Why Sales Negotiation Skills Are Important

Before we do a deep dive into the world of negotiation skills, let me first ask you a quick question;

Do you remember when you were a kid and you wanted to stay over at a friend’s house?

You may have asked your parents if it was OK to go and that you would be back around lunchtime the following day.

But what if your Mum had said that you hadn’t completed your chores like she’d asked you to before going?

Maybe you would have told her that you would complete them when you return the following day?

Or maybe you would have asked a sibling to help you complete them now?

Whatever it was that you did would have needed persuasion and influencing skills to allow you to have your way, in this case being allowed to stay over at your friends.

You may not have realised it then, but you were learning negotiation skills.

You were vying for position to get something you wanted, knowing that the other interested parties (your parents, siblings and friend) had different agendas they were working from.

This is an example of negotiating on the issue of time. Your parents had the power of veto in this situation because they provided the roof over your head and food on the table.

And it’s also an example of the fact that negotiating isn’t just about money. There are many occasions where we get someone else to move their position on other things in order to attain some form of agreement.

In fact, we negotiate every day. It isn’t just in a sales setting or when we are with clients, online or face-to-face. It may be with our kids, partners, colleagues, friends, suppliers, disgruntled customers, and many others who we encounter day-to-day.

What Does Negotiation Mean?

Negotiating comes from the Latin stem of negōtiātiō, which means the doing of business, and is equivalent to negōtiāt(us) in its root form.

Customers used to barter with stall holders in the Roman markets, doing business on all manner of items.

It has come to mean a series of discussions where one party gets the other party to move towards their position in a discussion. If there is no movement, there is no negotiation. Simply put, business isn’t ‘done’.

In a sales setting, you will have a series of ‘positions’ that you will propose, including things like timings, delivery costs, pricing packages, service levels, warranties, etc. Each one will be positioned at a point that makes money for you and also adds value to the customer.

The customer will have different positions and different starting points too.

Your emphasis will be on what you can deliver at the right price for you, where the customer still tries to get you to move closer to their position.

Without this need for ‘movement’, there is no negotiation. The question is…what’s the best way to get closer to each other’s position and still maintain the benefits to both parties?

The biggest component in a negotiation session is understanding what’s the most valuable items to each party. If price is the biggest issue, we need to acknowledge that and find out the reasons for it. If quality is the number one decision criteria, we need to ascertain why that is so important to the other party.

We call this the ‘value discussion’ and both sides see it differently.

Let’s take a look at some ways that we can improve our negotiations, some of the tactics employed and why negotiating is so important in a sales setting.
Let’s start with that last point.

Why Is Negotiation Important?

As we mentioned, negotiations are all about movements to a position that’s closer to what each other wants.

Your opening position may well be absolutely right for you, and the other party may have a position that is absolutely right for them.

Think about why negotiation in business is so important.

Every person has an idea in their mind about ‘value’.

What is valuable to one party may hold less value to the other. For example, if it’s imperative for a customer to have a delivery tomorrow so they can complete a project, the element of time is top of their list of priorities.

But if they can wait a month for delivery, that element is less vital and hence, less valuable in the discussions.

Negotiations are important for a number of reasons:

You may wish to maintain margins for your products and services, so your increased revenue can assist you in developing better products and maintain better services

You may want to build your reputation as a quality manufacturer and your negotiating skills will open up new markets for your services.

Also, because the modern-day buyer is more savvy than ever, and on-line has become the major force in purchasing for many organisations, they may play you off against your competitors to get a better ‘deal’, whatever that is in the buyer’s mind.

So, being able to effectively negotiate today is one of the top skills needed by the modern-day salesperson. Without quality skills in this vital area, you may find yourself losing out to cheaper offerings from your competition or not building value in the buyer’s mind for your products or services.

Not only will good negotiating skills bring you more business, it could also increase profitability and get a wider audience experiencing your products.

What are the components of negotiation tactics?

How do we describe negotiation tactics? Well, a dictionary definition is “an action or strategy carefully planned to achieve a specific end”

We can think of them as the actions we or the other party take to get to our pre-determined goals.

They can be done on-line, through face-to-face chat or through third parties. The tactics used will take us closer or further away from our intended targets.

Below are 5 stages of negotiation in which tactics play a vital and telling role. They are:

Preparation, Information Exchange, Bargaining, Concluding/Gaining Commitment and Taking Action

Each one has its own pattern and direction, with each being identified by its stage in the process and the varying tactics that are used to accomplish the goals inherent in each one.

Negotiation Stage 1 – Preparation

During the preparation stage, we would be carrying out the research and identifying the goals and specific objectives that we would like to achieve. We would also be identifying the needs, wants and desires of the other party. if we don’t do the preparation correctly, we may find the rest of the discussions are not built on a firm foundation.

Negotiation Stage 2 – Information Exchange

In the information exchange section, this is where our tactics revolve around finding the most important and valuable ideas that the other party will be basing their decisions on.
We can find out at this stage what their decision-making criteria is.

Negotiation Stage 3 – Bargaining

When we get to the bargaining stage, we will be using the preparation that we’ve accomplished and the information that we’ve gathered to identify what the moving points are for each party.
Tactically, you want to ensure that the other party see benefits to them that will also attribute benefits to yourselves.

Negotiation Stage 4 – Concluding/Gaining Commitment

In the concluding section, the negotiation is progressed by analysing and confirming the agreed points in the negotiation movements.

This allows you to gain commitment to each stage and agree to any next steps.

Negotiation Stage 5 – Taking Action

When executing the negotiation ideas, this is the action points that we take to determine the results that will be achieved by both parties.

Each one of these stages stand apart and alone in their importance for the success of any negotiation.

Discussions revolving around a process where any of these components are lacking in power, will cause difficulties for one or both parties in trying to achieve their goals.

Another tactical element that you can think of when planning for your negotiations revolves around the acronym LIMITS

In other words, you need to know what your limits are when approaching and discussing your position and theirs, too.

Think of the limits to your conversation in this way:

The L of limits stands for what you would like to achieve.

The I of limits means what you intend to achieve

The M of limits dictates what you must not go beyond.

Each of these form limits for your discussions. For example, you can set goals for how much you are willing to give as a discount.

This would be your must not go beyond level.

You can start off by saying what your overall price level will be, and this could be your like to get position.

Let’s look at what you intend to achieve (I)

An example would be of when you are selling a car. You may advertise it for £12,000 and this would be your like to get figure. You want to get £11,000 for the vehicle, hence your higher-advertised position that you can negotiate down from. You must not go beyond £10,500, so this would be your fall back or must not go beyond figure.

Having tactics like this will mean you have borders and barriers or parameters that you would not go beyond. Without identifying what your limits are, you run the risk of allowing discussions to get out of hand and you being at the beck and call of the other parties wishes.

When you find that the final positions in a negotiation are within your L , I and M window, then IT’S a deal.

So, what are some of the ways good negotiators get people to move closer to their positions?

How can you have more confidence in building those positions?

Let’s take a look at how we can develop these skills further.