ARE YOU NEGOTIATING TOO EARLY AND EATING INTO YOUR MARGINS?
June 1, 2020AN INTRODUCTION TO NEGOTIATING SKILLS
WHAT IS SELLING?
The relationship between supplier and buyer where the need to supply significantly exceeds the need to buy. Thus selling is a persuasive process by which the supplier aims to convince a buyer of their need for the supplier's product or service and the buyer acts upon that need.WHAT IS A NEGOTIATION?
The relationship between supplier and buyer where the need to supply is largely in balance with the need to buy.THE COMMERCIAL ROLE OF THE NEGOTIATION
Given a commonality of needs over a period of time, it does not automatically follow that a customer will buy on every occasion, or to a level that the supplier would like.Whether or not the supplier actively features a product and promotes its sale will depend largely upon the terms and conditions of the "deal" under consideration. Negotiation, then, is the give and take process whereby the actual conditions of a transaction are agreed. It is the process where the agreement is reached on product/service range and volume, technical advice, prices, promotional support, delivery, payment terms, and where mutual satisfaction is achieved.
THE BUYER'S PERSPECTIVE
In looking at the nature of negotiation it is important to understand the needs and perspectives of the buyer. The nature of negotiation from the buyers perspective has been well defined in instructions issued to United States Air Force buying personnel:-"Procurement by negotiation is the art of arriving at a common understanding through bargaining on the essentials of a contract such as delivery, specifications, prices and terms. Because of the interrelation of these factors with many others, it is a difficult art and requires the exercise of judgement, tact and commonness. The effective negotiator must be a real shopper, alive to the possibilities of bargaining with the seller. Only through the awareness of relative bargaining strength can a negotiator know where to be firm or where he may make permissive concessions in prices or terms."
The ingredients of the buyer's negotiation needs will be a combination of :-
- Profit margins
- Price, but rarely in isolation
- Quality in their terms
- Product range/specification
- Costs, not just initial price
- Availability
- Brand name - theirs or yours
- Proof of value
- The outputs (e.g. of a machine)
Negotiation should therefore be seen by both parties as the process of working out a procurement and sales problem together to reach a mutually satisfactory agreement. Knowledge and skill in negotiation is an important asset to the negotiator. It must include a knowledge of:-
- Cost/value assessment
- Ability to marshal facts logically and convincingly and to deal with people effectively under pressure
- At the same time the buyer must be helped to understand your position. No major purchasing programme can be stronger than the sources of supply - ultimately both parties are mutually dependent.
PRICE PERSPECTIVE
In particular it is useful to examine the professional buyer's view of the price in relation to other factors. Their aim is to get their company into the best position in the buying hierarchy. It gives them a competitive advantage. Price obviously is of importance to the buyer but rarely in isolation.It is important for them to relate price to value because typically their investment in the deal is less important than the return from that deal. Paradoxically, however, a buyer is often judged by their management on their price negotiating skills, yet even they will talk of "price buyers" in derogatory terms. They must, therefore, achieve the best balance for their company
Good buyers are trained to resist questionably low prices because of the inherent risks, for example, of quality, reliability, delivery and service. Where industry pricing is common, or is influenced by limited competition when a market is shared by a small number of manufacturers or suppliers, buyers seek to negotiate the conditions of purchase.
10 COMMANDMENTS OF NEGOTITAION
1. Never give a concession - trade it reluctantly.
2. Leave the buyer feeling that he/she has done a good deal too.
3. Watch for the danger phrases - "fairer to both sides", "a few small details".
4. Once you have started backing down it is difficult to climb up again.
5. Maintain neutrality at the early stages of the negotiation.
6. Absorb an attack by taking notes.
7. If you need time to think, read over your notes or make a telephone call.
8. Never make an offer until you have a list of everything he/she intends to argue about.
9. There has not been a deadline in history that was not negotiable.
10. Anything the other accepts as a constant can nearly always be made into a variable.
IN SUMMARY
An acute understanding of the difference between negotiating and selling and of the buyer's perspective is essential to the sales person in developing a negotiation strategy for any deal - large or small. Ultimately the best negotiator will not only achieve their own and their customer's objectives but they will be more successful than their competitors - remember the best price, product and brand does not win - the best salesperson does!ARE YOUR SALES CALLS CONVERSATIONS OR INTERROGATIONS?
