are offering great value and are highly credible – if your competition is offering the same or better then you are in a weak negotiating position.

Differentiation is key here: but only differentiation that adds value to the client.

I’ve found that for selling services, once I am in discussions with a client, the key differentiator is almost always the personal relationships that I and my team can establish during those discussions.

When I sold by first million dollar consulting project, I held an informal debrief session with the client’s MD over dinner and asked him why he had selected us over Accenture (Andersen Consulting at the time) – our chief competitor. I was expecting the answer to focus on our expertise in sales and marketing or our knowledge of his industry. Instead, his answer was simply: “you guys just ‘clicked’ better with my guys”.

It’s the personal relationships that tell the client that you can work together successfully and achieve the results they are looking for. By the time you reach any form of selection process, the rational screening has already happened. If you weren’t technically competent you wouldn’t be there. What matters then is how you differentiate emotionally.

Budget
Sometimes, the issue is simply that the client doesn’t have the budget to do what you propose.

To pre-empt this, it’s important to understand the client’s budget – at least in outline – fairly early on so you can shape your solution to fit. It sometimes feels uncomfortable or too blunt to ask budget questions. And sometimes the client simply refuses. But if you want to avoid negotiating because of budget, you need to know up front what it is and adjust accordingly.

If you do end up having to negotiate because of budget, the obvious thing to do is to de-scope the project to fit the budget – not to decrease your fee rate.

Habit
I have been in situations where I’ve come to discussion of price, and no matter how clear I have been up front that the price is the price and not a starting point for negotiation – the client has still expected that I have built some fat into the equation. In some industries it’s simply the norm that sellers quote high and buyers negotiate them down to a reasonable price. It’s just the way those businesses work. Even if your business doesn’t work that way – if you sell to buyers in those industries, it’s often just expected. They almost feel insulted if you’re not willing to “play the game”.

Personally, my strategy is to position early that I will be quoting a price that isn’t for negotiation. I don’t paint myself into a corner with no exit strategy – but I do try to repeatedly stress that this is not a starting point. It doesn’t always work – but it helps. I also know of some consultants who know their specific clients well enough to know who will inevitable look to “play the game” in negotiation – and they build this expectation into their initial price.

Role
Similarly, some procurement departments are expected to negotiate discounts, and their performance is measured on their results in doing so. Again, this is not an easy situation – but I’ve found the best strategy is simply to talk openly to the procurement department up front about what their aims and objectives are (over and above the aims & objectives of the organisation) and to try to reach agreement with them as to how we will handle pricing.

Psychology
Sometimes, clients who understand the tremendous value you are bringing to their organisation still can’t get over how much professionals appear to “earn” when a price is quoted – and try to negotiate accordingly.

This happens particularly with clients who are not used to buying professional services. They don’t know the “going rate” or all the expense and overhead that goes in to running a professional business – and assume that what they are paying in fees is the equivalent of the professionals salary. They develop a mental block about seemingly paying someone “an obscene amount” – irrespective of how much that person’s work is benefiting them.

This is a particularly tricky situation. Sometimes getting them to talk to more experienced buyers of similar services in their own organisation can help introduce a dose of reality. And constantly refocusing on the value being delivered helps too.

One strategy I use which I feel has helped in this and other areas is simply to offer an unconditional customer satisfaction guarantee. I tell my clients that when they receive my bill, they should simply pay what they feel the work was worth.

This can have a disarming effect. It increases client’s confidence – if I’m prepared to offer such a guarantee, then I must be confident in my ability to do the work and exceed their expectations. And it decreases their risk. If things don’t go well, they don’t have to pay.

Fee negotiation then becomes simple: instead of negotiating before they’ve seen the quality of my work and the results it achieves, we “negotiate” afterwards by them paying what they believe it was worth. In practice, since I introduced this a year ago, not one of my clients has paid anything other than the full fee.

Summary
So in summary – if you want to avoid the pain of negotiation:
• Establish value by fully exploring the client’s issue and its impact.
• Demonstrate and prove your credibility and compatibility up front.
• Differentiate through the way you work with the client through the sales process.
• Understand their budget early – and adjust accordingly.
• Adjust your approach to align with the negotiation expectations of the client, and the defined role of their procurement team.
• Defuse concerns and psychological issues.

1. Which party made the initial contact at the start of your interaction with the prospect?

-This item is rarely ever thought of by the time negotiations are getting ready to take place. If your prospect contacted you first, however, I would take this to mean you are in a little stronger position than usual. Someone who was interested in your product or service without you needing to “generate” that interest probably has a strong desire to take action. Remember, the party in the negotiations that “wants” is the party who is in the weaker position.

