Sales negotiation skills help you to agree on the terms of a deal as part of the B2B sales process. It occurs after the sales pitch has been delivered and any objections have been resolved. Having well-honed sales negotiation skills can make a huge difference to a salesperson’s win ratio and the price they close deals at.
In this article, I provide 19 B2B tips, which will help small business owners and their sales reps win more business at the right price. I recommend reviewing them all to see if any of these could hone your sales negotiation skills.
1. Do Your Homework
Doing your homework is a vital sales negotiation skill that underpins your success. You can’t make smart decisions without some prior knowledge about your future customers.
For instance, you should ask your prospective customer early in the sales process what they are currently paying for the product or service you are replacing. It will help you gain a deep understanding of the value they derive from the solution. For example, if you are selling insurance, what is the cost of peace of mind for a premium quality insurance policy?
Before entering a negotiation, make sure you have:
- Covered all your prospect’s concerns and objections: If you have not, then discussing price will only be counter-productive. At best your prospect will ask for a significant discount to account for the fact that they view your solution as flawed.
- Developed a clear understanding of the value of your solution to your customer: I would go as far as to ask them how much they could afford to budget for solving their problem, though I would do this earlier in the sales process, way before entering price negotiation.
- Found out who your likely competitors are going to be and what they charge for providing a similar solution: Your prospect may well be considering proposals from your competitors too. I would recommend asking early in the sales process who else they are considering as a potential solution.
- Decided on the bottom-line terms you are prepared to accept from the negotiation before entering it: It’s easy to give concessions in the heat of the moment, but being clear about the extent to which you will discount price and/or provide free add-ons before you start negotiating will ensure each deal you close is profitable.
The salespeople who consistently leave money on the table fail to prepare as well as they could have prior to entering negotiation.
2. Know The Industry Standards
Every industry and customer has its standards, and a sales rep with good sales negotiation skills makes it their business to be aware of them. For instance, if you are trying to sell software to Fortune 500 Companies and you do not recognize their standard data security protocols or you have not earned the right to close the deal.
Unspoken norms also underpin most sales negotiations. They serve as benchmarks for acceptable terms or methods of negotiation. For example, if you are selling to a quoted company committed to social responsibility, they are likely to check whether your business is a responsible employer before considering entering a supply partner relationship.
Your advance work should involve putting in place the standards required to earn the right to compete effectively for the business. Excelling in key standards can become the added-value that tips the negotiation in your favor when all other factors are equal.
3. Use Silence
Silence is one of the most effective sales negotiation skills. You’ve presented the terms, and your prospect is thinking. Don’t be tempted to break the silence and undermine yourself. They need to be the one to start the conversation. If you interrupt the silence, the only message you are giving is that you don’t have complete confidence in your product or service. So let them start the conversation.
Silence is a powerful weapon in sales negotiation. The best sales negotiators listen more than they talk during the negotiation too. They understand that asking the right questions is what gives them control and the information they require to make more effective decisions during the negotiation.
You can become an effective listener by allowing the other person to do most of the talking. Follow the 80/20 Rule; listen 80% and talk only 20% of the time. Encourage your customer to talk by asking lots of open-ended questions that help you understand their thought process.
4. Be First To Drop The Anchor
When selling a solution, it’s on you to present price and terms first. This is an advantage if you have done your homework and already have a good idea of the price and terms your customer is likely to accept. It also gives you the advantage of setting the price anchor; your future customer will need to gain concessions from you to move away from it.
If you have a good feel for your customer’s price, make an offer that’s just above this. However, this tactic is risky if you do not have a good understanding of your customer’s price and terms expectations. Good sales negotiators always test price and terms during the sale so that they know how to pitch terms confidently when they enter price negotiation.
5. Provide A Simple Justification
You might think that providing a detailed justification for your price would be more effective than just providing a blunt price, but this is incorrect. A weak justification is far more effective.
