A sales negotiation can be lengthy, nerve-wracking, and complex. For many sellers, every negotiation adds at least one gray hair.
The challenge is that too many people find themselves in a sales negotiation, but they don't understand the underlying dynamics of how sales negotiations work.
To help you master the art of sales negotiation, we've created the OP2eRA2 Sales Negotiation FrameworkSM. Following, you'll find a brief primer on the key points.
- OPRA stands for Objectives, Possibilities, Requirements, and Alternatives. OPRA focuses on the negotiated issue itself.
- The second 'a' stands for approach. Approach helps you take the right mindset and choose the right actions given specific situations.
- The second 'p' stands for process. Process helps guide you through planning, engaging the negotiation, leading negotiation conversations, and gaining commitment.
- The 'e' stands for emotions. Sales negotiations can be emotionally charged and there is no question that emotions play into the outcome. Dealing with emotions properly is essential.
OPRA - The Negotiated Issue
What do you want? It's an important question. If you don't know the answer for yourself and for the other party, you won't know how to get there.
Often times, sales negotiations sound pretty straightforward. For example, when a buyer says, "It costs too much. The price needs to be lower." This is a position they've taken—a line drawn in the sand.
Objectives, however, are often masked by positions. If you deal with the position by itself—haggling over price—you can't find the best solution.
Let's assume you don't start haggling. Instead, you ask why the price needs to be lower, and spend some time digging into the issue. You find out that the buyer would be out of budget if they bought now, but their objective is to buy. After working together, you solve the issue by splitting up the payments over multiple time periods, allowing the buyer to buy, without spending their entire budget at the outset. You come to a mutual agreement and save yourself the haggling over price.
Continuing with the example, price objections can be related to perception of value, existence of funds, a psychological need to press to get a better deal, or a host of other reasons. With any topic, if you don't dig to find out the objective behind the position, negotiations can turn into skirmishes over line after line drawn in the sand.
Think of requirements as the box you're expected to play in. For example:
- "We have to select a company with a local presence."
- "We have to make a decision in 30 days."
- "Our main point of contact must have at least 15 years experience in our industry."
- "The legal provision in the agreement must read like this."
- "Our budget is $135,000."
They all sound pretty hard and fast, right? Well, some of them might be, and some of them not so much. Most sellers have been told what the budget is, only to learn that it has suddenly changed when the buyer needed it to.
Other times a requirement is hard and fast. When a buyer says, "It needs to be like this," they might have no wiggle room at all. In any case, it's important to find out what the "box" is so you know what you have to deal with. Only then can you find space to try to think outside the box, and discover where staying in the box is the only option.
Once you know where you and the buyer want to go (objectives), and any parameters you need to abide by (requirements), you can work on various paths forward. Pre-planning, collaborative idea generation, and creativity all play a crucial role during the negotiation process to help you develop different possibilities for coming to an agreement.
Working together to generate possibilities and solutions helps move the process along as it builds trust, belief, and the desire for both parties to move forward.
What happens if you don't come to an agreement? Well, you do something else. In common negotiation parlance, this is called your BATNA, or the best alterative to a negotiated agreement.
Without knowing your alternatives and theirs, you don't know where the walk-away points are. If you don't, you can find yourself accepting agreements that aren't good for you, or losing to competitors or no decision when the buyer believes an alternative is a better choice than you.
It might seem complex, but dealing with the negotiated issue is really straightforward:
- Know the objectives or goals so you know what success looks like.
- Imagine and define the possibilities, so you can be creative and thorough for how to reach the objectives given the requirements.
- Know the requirements or parameters that you must abide by so that agreements aren't disqualified on their face.
- Know the alternatives and their value, because what you come up with for possibilities has to trump the alternatives or you end up with no deal.
While OPRA deals with the negotiated issue itself, the remaining key points deal with the process and approach to take in a negotiation.
There are two different fundamental approaches, or mindsets, that people take in sales negotiation: partner and positional.
In partner negotiations—which are sometimes called "integrative" or "interest-based" negotiations—the seller and buyer focus on working collaboratively to maximize value. This is the classic "win-win" negotiation approach.
The second major approach is positional negotiation. It's also referred to as "distributive" negotiation, where parties in a sales negotiation assume there is a fixed pie to split up, and the focus is on the splitting. Typically, the overall mindset is each party trying to get the most for themselves.
In the win-win negotiation approach, the classic thinking is "let's not distribute the pie, let's expand it."
Most writing and thinking about negotiation in the past several decades has been about win-win negotiation. In fact, many books and pundits tell negotiators to drop all thoughts of positional negotiation because it hurts the end outcome.
Often win-win is the right approach, but not always. The reality is that some buyers are looking to take advantage of sellers. When you encounter buyers who are just trying to get the best outcome for themselves, a win-win approach can leave you vulnerable.
To get the best outcome, you as the seller must be good at both kinds of negotiation, and you must be able to read the situation and choose the appropriate approach.
The best sales negotiations follow a specific process that includes 4 major components:
- Prepare and plan to get the best outcome. Almost everything in a negotiation can be predicted. If you've planned well, you can succeed with whatever comes up.
- Engage the buyer properly, paying careful attention to getting the negotiation started right.
- Facilitate and lead the actual negotiation process well. Those who wait for someone else to lead often don’t get to the best destination.
- Commit and get an agreement in place.
Emotions are powerful influences in negotiation, both positive and negative. Imagine for a minute that you really like the buyer. You've known them for a long time and enjoy them as a person. When you work on agreements, you work on them collaboratively. They never show you disrespect, never play negotiation games, and always value your input and advice.
In fact, you know they feel the same way about you. There are positive emotions all around. Now you've hit a negotiation roadblock. Imagine for a minute how you might approach solving it.
New situation: a buyer has been pitching curveballs at you nonstop, changing their story about what they'll accept, throwing your competition in your face, and obviously playing games with you to squeeze your price and wring out other concessions.
Still, you think you're in a position to come to a mutually beneficial agreement. Then, after you've reached verbal agreement, they bring in their CFO who plays bad cop and tries to squeeze the price another 3%. You've already told your team that the deal was essentially done. Negative emotions all around, right?
Yet the situation is just another negotiation roadblock. How do you solve it?
Two roadblocks, two very different sets of emotions in play.
It takes study and practice to know the specifics of how you might approach each situation, but the big picture remains the same: emotions are a major part of every negotiation. Your job is to make sure you recognize this, strengthen the positive emotions throughout the process, and minimize the negative.
Yes, sales negotiation can be complex. Once you know how it works, it's not that complex. Follow the OP2eRA2 sales negotiation model, and you'll find yourself with better sales negotiation success, and perhaps fewer gray hairs.