As an Account Manager, there’s always something to negotiate. Whether it’s setting expectations or upselling a new product, a commercial discussion is inevitable. Too often we retreat from these conversations because we have a great relationship with our client. Selling feels manipulative. We want to be liked. We don’t want to be annoying. We empathise with our clients too much.
Our job is to not only to keep our clients but to grow profitability through improved margins, more volume and additional products and services. Remember that selling is actually helping. You’re not ever going to sell something to your client that they don’t need.
Negotiation: the process of discussing something with someone in order to reach an agreement with them, or the discussions themselves
Sooner or later, for one reason or another, you will have to negotiate. The secret is simple: make the first move. That doesn’t mean putting an offer on the table up front. It means initiating the discussion when YOU are ready.
Greater Control Over Your Pipeline
You decide when to initiate the conversation with your client about an opportunity which means you can manage your pipeline at a pace that works for you.
List all your opportunities (even if they’re only an idea at this point) and their value including a priority and due date. Then zoom out and see where they’re clustered. You may need to bring forward or extend some deadlines so you have enough time and resources to prepare and negotiate those deals.
A quick note on close dates: be realistic – even generous. Schedule them around your business reviews. These meetings are already strategic in nature so a great time to introduce a commercial conversation.
Now work backwards and fill in the actions you need to take to get this deal ready to present to your client. Even if you use a CRM, tracking your opportunities with a project management tool is a great idea. I highly recommend Zenkit. The marvel of this cloud-based application is that it combines your favourite tools in one platform: Lists, Kanban, Table, Calendar, and Mindmaps and you can toggle between them. Trello is a popular alternative but I really like the toggling view of Zenkit.
Who Prepares, Wins
The prepared negotiator has the strongest position. You need to know the answers to these and other questions:
- What’s your value proposition (as your client sees it, now you)?
- Understand the commercial inputs and be clear on margins and your walk away pricing.
- What’s the historical relationship with the client?
- Where do you sit in the spectrum of suppliers? Are you a simple supplier or a trusted partner?
- How easy or difficult is it for your client to find an alternative?
- Are there any gaps in the existing product or service that need addressing?
- Who are your clients’ decision makers and what does the process look like?
- What actions do you expect the client to take and by when?
- Consider resistance management – what kind of complaints or concerns might be raised. Are there related issues? How will you respond to these?
- Do you need the support of internal stakeholders? Who are they and how much time do you need from them?
- What can you offer as a trade off (besides a discount) that’s low value to you but which your client will appreciate?
- How are you going to present the offer? Are you going to write a detailed proposal or presentation?
If one thing is clear, preparation takes time. A lot of it. Do you want to decide how and when you do the research, or would you prefer to be in a mad scramble pulling this together with no notice? Some people thrive under pressure. Or it kills them.
You don’t make the first move until the prep is done. That puts you in the best position to negotiate – informed!
Go close that deal, Tiger!
There is substantial psychological research that suggests extending the first offer will give you a bargaining advantage. By leading the discussion you establish control and define one end of the negotiation spectrum … yours!
This is known as anchoring. Find the evidence you need to support your anchor. Higher prices make the client focus on the positives, while lower ones invite a focus on the downsides (think when you’re buying a home. A cheap house makes you think about the renovations it’ll need, and the dodgy neighbourhood it’s in. A dream house has you thinking about the pool parties you can’t wait to throw in the summer!)
The Misconception: You rationally analyse all factors before making a choice or determining value.
The Truth: Your first perception lingers in your mind, affecting later perceptions and decisions.
David McRaney – You Are Not So Smart
This fascinating talk from behavioural economist Dan Ariely, the author of Predictably Irrational, uses classic visual illusions and his own research findings to show how we’re not as rational as we think when we make decisions. Around 12 minutes in he talks specifically about anchoring and how pricing is interpreted due to cognitive bias.
Negotiate the Offer: Where to Start
No-one accepts the introductory offer. If they did, then it was too cheap. Make sure you’ve left some room to manoeuvre afterwards.
Don’t insult your client with an offer that’s outrageously high or a low-ball offer that’s clearly absurd. Either of these tactics will destroy your credibility, damage your relationship and your client may lose interest in continuing the negotiation.
Open with a reasonable offer in the range of your target price AND where you think your clients’ best alternative to a negotiated agreement (BATNA) is. The closer you are to what your client will pay improves your chances of a quick close because they won’t feel like they are forced into making unnecessary concessions.
- Start low and negotiate up
Your client will want more, but that’s OK. Start at 10, close at 15, knowing you’d be happy with 20. Your client got a deal and so did you! This is a good strategy for things like billable hours.
- Start high and negotiate down
Your client will want to pay less but no problem – you can discount your offer because you’ve left some room to play with. This works best for products with fixed costs.
Imagine instead your client made the first offer and it was at your walk away pricing. How do you negotiate from there? You might persuade them to nudge the price slightly north, but any concessions in your favour will be marginal at best.
Don’t be shy. Go ahead and make that first move. What are you waiting for?
There’s more to the art of negotiation than the few pointers I’ve outlined here. For further insight check out these great posts:
- When to Make the First Offer in Negotiations
A truly outstanding post by Adam D. Galinsky that digs deeper into tactics you need to make the first move and close the deal.
- 3 Easy Ways To Get To “No” Faster And Radically Improve Your Sales Results
Timo Rein gives some simple advice on how to keep your pipeline moving.
- Managing a Healthy Sales Pipeline: Why Less Is More
Having plenty of opportunities looks good on paper, and might reassure the boss, but often you fail to close them. This quick read explains what went wrong and how to fix it.
- Six Surprising Negotiation Tactics That Get You The Best Deal
Forbes.com post by Kristi Hedges (follow her on Twitter) outlining some great steps to influencing a negotiation.