Manage-Wise

Working towards maximum results

Contrary to popular perception, closing and negotiating are no isolated events that happen only at the end of a sales cycle. They both happen during virtually every telephone call and during every meeting. When you call a new prospect and ask, “Can you speak now, or would you prefer I call you back at a specific time?” you are closing on, or arranging, a telephone conversation. When you work with your client to find the right date and time for your next meeting—as well as who will attend and what topics will be discussed—you are negotiating a next step that works for both parties.

In the results-based selling method, closing and negotiating skills are needed in every stage of the sales cycle. They are used in scheduling appointments, gaining access to senior executives, reaching an agreement on pricing and contract terms, and resolving customer issues before or after the sale. Therefore, a strong foundation in closing and negotiating is vital for anyone who interacts with customers.

Determining negotiation

At Sales Excellence, Inc., we receive many calls from prospective clients who want to train their salespeople to be better negotiators. Our first question is, “Why?” One application of negotiation skills, for example, is handling and overcoming objections, which can make working through the steps of your customer’s buying process go more smoothly and shorten the length of your average sales cycle. Negotiation skills are also critical in reducing price erosion and improving profit margins when it comes time to negotiate pricing and contract terms. But surprisingly, the most common answer we hear is, “We are losing too many sales to our competitors.” After a short discussion, we often find that this is an inaccurate diagnosis that stems from a misconception of what negotiation is and what it isn’t.

Knowing positioning

Once in a while, a breakdown in final pricing or contract negotiations can force a customer to abandon their vendor of choice and enter into negotiations with an alternate vendor. But many of the prospective clients we talk to—who feel they are losing too many sales to their competitors—are never being selected as the vendor of choice in the first place. There is a big difference between negotiating and positioning.

Your power, and thus your success, in negotiating final pricing and contract terms is determined by how well you have prepared and positioned yourself throughout the sales cycle. The earlier you start to set yourself apart from your competition, the more power you have when final price negotiations begin.

If your customer doesn’t believe that your solution is a better fit or that it doesn’t represent superior value over your competitor’s offering, there’s actually nothing to negotiate about. Differentiate before you negotiate. If you haven’t successfully positioned yourself as the best choice in the mind of your customer, you actually lost the deal long before it came time to negotiate contract terms and pricing.

Negotiating vs bidding

We have all probably heard a prospective client say—either verbally or via a request for proposal (RFP)—“We are considering buying a certain quantity of a certain product with the following specifications. Please reply with the availability and your best price.” Submitting a quote or proposal at the lowest possible profit margin in hopes of having the lowest price is not negotiating. That’s bidding.

You may choose to submit a bid that represents a substantial discount from your list price, but in your customer’s mind, that is the starting place. If you are selected as the vendor of choice, further negotiation often follows. Be careful not to give away all your profit margin in order to be the lowest bidder. You may need to leave yourself some room to negotiate even after you offer your “best price.”

Moving towards closure

In the results-based selling method, closing is not a dirty word. That is, unless your idea of closing is convincing or persuading your customer to do something they don’t want to do or is not in their best interest. Put simply, closing is reaching an agreement or asking your customer to make a commitment to take the next step in their evaluation and buying process. That next step could be to meet with you on Thursday at two o’clock. Or it could be to sign a half-million-dollar contract. Closing or reaching agreement on each step we take with our customer is a very natural part of working together and helping them to reach their desired future state.

Negotiation, on the other hand, is the way that you make the proposed next step agreeable and acceptable to both parties. This may involve some aspect of give-and-take or trade-off with your customer so that both parties feel that their interests are properly served. But negotiating is required only when the next step is not acceptable to either you or your customer as proposed. First, you try to close on the next reasonable step. Then, if necessary, you negotiate.

Seeking results

The skills involved in closing and negotiating are absolutely fundamental for any sales professional. That does not necessarily mean that they are simplistic, or that negotiating and closing sales opportunities is easy. Unless a salesperson has a system or a process for handling objections and conducting negotiations, bringing an opportunity to closure can be extremely difficult.

To help salespeople become more consistent and effective negotiators, I’ve developed what I call the results-based negotiation process. It is a repeatable series of steps and actions that a salesperson can take to move sales opportunities forward.

Excerpt from 'Selling Results' by Bill Stinnett. Reproduced with permission © 2007, Tata McGraw-Hill Publishing Company Limited. Vishwanath_Ghanekar@mcgraw-hill.com