May 1, 2020How many sales visits do you make where YOU do all the talking? Especially on a first appointment!
Its back to basics but you may want to take a look at the importance of questioning techniques. You need to ask open questions (how, what, why, where, when, who) and then listen. There is a time and a place for closed questions (will you, would you, do you, did you and have you) but as they typically get "yes" or "no" answers if you are not careful and you ask closed questions too early the sales call quickly degenerates into an interrogation. The rapport breaks down, you make your pitch too early and before you really understand the customer's needs. You lose control of the call, then you lose the order and the customer misses out on the great benefits you could have delivered.
So let's take an in-depth look at questioning techniques. But first of all, let's look at why we are, typically, asking questions in the first place - to uncover and develop needs.
WHAT IS A NEED
- A need is any want or concern expressed by the buyer that can be fulfilled by the seller
- Not everyone has a specific want, most people however do have concerns
- You cannot create wants and concerns, but you can uncover them by exploring the prospect's concerns
- In our cartoon - the king does not WANT and machine gun, but he is CONCERNED about winning the battle
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- The more serious the need (the concerns) the greater the impetus to act upon them
- You need to get the prospect talking to uncover their needs and develop the seriousness of them
NOT EVERYONE WANTS TO TALK
- Ask closed questions and you are limiting the information you get
- Open questions make people think
- Open questions get descriptive answers
- Open questions make people talk
OPEN QUESTIONS, CLOSED QUESTIONS
- Not everyone wants to talk
- Give people the opportunity not to talk and they won't talk
- Open questions (sometimes called indirect questions) make people talk
- They are used to get people to "open up" they make people think, they get descriptive answers
- Closed questions (sometimes called direct questions) get yes or no answers
- Analyze your questioning so as to make sure that you ask 80% open and 20% closed questions.
- Unfortunately, closed questions are easier to ask
- The "Compliant Client" helps us out they give open answers to closed questions
THE "KIPLING WORDS"
- Rudyard Kipling was once on one of his many trips in Africa
- A journalist asked him "why is it that you are so worldly wise?"
- Kipling replied, "...I keep 6 honest serving men, they taught me all I knew, their names are WHAT and WHY and WHEN and HOW and WHERE and WHO."
LISTEN
- Most salespeople talk too much
- If you are talking you are not listening
- If you do not listen you will never find out enough information about the customer or their needs
RIGHT REASONS, REAL REASONS, LOGIC AND EMOTION
- People make decisions for 2 reasons - right reasons and the real reasons
- Decisions are made on logic and emotion
- Decisions are made on rational grounds and irrational grounds
- We pitch sell to right reasons, but the decision is based on real reasons - we lose the deal
THE ICEBERG PRINCIPLE OF HUMAN BEHAVIOUR
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KEEP THE PROSPECT TALKING
- Salespeople don't keep the prospect talking for long enough
- They don't uncover the concerns
- They ask closed questions too early, pitch product too soon
- Frequently salespeople don't build up the seriousness of the problem
- Therefore, there is no impetus to act
- To avoid all these factors, we use different types of open questions
- OPEN NEUTRAL QUESTIONS - these get long, un-influenced, non - specific answers
- OPEN LEADING QUESTIONS - for long influenced, specific answers
THE FUNNEL QUESTIONING TECHNIQUE
- The questioning funnel is used to guide the prospect into the areas that suit us
- You can let the customer have their own way
- You can get the customer to ask for what you have on offer
DEVELOPING THE NEED
- The funnel technique will get the customer to really open up and talk
- Get beneath the tip of the iceberg and the customer will talk about their issues, concerns and problems
- They will realize for themselves the seriousness of their problems
- You can get them to tell you the potential outcome of not fixing them
- By getting the customer talking you get them to build up the seriousness of their problem
- The impetus to do something about it becomes greater
SUMMARY
- The funnel technique is one of the most powerful selling tools available to you
- The key to its success is to practice using it
- First of all, work on your open questions
- Then start to consciously differentiate between open neutral and open leading.