For instance, if you were to present price and terms and simply say, “this represents very good value for money” rather than “this represents very good value for money because x, z and z,” the first justification is far more likely to be accepted. This is because you do not providing them with enough information to generate any counter-arguments.
This was first discovered by negotiation scholars in 1978 when they conducted an experiment to use a photocopier at work. A researcher approached someone who was about to use a copier in a university building and asked to cut in to make copies. They learnt that providing little justification was much more likely to result in a positive outcome. Psychology Today wrote an interesting blog post about this if you’d like to learn more. This is one of the reasons that e-commerce sites provide pricing options and simply state “most popular” or “best value” next to the price they want customers to select.
6. Provide 3 Offers
One of the key sales negotiation skills is to learn more about your customer’s preferences is to offer them different options to emphasize key elements of the deal. The offers should be of more or less equal value to you. According to the reactions you get, you can refine the options and suggest a fresh set of offers. This approach, if delivered well, generates goodwill as you are seen to be willing to flex to your customer’s needs.
Providing three alternatives is important. Less than three and the customer feels restricted. More the three and the degree of choice starts to create too much complexity that can then result in confusion and indecision. This is based on extensive research in both real-world and online sales. This is why the best e-commerce sites provide three pricing options.
7. Don’t Fall Victim To Customer Price Anchors
You are not always going to be able to make the first offer. Some customers will jump the gun to make you an offer.
To avoid getting anchored by their price, counter with what would have been your first offer regardless of the offer your customer has made. In other words, focus on their realistic price expectations rather than the way they have opened price negotiations ahead of you. Be confident and calm, though if your counter-offer differs significantly then you may need to be prepared to lighten the atmosphere with a joke.
8. Always Counteroffer
Another of the key sales negotiation skills to master is always to counteroffer. Even if your prospective customer makes you a great first offer, make a counteroffer and negotiate out the details. They need to work hard or there is a danger that they will not feel as if they negotiated a fair deal and they may come back to seek further concessions before formalizing the deal.
9. Give & Take
Whenever you are forced to make a concession, make sure your opposite recognizes that you have done so by clearly identifying when what you are giving up. Then, try to make each concession balance with something the customer can do in return. If you don’t do this, the customer will feel entitled to your concession and won’t be satisfied until you give up even more.
Give and take is one of the basic principles underlying good sales negotiation skills. This is because it’s a basic ingredient of what most people consider being fair, which can be used to your advantage if you do not exceed the value your prospective customer can see in your solution. By keeping the negotiation a win-win for both sides, you can maintain a level footing with your customer, which is a good base for a long-term relationship.
10. Utilize Seating Arrangements To Make A Fair Deal
Sales reps with advanced sales negotiation skills, understand that negotiating across a table tends to generate a more competitive atmosphere, which is not helpful. Try to avoid this by sitting around the corner of a table or moving totally away from a table to create a more naturally collaborative environment where you can work together to complete a fair deal.
Try to meet face-to-face if at all possible as this will make it much easier to develop and protect the relationship, pick-up on your customer’s body language and avoid a competitive atmosphere. If distance makes it impractical to meet in person then try to use video conference rather than the phone for the same reasons.
11. Show How You Feel
It’s important for your body language to reflect what you are saying or you will lack credibility in your customer’s eyes. For example, if your customer asks for an unacceptably low discount, you need to be prepared to look shocked, maybe even flinch, whatever comes naturally. If you don’t, your body language will be telling your customer one thing whilst your words may be saying something different.
12. Be Confident & Don’t Hurry
Another of the important sales negotiation skills is to be relaxed and confident. This means asking for what you want without expressing anxiety or frustration. It’s important for a skilled sales negotiator to appear (and ideally to be) comfortable in a charged atmosphere where terms are being thrashed out in good spirit. You cannot negotiate the right terms unless you are willing to challenge your customer calmly and effectively when the need arises to do so.
