Negotiating is a part of everyday life; it extends from personal interactions to professional deals. In the business world, negotiation skills play a key role in the successful execution of the strategies set in place. This is just not limited to price negotiations but also encapsulates changes in assortment, procedures, distribution channels, terms, and conditions, etc.
Extracting maximum value from your pricing strategy relies on excellent negotiation skills. Often, poor negotiating skills result in salespeople failing to extract maximum value from deals resulting in lost margins. This happens for a variety of reasons such as focusing too much on moving volume or transacting emotionally. Hence, salespeople need to refine their negotiation skills for effective enablement and execution of pricing strategies, and as such is integral for the overall success of your revenue growth. Below we have outlined 5 steps for improved negotiation skills that can help salespeople improve and deliver better results.
1. Prepare & Lead the Negotiation:
Too many salespeople sit back and wait for the customer to define their needs and wants. To get a head start on closing a deal, the salesperson should lead the discussion by stating the values offered by their product/service and asking open-ended questions to better understand the customer’s situation. This approach helps in building a rapport with the prospective client and a base for successfully negotiating the deal.
2. Build Value and Offer:
Today customers look for products/services that deliver unique values, not necessarily the most basic or cheapest offerings. Initially, price should not be the first bartering point instead salespeople should focus on the value offered and mutual needs. Keep in mind, every time you as a seller offer a discount you are undermining the value of the offer. The salesperson’s focus should lie in communicating the value offered by the product/service.
3. Understand Customer Trade-Off:
The first two steps mentioned above give the salesperson an upper hand in understanding the customers’ psyche and spending power. Taking that into account, salespeople should also factor in their own company’s goals and strategies, ensuring that the needs of both parties are met. While trading off features/price, start off with something you can afford to compromise on, meeting the guidelines of the pricing strategy laid down. Common ground should be built by stating both parties’ needs and working towards finding a common point. While working out issues that are halting the deal, it is important to reiterate the unique value provided by the product/service. The aim is that the salesperson formulates and pitches a deal that does not reduce profit margins.
4. Gain Final Commitment:
The second to last step is being able to gain a firm commitment from the client or be willing to walk away. While bartering on price is common, it is only useful if the sale is won. After understanding what the customer is willing to let go of, the salespeople should gain commitment by confirming if the final offer meets the customers’ needs and if they would like to move forward. They should summarize on what has been agreed upon and offer to make the final transaction. If the customer is still in the initial stages of negotiating, a salesperson should be ready to walk away.
5. Close the Deal and Follow Up:
Understanding that a signed deal is not the end of the sales journey is important in ensuring that ongoing service is provided to maintain customer rapport. Pay attention to customers’ unmet needs and how you can accommodate them going forward. By maintaining support even after the deal is closed, it showcases that you care and value the customer transaction more than just the financial benefit. This helps increases customer retention and bring the customer back in for additional future deals.
Championing the steps mentioned above helps the sales team realize pricing strategy output and improve overall sales function thereby increasing profit margins and revenue.
The essence of negotiating lies in building a relationship with the customer based on their needs, developing & pitching the best offer given their position, and ensuring that the features important to them are highlighted as solutions to their problems. Effective negotiation involves developing one’s skills constantly and ensuring that not only are customer needs met, but also pricing playbooks and discounting guidelines are utilized to their full potential.
Keeping the above-mentioned in mind, helps one become a good communicator and listener, which are both essential for winning deals.
Our team at Revenue Management Labs will not only help you set prices and discounting guidelines but also set your team with a sales playbook that will help the team execute deals efficiently without losing any value!
ABOUT THE AUTHOR Michael Stanisz is a Partner at Revenue Management Labs. Revenue Management Labs help companies develop and execute practical solutions to maximize long-term revenue and profitability. Connect with Michael at email@example.com