2. Was your prospect adequately qualified to your standards?

-Salespeople rarely perform this activity in the belief it will drive away prospects. However, you need to make sure the prospect’s time line, credit, payment terms, and real needs are up to your standards. If any of these items are not up to par, you aren’t ready for negotiations. You simply have an unqualified prospect you are wasting time on.

3. Did you prove your profit-justified proposal in your prospect’s mind?

-Have you either presented or plan to present a profit-justified solution to your prospect? Proving that your product or service will improve efficiency, decrease expenses, and increase revenues will put you in a very strong negotiating position with your prospect. On the other hand, if you fail to prove your profit-justified solution you will be in a very weak negotiating position. In my opinion, this is the most important item you need to address in order to negotiate a sale to your favor.

4. Do you have a backup proposal that can address the prospect’s needs if your primary proposal is turned down?

-Sometimes a customer might really like your primary solution involving your products or services but simply does not have the money or credit to pay for them. While many times you can uncover this situation during the qualifying process, you might be taken by surprise during the negotiating phase of your sale. If this problem arises, it is always wise to have a less expensive solution that still addresses the prospect’s needs. While it might not fix the problem as well as your primary solution, it could be the right middle ground that both you and your prospect can agree upon.

5. If the need for a price concession on your part arises during negotiations, have you planned on what you would like in return?

-Salespeople rarely plan for what they might be able to ask for in return for a price concession during negotiations. Usually, the salesperson heads into negotiations armed only with the “rock bottom” price they can get away with to still make the sale happen. A referral of high importance or a trade on price for another future sale might be a couple of things you can ask for in return for your price concession. Ideas for what you can ask for are limited only to your imagination, so make sure to plan for this accordingly before heading into the negotiating phase with your prospect.

Unfortunately, in the real world, negotiation is one of the most adversarial battlegrounds of political, egotistical and personal manouvring in modern communication. Think of situations where you need negotiations in order to make a deal and you will be in one of the most stressful situations in the world. These may include ‘hostage negotiation’, divorce proceedings (In the UK, negotiation and counselling may be a legal requirement before final divorce proceedings are heard), divorce settlement etc.

In to this mix we have to add the humble business negotiation. So humble in fact that some companies don’t let their sales people take part in this part of the deal but have an entire department of lawyers who specialise in ‘negotiating’ business deals on their behalf – and you know things are serious if lawyers are involved. The problem is that negotiation in business doesn’t actually fit into the mentallity of the sales process because a sales person ideally is ‘all about the client’. Throughout the entire process, from lead to close, the sales person should be focusing on questions like “what do you want?”, “What is your problem and how can I fix it?”. Negotiation is actually the opposite, it is all about me, “What do I want?”, “How am I best protected in entering this business relationship?” and “How much can I afford to give away and what can I hope to get?”.

Yet, don’t sales people have to negotiate as well? Not everyone works in a company whose legal department handles all negotations. Yes, the majority of sales people have to negotiate in order to make deals and in this respect some are sorely lacking because they don’t have the ability to switch from sales person to negotiator.

A lot has been said about avoiding price before developing a value in your product and in today’s economic climate this is going to be harder to avoid but this very situation highlights the very real problem in sales – negotiating way too early. Sales people think they are doing their client a favour by discounting their products because they are in the mentallity of “how can I fix your problem” but price is in the realm of the negotiator and should be about “protecting your own interests ie: margin”.

A strong sales process will make up for and more frequently than not even eliminate the need for negotiation if done right. That’s right, I would ascertain that if you do a good job in the rest of your sales process the vast majority of your clients will be ready to sign no questions ask. My first sales job was as a mortgage banker for a large direct lender, and I frequently signed deals over the phone with no manipulation or budging on points or rate, and I am going to briefly describe how I did that.

Instead of starting out my conversations with clients talking about their current rate, or the rate they wanted to achieve, we started out talking about their financial goals (The real reason you refinance, right?). We talked about where they are now, where they wanted to be, how much they were paying out in bills, and what they would like to pay off. Once I felt I had my clients trust, and was sure we understood each other I would start engineering the deal and offer then two or three options all of which would achieve their stated goals at a profit to me that I was also happy with. When I went back to the client I was not going back to pitch them, or talk rates and fees, I was going back with three different solutions to their problem and giving them the opportunity to pick the solution they wanted. If they balked at all three of the deals I would calmly and professionally reiterate their goals as previously stated to clarify my understanding, and re-explain how the given deals helped them achieve those goals, and ask questions to determine what was missing. If it was a goal that was important to them that I missed I would rework and re-present new deals, but if the conversation turned to rates or fees, I would simply explain that that was a good deal for them, how it would benefit them and that I also had to get paid for my efforts. If the deal was not accepted I walked… plain and simple. Guess what… I did not walk away very often, and close to half of the deals I walked from called back later ready to work with me.