Inexperienced sales negotiators try to rush through the negotiation process to get it over with as quickly as possible. But this will either run the risk of coming across as rude or be perceived as putting your customer under too much (unnecessary) pressure. In addition, if you rush, you are more likely to make mistakes and leave money on the table. Whoever is more flexible about time has the advantage. An experience customer will recognize this and take advantage of the situation.
13. Focus On Your Customer’s Issues
It may be essential to complete the deal to hit the quarterly sales target, but allowing yourself to dwell on your own personal pressures will only get in the way of winning the deal. Instead, focus on your customer’s issues and the deal will be far more likely to stay on track.
Instead of trying to win the negotiation, try to understand your customer’s needs. If you help resolve their concerns, they will be more inclined to purchase.
For example, is it one of your terms, timescales or their lack of budget in this quarter? Whatever it is, you will only find out by focusing all of your attention on your customer and asking them more questions.
Letting your own pressure or frustration show will only put the deal at risk.
14. Don’t Take Anything Personally
A key aspect of honing your sales negotiation skills is no to take anything personally. Whether you like the other person or not, or whether they are rude or not does not need to effect the way you feel or the way that you conduct the deal. As my accountant says, don’t let emotion get in the way of a good deal. If someone is rude or difficult to deal with, try to understand their behavior (which is probably stress induced) and don’t take it personally.
15. Be Specific About Terms
Often your prospective customer will ask if you would consider a discount, as a result this is a question that you should prepare for in advance. First, you want to discuss and agree on exactly what the rest of the terms will be and then you may decide to offer a discount to seal the deal. But be specific.
Offering a discount in the range of 10-20% does not help move the deal towards a conclusion; it just makes you appear poorly prepared, probably because you are. Be confident and offer a specific discount that sits within your affordable range.
Think of it this way: splitting the difference gives away your profit. For example, if your solution costs $1000 and the prospect wants a 50% discount, you shouldn’t counter with $750, although it may seem logical. To do so disrespects your own price and will concern an experienced customer. This is because it may make them question whether they have fundamentally misunderstood the value of your solution. Instead, only progress with price negotiation in small further increments if you need to and protect your hard earned profit margin.
16. Avoid Cost Proposals Until Negotiation Is Complete
Sales negotiations can take quite some time to conclude. Many options may be proposed, some will be accepted, and others will bite the dust. Most sales reps with advanced sales negotiation skills aim to settle the deal verbally before formalizing this into a written cost proposal.
This avoids a formal written proposal being rejected, which is often an irretrievable position to turn around. Whereas all the time it remains a verbal negotiation, you are able to test and probe without taking the risk of having your terms formally rejected.
17. Negotiate On Terms, Not Price
Offering your customer extra value to sweeten the deal rather than discounting price makes much more sense as a sales strategy. This is because the extra value that you are providing you comes at cost to you, but at market value to your client. On the other hand, a price discount is simply a profit reduction where for which you will take the full hit.
Some aspects of your service may cost almost next to nothing to add in to sweeten the deal. For instance, if you are a software provider, adding an extra free user has virtually no cost to you, but represents tangible value to your customer.
18. Make Yourself Likeable
Although you are sitting on the opposite sides of a negotiation, it’s important to remember at all times that you are dealing with a valued customer whom you will want to return to for customer referrals in the not too distant future.
Anyone who has advanced sales negotiation skills, tries to keep price and terms discussions light and respectful and if it gets tense, try to use humour to lighten the atmosphere. It’s worth remembering that a customer is much more likely to flex for someone they like than for someone they don’t.
19. Walk Away If Necessary
If you depend too much on the positive outcome of a deal, you lose your ability to say no. This is where your homework comes in useful, which was the first of the sales negotiation skills I highlighted at the start. Workout what your bottom line price and terms are before you start negotiating and be prepared to walk away if you reach that point. Deals are not worth winning if they do not allow you to make a profit.
The Bottom Line: Sales Negotiation Skills & Tips
Do you have any sales negotiation skills or tips to share with our readers? Let us know in the comment section below and remember to check out the rest of our sales education section for more great tips and resources.