- When you become skillful with this technique selling becomes a lot easier
- You can make the customer ask for the products or services you have on offer!
- You can get beneath the tip of the iceberg and really find out what is going to make the prospect make a decision.
- Just remember WHAT, WHY, WHERE, WHEN, HOW and WHO!
SELLING BENEFITS AND VALUE
May 1, 2020Delivering meaningful value
- Through skillful questioning technique you have uncovered the prospect's needs
- It's very easy to bombard your prospect with the many features that your products offer
- However, not every feature is of benefit to every customer
- Features and USPs are meaningless if they do not deliver value in the customer's eyes
Features, Functions and BENEFITS
- Feature - anything you can touch, feel, see or measure, answers the question "what is it?"
- Function what the feature does, answers the question "what will it do?"
- Benefit gain, save, advantage made from function, answers the question "what will it do for me?"
- Customers buy features, functions and benefits; sales people sell features and at best functions
- Ask yourself "so what?"
- Explain to the customer "And this means to you"
- "Let me show you anyway" means you are telling about features the customer may not have asked for
Questioning Technique
- With skilful questioning (see funnel technique) you can uncover and develop customer needs
- You can guide the customer in the direction of the products that you have on offer
- Ask questions to see if your features and functions are going to be of benefit to this customer
- If they are not - then why waste time and effort explaining them?
Explaining the Benefits
"So, Mr. Customer, with the new support agreement you can call our help desk day or night (the feature). This will give you continuous support (the function) when you introduce your 24-hour shift pattern. This means that should you experience any difficulties, say at the weekend, you will not lose any production capacity (the benefit) as you will get help with any problems straight away".Adding value up-selling and cross-selling
- Up-selling increasing revenue by selling similar products and services that have a higher price
- Cross-selling (link selling) increasing revenue by selling complementary, additional products
- Must be able to prove to the customer that there is "something in it for the customer" - added value
- Value is "...the worth of something compared to something else......"
- Value could be a high "pay back" for small outlay (also discussed in terms of ROI)
- "Pay back" is the tangible return delivered by the benefits of your products and services
- The greater the pay back the greater the value to your customer
- It is rare that a customer buys just "for the sake of it" they want a return for the outlay
The Value formula
- Value = benefit cost
- The more needs we can uncover, the more benefits we can deliver
- The more benefits the greater the pay back, the greater the pay back the higher the value
- The higher the value the better the chance to up-sell and cross-sell
Proving value, THE VALUE GAP
- Once the need is uncovered there has to be adequate pay back and value in fulfilling the need
- The customer has to understand the implications of not fulfilling the needs (or fixing the problem)
- You need to establish the difference between adopting your solution and not adopting it
- The difference between status quo and adoption is the "value gap"
- Find value gaps to which you can attach a monetary amount
- Then you can justify the benefit in terms of tangible "added value"
Value Gap simple example
- Manual sales order processing system
- Company could sell 20% more orders if they could process them
- Annual sales = £1,000,000
- New automated SOP would mean processing the orders
- Value gap = £200,000 per annum
- New SOP system = £50,000, cost of implementing, training, operating = further £50,000
- New SOP pays for itself in 6 months - if you can prove the system WILL process the additional 20%
- Customer will never understand the value gap if they do not see how the features and functions deliver the benefits
Summary
- The best product, at the best price does not always win the order
- Sell benefits, don't simply tell about features
- Look for the value gap and quantify it
- Make the intangible tangible = monetary value
- Do not leave the customers to work the value for themselves - they might not bother!