Here is they key point… If you are negotiating on more than one or two topics you are either working with a bad client or you have not built value. Value is not built at the closing table; it is built over time by setting up a strong sales process. Moreover, if you discount or make concessions that is the new ground your relationship is built off from. In the words of Yoda: “Once you start down the path that leads to darkness… forever down that path you must travel.”

For discussion: Think about your product or service… Are you negotiating on things that could be avoided by building a stronger sales process? What steps are you planning on taking to avoid this in the future?

And so it is with sales and negotiations; it is definitely needed and worth while for the right reason and on the right occasion but can become dangerous and addictive if over used and depended on regularly and over time.

The reality is that there will always be a need to negotiate certain aspects of a deal, be that the SLA, credit terms, delivery dates, etc. In the right measures for the right elements, it is part of the process. But too many sales people rely too much on negotiations and fail too many times as a result. In the process they see negotiations as the culprit not themselves.

My experience has been that if the sale is properly executed, negotiations are one element of the over all plot, with little impact on the theme and the result. But when people breeze through the sale, then try to “negotiate” the deal at the end, they tend to blame the wrong party for a no deal, or worse a bad deal they have to live with, and worse again, their companies have to live with usually long after the rep has left. But like any but drug and dependencies it is hard to kick, and everyone suffers in the process.

The reality is that a deal has to be sold throughout the process, not at the end, too many sales people spend the early part of the process socializing, looking pretty, working on building a relationship rather than a case for the prospect to buy. Others go in and wing it, read the brochure, spray and pray as they say, and then are surprised that the client still needs to be convinced at the end. This is where the problem is, if you have not conveyed the value to the prospect, of course they are going to resist and ask questions towards the end. They will question the price because they likely do not understand what they are paying for, more importantly where the return is on the investment required.

If you sell properly, executing the process, fully interacting and engaging the prospect along the way, using questions not only to uncover information, but to help the prospect understand the immediate and the obvious, and the knock on ongoing impact and benefit of your offering. When you do this all the way along, you will have a willing participant and buyer by the time you get towards the end of the process. Questions from the prospect at that point are conformational in nature, not negotiations. If you fail to do that and rely on features and price, you will have to negotiate at the end.

We see a number of companies badly addicted to negotiating as a means of winning deals instead of selling them; at times it is hard to watch; as with any addiction, it leads to further bad habits in order to feed it. Their need to “negotiate” leads them to develop a habit for discounting. Since they were not able to convey value, they started negotiating discounts. They need an intervention to save them.

Like many junkies, each transaction was a fix; they call a prospect, introduce themselves, highlight other clients using their product, read the feature sheet, and then wait for the prospect to buy. When that doesn’t happen in a given time frame, they drop their price and then drop the price again, until they eventually negotiate a fix: a price that both parties could live with.

I don’t want to imply a negative impression of the sales people, like other people who have a dependency they need help, and they can rehabilitate and sell the right way. I also believe that they are also victims of their environment; in this case this is the sales culture of the company. A good sales person in a bad environment quickly develops the dependency of the pack.

The cure is to help reps solidify the earlier part of the sale; their choice was to try and learn to “negotiate” better around price (not value but price). It also takes a change of habit at the top, the leadership has to reward the right habits, and not encourage and reinforce bad ones (product dumping and discounting). With out that, we may as well just write them a disclaimer similar to that of the drug companies listing potential side effects and complications that arise from a sales process built on a dependency on negotiations.

Here are five tips to improve your negotiation skills so when you need to call upon them, you’ll be ready to sell more.

1. Identify points of agreement first.
Create a solid negotiating position by first identifying points of agreement with your prospect. This starts the negotiating event with a feeling of accomplishment for both parties, which is always a great way to start.

2. Be the first to concede a point.
Reciprocity is a fundamental of human nature (at least for all but the most difficult people). If you concede a point first, you’re more likely to see the reciprocity effect benefit you later. This puts you in a stronger position for the points of negotiation that are yet to be determined, and these are most often the most important points to “win.”

3. Check your emotions.
In most negotiating situations, it’s best to keep displays of emotion at bay, even if your prospect isn’t. “Cool as a cucumber” is the usually the key. Getting heated, angry, disappointed, or tense usually helps the other side (so does getting happy, giddy, and overjoyed). The only exception to this rule is that if showing an extreme emotion will move the negotiations forward in your favor, go ahead and show those emotions. But this is a rare sales scenario.

4. If you must discount, add first.
If you must concede major points, as in agreeing to a discount, do so by adding additional product or services rather than discounting the existing product. For instance, if I’m selling jewelry, let’s say a necklace, and a prospect demands a price that is difficult for me to accept (but I know it’s necessary for the transaction to close), I’ll see if you can add the matching bracelet to the purchase as a condition for meeting the price demand of my customer. In this way, the discount will be less painful.

5. Negotiations aren’t over until they’re over.
Unless the prospect draws a line in the sand and says something like “this is my final offer” (and you believe him), the transaction is still in play and negotiations should continue. Keep the negotiating activity going until the sale is closed. I’ve seen lots of sales opportunity lost because the sales person gave up too early.

In a relay race, each member of the team must perform at his best and then pass the baton to the next member of the team without fumbling it. Prospecting may be the one who gets us started – coming out of the blocks with a furious attack. The baton is passed to Qualifying down the backstretch before Selling takes over. Ultimately, Selling hands the baton off to Negotiating and he breaks the tape at the finish line.

This visual makes it clear that while Selling and Negotiating have some overlap, Negotiating is always the final leg of the race.

The vast majority of media is purchased by professional buyers who alert media outlets of a pending buy. By the time a buyer has issued the specifications of a buy, she has already formed a picture of who will be bought. The final piece of the puzzle for her is to figure out who gets which percentage of the available money and at what price. In other words, Negotiating is being done and the opportunity for Selling has ended.

Buyers split all media outlets into four categories: 1) Those they have to buy; 2) Those they would like to buy; 3) Those they can take or leave and 4) Those they will not be buying.

Negotiating your best deal doesn’t depend on the category in which you’ve been placed so much as it depends on your knowledge of where you’ve been placed.

Category #1 – Name your price
Category #2 – You will be able to negotiate a premium
Category #3 – You are fighting for the leftover money
Category #4 – You will not be on the buy.

Remember that while you are Selling, the buyer is forming an impression of the categories into which she will place you. Once the buy specifications have hit her desk, you’ve been categorized and the Negotiating begins.

Sellers in Category #1 and #2 will obviously have the easiest time Negotiating. They’ve positioned themselves well with all the important decision makers and they correctly perceive no additional need to continue Selling.

If you’re in Category #3, your best bet is to make a deal quickly. Not all Category #3 outlets will get on the buy so while it’s okay to take a shot or two at moving up, remember that there is little overlap between Selling time and Negotiating time.

Category #4 outlets may feel as if they have nothing to negotiate for and will want to continue selling. However, continuing to sell in a hopeless situation reduces your credibility and damages your chances at future business. The one thing for which you can negotiate is a meeting to take place in the very near future where you can get a head start on re-positioning yourself for the next buy. While Category #4 outlets have little leverage, you can exchange a graceful exit in exchange for the meeting. Buyers appreciate it when you don’t waste their time.

The best media sellers know the category in which they’ve been placed when the Negotiating begins and act accordingly.

I was in a sales seminar a couple of years back, and right next to me was a corporate buyer. As is habit, I struck up a conversation with him during a break in the action and received this information. His company sent him to this event to learn more about the tools of the sales person in an effort to become a better negotiator. Think about this and learn from it. Great negotiators study their adversary and build plans that counter their latest methods.

Am I suggesting that you start going to procurement trainings? No. What I am suggesting is you use the people already on your side to help you. If you are like me, the people you actually sell to are almost never the people that finalize negotiations. The high level executive or appropriate decision maker will work with you on what services they get for what price, and this negotiation is the first stage. Then, when push comes to shove it is the budget holder or a procurement officer that begins the price haggling. In either instance you have resources at your fingertips.

1.      Yourself – You are a consumer, therefore you are a buyer.

How often are you in a situation where you need to buy something and negotiate? Most sales people are shrewd and get the most for their dollar. Think about the last car you bought, how did you relate to the sales person and what did you do effectively to get a better price? How would you have countered or reacted to your own efforts?

2.      Your Company’s executives – They buy things everyday.

What better way to learn about the negotiating tactics of a certain group than to find a friendly and ask them questions. Sell to CIO’s? Go to your CIO and ask her how she negotiates? Sell to Directors of Finance, something tells me your company has one.

3.      Your Company’s purchasing agents – This should be obvious by now.

They want you to sell, it is job security. Ask them how they negotiate. See if they would be willing to role play, as this will sharpen your skills.

4.      Your Customers – The greatest Sales Evangelists build bonds with their clients.

On a regular basis you should ask your clients why they bough from you. Ask them what they were concerned about, and if you have the guts (and you should), what their negotiating tactics and objectives were. Once they trust you, you might be surprised what people tell you.

Not many people expend the energy required to become the best. Few people do any of the things I have listed here. The Sales Evangelist is that rare individual that tries anything in an effort to get better. Perhaps today is the day you start on the path.